Beating the market's earnings expectations clearly pleases investors - even if your profits are still down by more than a third. The market had chalked up a consensus estimate of £72.7m for bookie Ladbrokes ' (LAD) operating profits but it beat the odds to outperform this figure by 11 per cent at £80.6m. This could well be an early sign of chief executive Jim Mullen's strategy, outlined in July, bearing fruit.
Slashing the dividend and cutting costs to generate cash and reinvest in increased marketing, self-service betting terminals (SSBT) and greater online use seems to have paid off. Acting chief financial officer Richard Snow said there was still "lots to do" given the group had committed to the strategy until the end of 2017. But he acknowledged the £18m extra it had spent on marketing in the second half had led to revenue growth of the same proportion.
The SSBT strategy is also working. Around 8.3 per cent of bets in its retail estate were placed on these machines during the final quarter compared to 3 per cent during the same period last year. Not only this, but the plan to encourage retail customers online has started well - 35,000 new digital customers were gained last year.
Broker Numis expects adjusted pre-tax profits of 69.1m for the 2016 financial year leading to EPS of 5.8p compared with £52.5m and 4.9p in FY15.
| LADBROKES (LAD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 130p | MARKET VALUE: | £1.32bn | |
| TOUCH: | 130p-130.3p | 12-MONTH HIGH: | 147p | LOW: 93p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 260 | |
| NET ASSET VALUE: | 45p* | NET DEBT: | 67% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 0.98 | 135 | 13.0 | 7.8 |
| 2012 | 1.08 | 200 | 21.0 | 8.9 |
| 2013 | 1.12 | 67.6 | 7.3 | 8.9 |
| 2014 | 1.17 | 37.7 | 4.4 | 8.9 |
| 2015 | 1.20 | -43.2 | 0.5 | 3.0 |
| % change | +2 | - | -89 | -66 |
Ex-div: 28 Mar Payment: 12 May *Includes intangible assets of £674m, or 66p a share | ||||
