Ladbrokes saw its shares come under pressure after it hit the market with the unwelcome double whammy of a poor trading update and plans for a massive rights issue.
The bookmaker will raise a net £275m through a one-for-two rights issue at 95p a share, a 48 per cent discount to the price before the announcement. It said it will use the money to pay off a large chunk of its increasingly unwieldy debt, which rose to £995m by 30 September from £962m at its half-year-end.
That would still leave it with a substantial net debt pile of £687m and, in light of steadily deteriorating trading trends, Ladbrokes is pursuing a wide range of cost and debt reduction initiatives. Group net revenue in its third quarter fell 15 per cent, while operating profit fell 58 per cent to £22.4m after a flurry of adverse sporting results, including just four draws in the first 66 matches of the Premier League season. Meanwhile, eGaming net revenues fell 13 per cent, after its sports book gross win margin collapsed to 4.6 per cent.
So, as we predicted after its half-year results, Ladbrokes said it will cut its final dividend as part of a range of money-saving initiatives, although it promised to reinstate the payment by the time of its half-year results next year. It will also slash capital expenditure to £50m this year and freeze pay until January 2011.
