From the Blue Index blog

Dont bet on Ladbrokes
May 15th, 2009

Shares in bookmaker Ladbrokes (LAD) were looking like a good recovery play up to this morning, having regained over 50% of their value after the October low of 133p last year

But this morning, Ladbrokes reported a 34% slump in profits for the first four months of 2009. Profits from big spending high rollers tumbled to just GBP25m from GBP40m in 2008, with punters enjoying a particularly good Cheltenham Festival in March. These abnormal gross win margin levels, increased free bets and unfavourable cost phasing in eGaming against the previous year resulted in the profits slump, although CEO Chris Bell was at pains to point out the rate of decline is not representative of our expectations for the year, and he said the decline has already given way to more normal trends in May. And overall, added Chris Bell, the general resilience of the business and strong cost controls gives us confidence in the outturn for the full year.

But brokers Noble, Shore Capital and Daniel Stewart all see the results as disappointing and weaker than expected, particularly given that results at rival William Hill are strong and in stark contrast

Full transcript here
http://blog.blueindex.co.uk/2009/05/dont-bet-on-ladbrokes/

StockMarketWire.com
Ladbrokes has welcomed the Competition & Markets Authority's final approval of the proposed merger with Coral.

The CMA has approved the disposal of 322 shops to Betfred, 37 to Stan James and one shop to Bet21.

Following receipt of this approval, Ladbrokes will publish a prospectus in relation to the readmission of the enlarged group to the premium listing segment of the Financial Conduct Authority's Official List and to trading on the London Stock Exchange.

It is expected that completion of the Merger will take place in the very near future.

Ladbrokes chief executive Jim Mullen said: "I am delighted that the CMA has given approval to our merger with Coral. Both businesses are approaching the merger with good momentum and we are now focusing on completing the merger and delivering on the opportunities it offers."

Change of Name
Further to the publication of the Prospectus in respect of the proposed merger of the Company with certain businesses of Gala Coral Group Limited on 27 October 2016, and in accordance with LR 9.6.19, Ladbrokes plc announces it has today changed its name to Ladbrokes Coral Group plc. The merger is expected to complete on 1 November 2016.

Canaccord comment today:
Fifteen months after its initial announcement, the slow motion Ladbrokes/Coral merger finally completed today. We think that it will be worth the wait, notwithstanding increased UK regulatory scrutiny on the Gambling sector. LAD didn’t get a compelling valuation (3.6x Ebitda, after adjusting for accrued profits) for its forced sale of 360 stores. But it was a relatively low price to clear a deal that offers strategic value and considerable scale in both retail and Online gambling. It also delivers a strengthened management team and substantial cost synergies, which we see at comfortably above management’s projected £65m.
Both LAD and Coral have traded strongly through FY16, supported by a Bookie-friendly European championships, and the early fruits of LAD’s strategic review. Online growth remains impressive (Coral +24% in the 3 months ended September, Ladbrokes +33%, albeit from a low base). This strongly underpins post-merger Revenue/Profit expectations. The Triennial review of Stakes/Prizes could drive tighter regulation (i.e. cut the starting point for the so-called £50 journey) or reduce maximum stakes or machine numbers. The impact of the £50 journey was equivalent to a £30m hit to LAD/Coral profits. But we see greater upside to LAD/Coral’s £65m synergy targets. This amounts to just 3% of combined 2018 costs, versus 11% for Paddy Power/Betfair and 15% for bwin/party. Clearly, there is less direct overlap in Retail (although management expects 60% of its synergies to come from Retail). But even as a % of just LAD/Coral Online costs, the £65m target is just 9%. A target of over £100m seems realistic.
We think the fit looks good, and synergies offer upside. This provides plenty of ballast, at a time of increasing uncertainty around UK gambling regulation. And the impact of the deal on forecasts (with just the £65m of synergies) is compelling. We see FY17 EBITA rising from £118.4m to £313.5m, driving EPS up 47% from 7.9p to 11.7p. And given a commitment to 2x dividend cover, the dividend is ramped up to 5.8p. For FY18, EPS is upgraded 65% to 13.9p. Leverage rises, but it remains a comfortable 2.5x Ebitda in FY17F, falling to 2.0x at end FY18F.
Valuation
The shares are off their highs following recent regulatory concerns, but they are still up by 26% over the past year and 14% over 6 months. On our revised forecasts, it trades on a PER of 11.4x and EV/Ebitda of 8.2x (William Hill on 12.7x/8.8x) in FY17 falling to 9.6x and 7.1x in FY18 (a marked discount to Hills on 11.6x/8.2x). And it offers a 4.4% FY17F yield. We think this looks attractive – if we put the Online business on a 12.0x FY17 Ebitda multiple, Retail is valued at just 5.5x. And we see upward pressure on synergies. Our 165p TP (FY17F EV/EBITDA of 9.5x) represents 24% potential upside. BUY."

This thread will now terminate as the ticker LAD is obsolete. New ticker is LCL.