Ladbrokes Coral Raises Savings Goal After Bookmaker Merger

Updated on
  • Cost synergy target increased to 100 million pounds by 2019
  • Shares drop as Italian soccer results weigh on current trading

Ladbrokes Coral Plc said cost savings from the merger that formed the U.K. betting giant will be greater than originally expected as it revealed that Italian soccer results have weighed on business in the early months of 2017.

Cost synergies from putting the Ladbrokes and Coral bookmaking chains under the same ownership will reach 100 million pounds ($126 million) per year by 2019, the company said Tuesday, up from a previous goal of 65 million pounds.

“The challenges around integrating two significantly sized companies has been managed well,” Chief Executive Officer Jim Mullen said in a phone interview. “You get access to more detail post the merger and you also maybe change your plans slightly about the acceleration of how you can deliver.”

The increased target provides a boost for the company at the start of a year when it faces a government review of betting-shop gambling machines, the outcome of which will be crucial to bookmakers’ profitability. Other challenges facing the industry include a consumption tax on online gaming products being introduced later this year, and a review of industry advertising by Britain’s competition authority.

About 25 percent of the merger savings will come from headcount reductions, with the rest being in areas such as trading, digital platforms and back office, Mullen said.

Revenue Synergies?

The company is still assessing potential revenue synergies to be had from the combination and has nothing to announce at the moment, he said.

Results for 2016 showed pro-forma operating profit for the combined businesses of 264.3 million pounds, in line with a previous forecast given by the company. A reported loss of 202.4 million pounds included 323.6 million pounds of non-trading items, partly related to November’s merger.

Ladbrokes Coral shares fell 1.9 percent to 132.7 pence at 11:40 a.m. in London as the company said its business in Italy has been hit by a run of highly unfavorable soccer results. The top three teams in the Serie A table -- Juventus, Roma and Napoli -- have between them won 25 of their last 30 league games, including a Napoli defeat of Roma.

Margins at the Eurobet Retail business in Italy are down 14 percentage points in the year to date, with net revenue at the unit down 44 percent, the bookmaker said.

Total group revenue is up 2 percent to date after leap-year adjustments, which some analysts said was less than expected.

The bookmaker said it’s been winning more from British customers in the early months of 2017, thanks largely to this month’s prestigious Cheltenham horse-racing meeting. Results went against bettors in 23 out of 28 races, Ladbrokes Coral said, a turnaround from the previous year when bookmakers had record losses.

Overall, sports-betting margins in both the U.K. online business and betting shops are about 1 percentage point ahead of last year, even though Premier League soccer games in February and March favored customers.

(Updates with Italian soccer results in eighth paragraph.)
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