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Ladbrokes ready for change

Judging by the 5 per cent share price jump in reaction to Ladbrokes’ interim results, new chief executive Richard Glynn has done a good job in convincing the market that he can address the group’s reputation for underperformance.

The new boss says his review of the business has identified a number of key areas where progress can be made, and he's already addressed his short-term goal of improving the performance of its machines business, unveiling a new four-year deal with Global Draw for the supply of machines. A number of key management changes were also announced alongside the results, including the appointment of a new head of the retail division to start early next year, and also a managing director of digital channels.

In the meantime there were few surprises in the numbers reported. The UK retail business, which represents 68 per cent of operating profits, saw income fall 6.3 per cent to £76.9m. eGaming managed to more than offset this with a 40 per cent profit rise to £29.1m, while reported earnings were boosted by a £20m one-off corporation tax credit.

Broker KBC Peel Hunt forecasts full-year pre-tax profits of £159.6m and EPS of 14.3p (from £191.3m and 21.6p in 2009).

LADBROKES (LAD)
ORD PRICE:145pMARKET VALUE:£1.32bn
TOUCH:145-146p12-MONTH HIGH:174pLOW: 115p
DIVIDEND YIELD:2.7%PE RATIO:4
NET ASSET VALUE:27p*NET DEBT:208%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200956513015.72.98
201050010538.53.85
% change-11-19+145+29

Ex-div:11 Aug

Payment:1 Dec

*Includes intangible assets of £611m, or 67p per share

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More analysis of company results

IC View

Ladbrokes' results offered tantalising signs of recovery, and management is confident enough to reinstate its dividend. But it's still early days, and with the shares trading on a forecast PE ratio of 10 times forecasts, much of the anticipated improvement is already priced in. Fairly priced.

Last IC view: High enough, 149p, 19 February 2010

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