Ladbrokes posted group EBIT of £14.3m for the three months ended September 30, down 57% year-on-year, while Hills reported a 39% year-on-year operating profit drop for the 13 weeks ended September 29.
If you look at both companies, both have been impacted in the third quarter by weak gross win margins across their business. It’s a double whammy with margins going from being above average to below average and that really comes down to sports results, specifically horse racing results in September, which impacted on both of themDavid JenningsHills’ trading statement only included percentages and did not state specific totals.
David Jennings, an analyst at Davy Research, said: “If you look at both companies, both have been impacted in the third quarter by weak gross win margins across their business. It’s a double whammy with margins going from being above average to below average and that really comes down to sports results, specifically horse racing results in September, which impacted on both of them.”
Hills' operating profit drop was in part put down to tax increases, such as the UK point of consumption tax, which requires gambling companies offering their services in the UK to pay the same amount of tax, regardless of where they are based, which was implemented in December.
“The point of consumption tax, which wasn’t there last year, is there this year," said Jennings. "In addition to that, you had the 5% increase in machine gaming duty in retail.
“The tax there has gone from 20% to 25%. You’re undoubtedly going to see pretty volatile earning streams, certainly on the quarter. The longer the period goes on, you’d expect that volatility to reduce.”
Ladbrokes said its proposed merger with Coral, which was announced in July and is still waiting approval from the Competition and Markets Authority, is “on track”.
