Ladbrokes

Are we reaching the endgame for the Ladbrokes Life?

Is the storied Ladbrokes brand approaching the end of its usefulness, being eaten from within by the now stronger Coral? Scott Longley speculates….

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Ladbrokes Coral was understandably keen to accentuate the positives from this week’s third-quarter trading statement saying it represented “another positive period” for the group as a whole and adding that the digital performance was “strong.”

This is true to an extent but it doesn’t convey the whole online picture. Yes, parts of the business are doing very well indeed; Ladbrokes Australia, for instance, enjoyed continuing revenue growth of 50 percent while sports-betting at Eurobet.it was up 36 percent.

From there, though, the sliding scale of the figures starts to take on a more negative aspect and also poses questions about the twin brand strategy employed by the business since the merger was completed a year ago.

The Coral.co.uk business fared OK in the period, up 13 percent overall and Galabingo.com also grew 10 percent, although the overall Gala operation saw revenue growth come in 3 percent up with the company blaming a £1m jackpot payout on Galacasino.com for the lacklustre top-line number.

The picture becomes murkier still when it gets to the Ladbrokes.com business where net revenue was down 9 percent thereby offsetting the Coral gains.

The company came up with a pick-and-mix menu of reasons behind the backwards step.

Variously, the numbers have been affected by changes in its marketing efforts with the focus turning to improved returns on acquisition and retention (which indicates the degree to which the company was buying players this time last year); the operation suffered as new product and feature enhancements were suspended in the first half as the Ladbrokes.com operation was transferred to the ‘one digital platform’; and finally there was a “significant reduction” in affiliate marketing activities over the period (with the looming verdict of the Competition and Markets Authority decision likely to be playing a part here).

The problem for the Ladbrokes Coral management team is that these explanations don’t do much to convince that the brand is able to compete with the market leaders in the UK. As was demonstrated last week by the results of the twin goliaths of the UK market, Sky Betting & Gaming and bet365, the growth at the top is far outstripping that of those further down the ladder.

Both Ladbrokes and Coral are falling further behind even as they attempt to play catch up. Hence, the question whether the corporate entity has the wherewithal to be able to keep pushing its own twin brand strategy in the face of these competitive pressures.

At the time of the merger it was clear that for all intents and purposes this was a “blue takeover” with the Coral management holding the whip hand and the old Ladbrokes being subsumed within the new organisation. This included the notable closure of the Ladbrokes old head office in Rayners Lane in favour of a move to the new Coral HQ in Stratford, east London.

While it was Ladbrokes’ Jim Mullen who got the chief executive post in the merger, much of the rest of the top management and board were from Coral. This includes the financial director Paul Bowtell, Andy Hornby, the chief operating officer, and chairman John Kelly who was previously chief executive at Gala Coral when that was founded in 1997.

Review will not be kind

Meanwhile, the company awaits the verdict of the government’s triennial review which Paul Leyland, partner at gambling consultancy Regulus Partners, suggests could deal a significant blow to the business.

“Our concern remains that a DCMS review toward the negative end (below £30) remains both likely and of greater disruption than the industry is expecting,” he said. “Further, if this disruption is impacting a weaker underlying business than recent momentum might suggest (including Ladbrokes online marketing), then its effect could be substantially compounded.”

The rationalisation of the retail business that will necessarily take place following the review will move Ladbrokes Coral in a new direction once again, possibly into the arms of an acquirer with GVC looking like the most likely candidate.

The latter business has itself been pursuing a multi-brand strategy with some success and there are obvious reasons to think it would continue with the same strategy were it to buy Ladbrokes Coral.

The success of the name in Australia, meanwhile, will mean the Ladbrokes name will certainly live on somewhere around the globe. But in the UK things are looking bleaker.

A new corporate entity might see the Ladbrokes name disappear from the listed space while substantial post-review shop closures might make a dual high-street brand strategy less appealing. In such circumstances it is possible to envision a new owner deciding it was time for the Magic Sign to vanish in a puff of smoke and, no doubt, a welter of recriminations from old company hands.