For the betting and gaming division of Hilton Group, 2005 represented the second best ever year, following the record results posted in 2004, with an operating profit of £266.6m from a gross win of £918.0m.
Hilton Group finalized the sale of its hotels arm and is now preparing to operate as a pure betting business renaming the company Ladbrokes, while returning a special dividend of £4.2 billion to shareholders.
“I am honoured to be leading Ladbrokes into the future. This new chapter in the company\’s journey promises to be more exciting than any in our 120-year history as we continue to differentiate our brand at home and extend our reach further internationally,” commented the newly confirmed Chief Executive Christopher Bell.
The company said its egaming division had performed well with its contribution growing by 94% year on year. Gross win for the division grew by 38% to £123m, while operating profit almost doubled to £41.4 million.
Sportsbook gross win was up 25% to £33.0 million, including the contribution from the recently launched Ladbrokes Financials. Average monthly active player days grew by 13% to 471,000 and stake per bet grew by 18% to £17.01, but margins reduced to 6.8% (2004: 8.3%) as the number of betting opportunities, including betting in play which tends to be a lower margin product, increased.
Poker gross win grew by 79% to £41.4 million, with average monthly active player days up 111% to 411,000 and average weekly rake of £793,000.
Casino gross win of £39.1 million was up 16%, with 64,000 average monthly active player days, up 14%, and average weekly drop of £749,000.
Games gross win of £9.6 million grew by 57% following the launch of a number of new games during the year and average monthly active player days were up 38% to 54,000.
Highlights in 2005 included the launch of new services such as Ladbrokes Financials, Live Dealer casino and an online version of the popular Chinese game Mahjong, while turning to the retail division, 2005 saw the acquisition of Jack Brown, the largest bookmaker in Wales, and the development of Ladbrokes Xtra.
At the year end Ladbrokes had 2,134 shops in the UK, 148 in Ireland and 301 in Belgium. The company\’s UK retail business posted operating profit of £207.8 million, down 3.2% from the record performance in 2004. Jack Brown contributed £3.0 million since its acquisition in July 2005. The company\’s Ireland and Belgium retail reported an operating profit of £11.7 million, with Ireland down 9% and Belgium down 14%.
The company\’s telephone betting division posted an operating loss of £0.1 million, compared to an operating profit of £17.8 million in 2004, with an adverse year on year swing of £11 million due to high rollers.
Vernons maintained its operating profit level of £5.8 million and customer retention rates continued to improve (79% on \’Numbers\’ and 89% on \’Pools\’).
Chief Executive Chris Bell said the success of the egaming business was an “early indication of the international appeal of the Ladbrokes brand”.
Bell confirmed Ladbrokes would soon review its policy of not taking online bets from US customers, despite the legality of online gaming in the US remains ambiguous..
“We always review our position,” he said. “We\’re the biggest online brand that doesn\’t take U.S. players. We are going to review that even quicker this year.”
Bell also said discussions regarding possible acquisitions would continue to progress but added “we will only pursue deals where the investment case is a sound one.”
The company has also announced the details of its consultancy role in the launch of China’s first sports lottery pool betting shops which have opened in Beijing Province. The shops are the first in mainland China to offer singles betting on football matches.
Senior members of Ladbrokes management team have been stationed in Beijing over recent months providing consultancy services to China Sport Lottery (Beijing) Sales and Marketing Co., the organization with responsibility for sales, marketing and operational aspects of the new sports pools betting shops which use the ‘Happy Pool’ brand.
The market size of the China Sports Lottery, including the football lottery, is projected to be around $4 billion this year. Beijing takes about 8% of the national sports lottery market.
Bell said the “very small step into China” was “also an encouraging one.”
“China has the potential to be one of the biggest betting markets in the world,” he added. “This demonstrates how well the brand travels.”
“We\’re likely to announce another two or four (agreements) in the coming months and they\’ll all be in Asia or Europe.”
“Ladbrokes has strong foundations for the future. We have a strong brand, an excellent experienced management team, a track record of success and a clear strategy for growth, underpinned by sound financials. We look forward to implementing our plans for 2006 and beyond,” said Bell.
“With just a few weeks of 2006 behind us, whilst the retail estate has suffered from a loss of horseracing fixtures and some poor results, we are encouraged by the recovery in Telephone Betting and the continued success of our eGaming division,” he added.
This year\’s World Cup soccer tournament promises to be “the biggest betting event ever” for the company. The last World Cup four years ago generated £6 million of profit for Ladbrokes, despite the fact that the favourites, Brazil, won the tournament. The worst result for Ladbrokes this summer would be for England to win the World Cup.
“The year ends with England\’s defence of the Ashes in Australia in December, which we hope will again capture the nation\’s betting attention,” said Bell. “These event, together with the final stages of the Champions League, Cheltenham, Aintree, Epsom and Royal Ascot will make this an exciting year for Ladbrokes.”
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