What is also interesting with regards to our machine numbers is that only 8% of our gross win was accounted for by stakes above £50Carl LeaverHow would you summarise these results?
It was another strong quarter for us. We had 13% EBITDA growth and that takes our year-to-date growth to 15%. Online net revenue growth was again the key highlight. That was a 19% increase on the same period in the prior year. The sportsbook is growing stronger than the Gala site. Coral.co.uk was 26% ahead and Eurobet.it was 25% ahead. Our growth would have been higher than that had it not been for some new regulatory requirements around source-of-funds checks and self-exclusion, which put a bit of a dent in our numbers, as well as some short-term instability that we saw with the platform on the introduction of reality checks. That lasted about four weeks or so and probably cost us £2.5m.
Without those impacts, we would have seen growth just short of the 30% mark. Within that, Coral Connect continues to be a key driver. We signed up 74,000 new Coral Connect customers during the quarter, which is yet another increase on previous records. Coral Connect now accounts for nearly 50% of all Coral.co.uk net revenue, which really demonstrates the importance of our multi-channel strategy to our growth.
What would you put the increases in retail and online net revenue down to?
Online has grown through the continued performance of Coral Connect, but the Euros worked very well for us, in terms of new customer acquisition. In total, we signed up 230,000 first-time depositors during the quarter, and that was despite a decision not to advertise on TV. We also decided not to advertise on TV during the last World Cup. That worked well for us then and it’s worked well again. We think that the cost for airtime during a football tournament is prohibitively expensive and it’s very difficult to drive a return from that spend. We are quite forensic in the way that we apply our advertising budget and it seems to have worked well for us during the quarter.
In terms of retail, machine revenue grew strongly, following the anniversary of the £50 stake controls, meaning that supervision is needed for stakes above £50, which was good to see, because that cost us quite dearly in the previous 12 months. What is also interesting with regards to our machine numbers is that only 8% of our gross win was accounted for by stakes above £50. This idea of fixed-odds betting terminals being high-stakes gaming is somewhat out of date, because about 99% of our customers stake at £50 or below.
Andrew Lyman, William Hill’s Director Group Regulatory Affairs, said earlier this year that the new measures led to a 6% hit in betting shop revenues. Would that be in line with what’s happened with Gala Coral?
Yes, that would be bang on. In fact, everybody has arrived at the 5-6% range.
The point of consumption tax regime cost £10.8m from online operations. How would you say you have coped with the tax?
This quarter was the first time that all the regulatory effects annualised. This financial year, to the end of September, it will cost us about £45m or maybe slightly higher than that, so of course, it’s a massive hit. We are fortunate that our business is growing at a strong enough rate online to cover that cost and still deliver some significant profit growth. That’s not the case for all operators in the industry, but in our case, we’ve been able to grow our way through the problem.
This could be considered as the home straight before the Ladbrokes merger. What targets have you set for Gala Coral before the merger happens?
What I’d like to see is continued momentum that we’ve got within the business, not just through to the merger, which hopefully is pretty close now. We’ve been working on it since before the middle of last year, when the deal was announced. We’ve got a few weeks until we’re hopefully able to complete the merger, following the sale of the shops. I would like to see that momentum continue through to then, but importantly beyond then, because we’re managing a significant integration. I think we’ve got that set up well. I’ll be taking responsibility for the integration, which leaves Jim [Mullen, Ladbrokes CEO and impending Ladbrokes Coral CEO] and the rest of the team focused on continuing to deliver the operational results. Hopefully, that will ensure that we will be able to maintain that momentum, not only in Coral, but in Ladbrokes Coral too.
You were named as being in charge of leading the delivery of synergies when the merger completes. How will the performance of Ladbrokes Coral impact on Gala Coral’s brands and how will you bring about those synergies?
Our target is that it will not impact on the performance of the business. On top of the encouraging performances we’re seeing in both businesses at the moment, we’ll deliver £55m of the cost synergies at least, and of course revenue synergies as well. That’s the objective.
It was mentioned in the press release regarding the Q3 results that parties have expressed an interest in buying the 350-400 shops that need to be sold to complete the merger. To what extent have negotiations progressed?
We are into phase two of the process. We have a number of interested parties from a range of types of buyer, which I think is a healthy position to be in. We’ve got some potential buyers that can buy the whole of the group of shops and some that can buy a big chunk of it. There are some that are sat there ready to buy any of the shops that the lead purchaser is not able to take. I think we’re in good shape.
Can you tell me anything about the number of shops that will be sold on both the Ladbrokes side and the Coral side?
It’s pretty broadly split. It’s about half and half and the number sold will be towards the bottom end of the range of shops that need to be sold.
