by Renee Israel
Shares for giant UK gambling group, Ladbrokes slumped 9% following
a disappointing financial update, it was reported today.
Nevertheless, the group said that it still expected to meet full
market expectations since some divisions of its business performed better than
others.
The UK's second-biggest bookmaker said that profits from its
digital division dropped more than expected in the first half of the year. A
delay in technology upgrades and a poor sports book margin were blamed for this.
Ladbrokes said, however, that other segments, such as its retail
division, offset the disappointing digital gambling numbers and that market
expectations would be met by the end of the year.
The group also predicted that digital profits would start to climb
in 2013.
Ladbrokes Financial Statement
Ladbrokes shares dropping 9% resulted in the company
issuing a statement:
"As stated previously, we anticipated that the phasing of our
investment programme, increased marketing expenditure, planned operational
losses associated with new international licenses and the withdrawal from
certain international markets would result in a decline in digital profits year
over year."
Ladbrokes expects its six months profits from its digital
division to be halved compared to last year's figures. As a result, Ladbrokes'
shares fell 9% to 158.2p.
Recommendation to Hold on Ladbrokes Shares
As a result of the latest financial update, analysts have cut their
recommendations on Ladbrokes shares from buy to hold.
According to Nick Batram from Peel Hunt analysts: "There was always a risk
that there would be some delay in the digital turnaround and poor sports results
have simply given greater exposure to the issues."
"Credibility will take a knock but ultimately we believe a stronger, better
digital business will emerge," said Batram. "That said, the shares are close to
our fair value and a hold is a more appropriate recommendation at the current
point in time."
Ladbrokes has been struggling to improve its online gambling portfolio and
keep in line with competitors such as William Hill and Paddy Power who seem to
be ahead in the game.
Its efforts, however, have been unsuccessful this far, despite Ladbrokes
being in negotiations with groups such as 888, Playtech and Centerebet.
In March this year, it was shown that the bookmaker's annual report reflected
that Chief Executive Richard Glynn had received half his maximum annual bonus,
despite a fall in profits and failed attempts to acquire an online gambling
company.
