Ladbrokes Plc, which owns more than 2,300 betting shops, said profit on soccer wagers was wiped out after too few games ended in draws, and announced a 275-million- pound ($439 million) rights offer to shore up its finances.
The Harrow, England-based bookmaker said it will offer investors one new share for every two they hold at a price of 95 pence each, 48 percent below yesterday’s closing price of 181.2 pence. The company also suspended its dividend today, and said operating profit fell 58 percent in the three months to Sept. 30, with two-thirds of the drop caused by soccer betting.
“Trading has forced management’s hand, and this gives us some concern,” KBC Peel Hunt analyst Nick Batram said in a note. He placed his recommendation “under review.”
Ladbrokes fell as much as 9.2 percent in London trading, the steepest intraday drop since May 15. The share sale will cut net borrowings to 687 million pounds from 962 million pounds and leave the bookmaker with an average debt maturity of about four years, Finance Director Brian Wallace said on a conference call.
“It isn’t just trading that has led to the rights issue,” Wallace said on the call. “We have been reviewing the capital structure since the beginning of 2008.”
Larger rival William Hill Plc this year raised 350 million pounds in a rights offering as part of its debt refinancing.
Not Enough Draws
Net revenue in the three months ended Sept. 30 fell 15 percent, while the amount won from customers also slid because of adverse soccer and horseracing results, Ladbrokes said. Operating profit in the period declined to 22.4 million pounds from 52.8 million pounds a year earlier.
Only four, or 6 percent, of the first 66 English Premier League soccer matches played this season ended in a draw, compared with a five-year average of 25 percent, Ladbrokes said.
A popular way to bet on soccer in the U.K. is to wager on a series of five or 10 matches at once. Punters usually pick a winner for each game rather than predict a draw, benefiting betting companies when matches end without a victor.
“Our football trader has been in the business for 40 years, and says this is absolutely unprecedented,” Ladbrokes Chief Executive Officer Chris Bell said of English soccer’s dearth of draws this year.
The number of soccer games won by the favorite also rose to about 70 percent from 55 percent normally, Bell said. Profit margins on soccer fell to zero in the last three months, from 30 percent a year earlier, according to the CEO.
Salary Freeze
“We believe trading results have been poor as a result of abnormal sporting results, which will normalize,” Evolution Securities analyst Ivor Jones said in a note. He maintained a “sell” recommendation on the stock.
Ladbrokes shares were down 12.7 pence, or 7 percent, to 168.5 pence as of 9:46 a.m. in London. William Hill declined 7 pence, or 4 percent, to 169.2 pence.
The bookmaker said it won’t pay a final dividend this year and will resume distributions at next year’s first-half results.
More cost cutting measures are being introduced, including a freeze on salaries until January 2011, the company also said today. Expenses in the U.K. retail betting unit this year will be 5 million pounds less than previously expected, it added.
(Source: Bloomberg)
