Betting firm share price falls after profit warning

Disappointing Cheltenham
Like the majority of other bookmakers in the UK, income from betting on horse racing is hugely important to Ladbrokes. The Cheltenham Festival, a four-day meeting last month, was one of the biggest fixtures on the horse racing calendar, but for Ladbrokes and many of its rivals, a string of victories for favourites had seen them lose a significant amount of money.

Typically, when favourites win, as most punters are likely to back them, bookmakers stand to lose more money than they would if, for example, a 50/1 shot were to win a race such as the Gold Cup or Champion Hurdle. On the final day at Cheltenham, a number of favourites had won, which reportedly saw £6m wiped from Ladbrokes’ bank balance.

A levy too far?
The betting industry in the UK is, compared to some countries, heavily regulated, but a new task which came into force last year could be partly to blame for Ladbrokes’ current short-term woes. The 20% Machine Games Duty (MGD), which was brought in during the 2012 Budget, sees income from betting shops’ games machines taxed to some degree.

As Ladbrokes have hundreds of betting shops in the UK, it’s likely that a fairly hefty chunk of money will have found its way to the Treasury. However, better news for this quarter could be on its way, as the Grand National earlier this month at Aintree saw 66/1 shot Auroras Encore win the most lucrative race in horse racing for bookmakers.

Brighter times ahead
Recent good news at Aintree, coupled with other big sporting events coming up including the UEFA Champions League semi-finals and final could see Ladbrokes’ profit and share price rise once again. A recent revamp of their website could also spark recovery. In the meantime, chief executive Richard Glynn spoke about his firms’ recent misfortunes:

“The trading environment and economic conditions since the start of the year have remained challenging”, said Mr Glynn in a statement to the media. Online gaming, where Ladbrokes has been left trailing, is one area where they hope to expand in the near future.