Ladbrokes results encourage as Mullen's strategy takes shape

(ShareCast News) - Ladbrokes shares raced higher as Thursday's third-quarter results met forecasts but were somewhat mixed as new chief executive Jim Mullen's plans take effect, with underlying revenue growing but operating profit falling sharply.The bookmaker reported a strong start to the football season, which helped underlying group net revenue for the three months to the end of September to rise 2% at the underlying level, excluding the impact of the football World Cup last year, which masked the 0.7% decline at the statutory level.Strong 10.5% underlying growth in digital revenues helped put a better sheen on underlying UK retail revenues up 1.1% and European retail down 4.6%.After several quarters of declines, UK retail enjoyed a 1.8% increase in amounts wagered and machine gross win per shop surged 8.6%. In the online sportsbook amounts wagered were up by a strong 34%, whilst active users and gaming revenue both saw double digit growth.The results reflect the first activity since Mullen introduced his plans to invest and grow the recreational and multi-channel customer base particularly across UK retail, online and Ladbrokes Australia."It is early in our journey, but today's results reflect positive initial progress and customer traction with continued increases in staking and actives across Digital and improved staking trends in UK Retail driven by football and racing," Mullen said.Earnings before interest and tax decreased by 56.7% to £14.3m, largely as expected, as management upped their marketing spending to grow the "recreational" customer base, while also being buffeted by the UK taxes, a withdrawal from unregulated digital markets and tougher margins in comparison with those enjoyed during the World Cup 2014.In the UK the group has been encouraged by the response to the late August nationwide launch of a multi-channel offer, 'One Ladbrokes', that is focused on growing digital actives through the combination of digital and over-the-counter (OTC) technology products, such as the bet slip tracker mobile app, the 'Grid' loyalty card and new retail staff incentivisation and training."With sportsbetting at our core we see customers responding well to our products, our value and to our recently launched multi-channel offer," Mullen added. "All these initiatives are part of the long term plan for Ladbrokes with our targets based around delivery on hard financials for 2017."The focus now is on building on this start. Our people are responding to this challenge and we are committed to taking whatever steps necessary to keep this focus."There was no further news on the merger with Coral apart from it being "on track", having sucessfully raised £1.35bn in new bank debt to finance the merged group.Analysts at Shore Capital said they were disappointed with win margin in light of the wagering growth, even though football was said to be strong."Q3 was said to be in line with management expectations suggesting the group remains on track for circa £70m of operating profit for the full year - circa 4p of earnings - implying Q4 profits consistent with the third quarter," they said, maintaining a neutral stance but noting that the current price "appears to assume little chance of the Coral merger completing, which may be overly pessimistic".Shares in Ladbrokes were up 4% at 105.1p by 0844 BST on Thursday.