Horse racing falls behind roulette as Ladbrokes‘ biggest earner

Takings from touch-screen roulette machines in Ladbrokes‘ betting shops have edged ahead of earnings from traditional horse racing bets — the first product to do so in the group’s 122-year history.

The average weekly sum per machine lost by punters playing in Ladbrokes‘ UK betting shops rose by 18.2% to GBP 676 during the first six months of 2008.

Average over-the-counter takings rose by 0.9% to GBP 251.80, with horse racing accounting for just under half of that figure, increasingly losing share to other sports bet offers, particularly football.

Takings from Ladbrokes‘ 8,100 machines for the half year were GBP 142.5m, benefiting from recent deregulation that has allowed the bookmaker to advertise on television and open for late evening trading.

Seven years ago, about two-thirds of Ladbrokes‘ shop takings were from horse racing. But machines and football have attracted a new generation of gamblers.

Brian Wallace, the company’s finance director, warned investors that seven years of growth from its machines was now likely to slow as the market matured.

He expects machine takings to rise 11% for the second half of 2008, prompting concerns among some analysts about the future growth prospects for the betting shop business. Its rival bookmaker William Hill has also warned that machine growth is expected to slow.

Gross wins from the Ladbrokes‘ online bookmaking, poker and casino operations rose 23% to GBP 96m, but the group in effect gave away GBP 9.4m in free bets, promotions and bonuses as well as spending GBP 19m on marketing costs involved in recruiting and retaining players. As a result, operating profit for the e-gaming division was almost flat at GBP 26.2m.

Chris Bell, the chief executive, said he did not expect aggressive promotional activity on the high street to reach the levels seen on the internet.

Nevertheless, the group launched a reward points-based loyalty card scheme in June, which has already seen GBP 1m in free bets redeemed by customers.

Bell and his head of e-gaming, John O’Reilly, have been lobbying Treasury officials to substantially lower the 15% gross profits tax charged on online sports bookmakers based in the UK.

They argue that their web business will ultimately struggle to compete against rivals based in offshore tax havens.

William Hill and other high street chains are making a similar case to Treasury officials but they and Ladbrokes remain committed to a „gentleman’s agreement“ under which the leading UK bookmakers promised in 2001 to bring their online businesses onshore, in exchange for the replacement of betting duty with a lighter tax on gross profits.

That tax change, overseen by Gordon Brown when he was chancellor, led to the rapid proliferation of touch-screen roulette machines in betting shops. These proved to be so lucrative that leading chains saw their share prices quickly double.

Ladbrokes said its operating profit for the first half of this year declined 11.8% to GBP 170m, largely reflecting a sharp drop in the traditionally volatile high-roller custom at the group’s telephone betting division.

Takes for the first three months of the year were strong, but faded recently with a run of good results for punters at Royal Ascot and the Euro 2008 football tournament.

Bell said it was a testament to the growing popularity of football betting that Euro 2008 had attracted bets totalling GBP 30m — more than Euro 2004, despite the absence of home nation interest. However, he admitted profits were much lower as the winners, Spain, were well backed whereas Greece’s surprise win four years earlier proved highly lucrative.