Ladbrokes Profits Drop: Moving Online Unit to Gibraltar

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By David Altaner

Aug. 6 (Bloomberg) -- Ladbrokes Plc, owner of more than 2,300 U.K. and Irish betting shops, posted a 21 percent drop in first-half profit as horse-racing and soccer results favored customers.

Ladbrokes will also move its online sports-betting to Gibraltar by the year end to save about 7 million pounds ($11.9 million) in tax and levy annually, Chief Executive Officer Christopher Bell said in a conference call. Competitor William Hill Plc announced a similar move this week. Online bookmakers based offshore pay about 1.5 percent in tax, compared with 15 percent for U.K.-based operators.

"It gets to the point of ‘last man standing,' it really gets to be untenable," Bell told reporters. "We made it quite clear we wanted to stay in the U.K."

The company's Internet gambling operations were hurt in the first half by intensified competition for poker, Ladbrokes said today in a statement. Results were also crimped by horse-racing cancellations and customer wins at shops early in the year, the Harrow, England-based company said.

Net income for the six months ended June 30 dropped to 74.7 million pounds ($126 million), or 12.4 pence per share, from 94 million pounds, or 15.5 pence, in the same period a year earlier.

Internet Gambling

Operating profit dropped 21 percent to 20.8 million pounds at Ladbroke's Internet-gambling sites. Net Internet revenue of 84.6 million pounds was a 2.3 percent decline, which compares with a 12 percent pro forma gain for William Hill's online operation.

Ladbrokes may be behind William Hill in both timing and execution of Internet-gambling changes, wrote Paul Leyland, an analyst with Collins Stewart who has a "hold" rating on Ladbrokes. "We see considerable scope for William Hill to increase its lead over Ladbrokes over the next 12 to 18 months, particularly online," he wrote.

Bell said only a "handful" of jobs would be moved to Gibraltar. The company had no plans to move its telephone- betting operations overseas, he said.

Ladbrokes gained 6.9 pence, or 4.1 percent, to 174.4 pence at 12:18 p.m. in London. The shares have dropped 5.1 percent this year, giving the company a market value of 1.05 billion pounds.

Consumer confidence and business conditions "have definitely worsened" since May, yet the company was still aiming to meet analysts' full-year profit estimates, Bell said. "There is no question these are tough times and trading remains difficult."

Ladbrokes said it was cutting its first-half dividend by 31 percent to 3.5 pence per share, because of the "current uncertain outlook." The bookmaker also unveiled plans to sell its Italian business.


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