Graham Wood – Where To For Ladbrokes?

Are we about to see a major change to the UK gaming market that will witness a household name disappear from view by the end of the decade?

For decades the landscape of the British betting business was dominated by the Big Three bookies, conservative cautious monolithic operators who accounted for the vast majority of betting turnover and who managed thousands of retail outlets up and down the land.

With the arrival of Internet and the opening up of overseas markets there was a change to the betting world as leaner, quicker-witted smaller operators went off to grab the lion’s share of the domestic and international online markets, leaving the slow-moving dinosaurs to continue with their land-based businesses and to try to adapt to the changes technology were forcing on a business that, for years, saw punters write their bets on pieces of paper and operators record transactions on microfilm.

Coral was the first to break the mould when it bought pioneering online firm Eurobet and secured a secure foothold in the newly regulated Italian betting market. In the meantime Hills and Ladbrokes struggled to keep up, but gradually improved their online offering whilst all three market leaders dragged their betting shops kicking and screaming into the 21^st century, primarily by adding virtual racing and FOBTs to their retail offer.

Whilst Coral have struggled to deliver on their early promise, and Ladbrokes have carried on with their cautious uninventive strategies – entering and then reversing out of a number of overseas markets in recent years – Ralph Topping shook everything up when he did the unthinkable and signed a deal with Playtech to transform William Hill’s online offer whilst totally rethinking the company’s business strategies.

Since Topping took over Hills, Ladbrokes have simply been trying to play catch up, stumbling from profit warning to profit warning. At the helm is the (by Lads’ standards) audacious appointment of Richard Glynn, who was brought in from Sporting Index to breathe a bit of fresh air into the staid workings of the company, but appears to have only offered more of the same.

Hills have clearly succeeded by being bold, inventive and dynamic, words which seem an anathema to the Ladbrokes way of thinking. Coral too have been held back by their cautious approach, and also by their debt burden, so that the Big Three has more or less become the Big Two, with Fred Done and Coral now chasing from a distance.

Where now for Ladbrokes? Copying what Hills did and signing a deal with PlayTech may give a boost to their business, whilst a few abrasive Israeli executives shouting the odds in the boardroom might actually do the corporate atmosphere some good.

People forget that Ladbrokes actually have the largest number of shops, it is just that most people think the William Hill outlets look better. And of course they largely outperform their rivals (with the exception of the cherry-picked LBOs developed by Paddy Power in the affluent South East) in terms of both over the counter and machine spend.

Being under pressure from your investors means looking at short-term fixes to avoid another profit warning in the next quarter, and prevents you looking at the ground-breaking opportunities that can revolutionise the business in the long-term.

Despite all of the pressures to pull a rabbit out of the hat to keep the City happy, now is the time for the Ladbrokes directors to (I really hate this expression) “think outside of the box”, exactly as Topping has done. The days of being cautious are over, and if the current management team cannot come up with some new ideas soon, then a takeover or acquisition may be the only way that Ladbrokes can keep up with the rest and still be a major player in all distribution channels by the end of the decade.

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