Bookmaker Ladbrokes has been hit by the worst Cheltenham horse racing festival in living memory, which left the betting industry nursing collective losses of more than £60m.
Cheltenham proved disastrous for bookmakers, as nine favourites and one joint favourite won in the 28 races over four days. Former Barclays banker Rich Ricci, now a racehorse owner, scooped almost £400,000 atthe festival when three of his horses romped home. The racing results forced rival William Hill to issue a profit warning last month.
Ladbrokes’ chief executive, Jim Mullen, said its results would meet expectations, despite the hit from Cheltenham, as he reported a 10.6% rise in group net revenues in the first quarter. Sporting results were favourable up until Cheltenham, he said. The festival “proved to be the worst in living memory, which took some of the shine off the period”. He added that “experience tells us to expect results to normalise over time”.
Mullen said intense competition at the festival had pushed the industry into offers and pricing which “abandoned bookmaking principles”. Ladbrokes offered punters money back on first races, and other bookmakers offered best price on every race. Mullen told analysts that while bookmakers were in the gambling industry, they should not gamble themselves.
The industry ditched many of those offers at the Grand National at Aintree, and fared better with the winner, Rule the World, a 33-1 outsider.
Ladbrokes said it would lose £3m should Leicester City win the Premier League. Its performance will also depend on the outcome of the European football championships in June. It noted that France remained favourites followed closely by Germany and Spain.
The company’s retail net revenues in the UK were up 4.1% between January and March, while in Europe they rose 6.5%. Digital net revenues jumped 36.5%, as online gaming continues to gain in popularity.
Ladbrokes slumped to a £43m loss last year, its first in a decade, owing to the cost of shutting and refurbishing betting shops, revamping its digital business and implementing its proposed merger with Coral, which still needs to be cleared by regulators. The Competition and Markets Authority has postponed the publication of its provisional findings until mid-May.
Mullen said there was plenty of evidence to suggest that the group’s turnaround plan was working but added that it was still early days. More than 70 shops have been refurbished.
Steve Clayton, head of equity research at Hargreaves Lansdown, said: “Current trading at Ladbrokes is encouraging, but in truth, a little bit of a sideshow in the short term. The real story here is whether the merger with Coral will be allowed, and for that news we must wait a while longer. If it does go through, the deal could be transformational for the group.
“A merged Ladbrokes and Coral will have a dominant retail position, even if many shops have to be sold off. We expect substantial cost saving will be possible because there will be vast areas of overlap and unnecessary duplication of functions across the combined business.”
