Ladbrokes earnings plummet by half as promotion costs rise ahead of Gala Coral merger

Ladbrokes earnings before income tax (EBIT) plummeted by 57% in the third quarter of 2015, the online betting company reported on Thursday (22 October). The firm said its increased marketing spend over the last months were to blame for the fall in earnings.

Sales edged up by 0.7% and saw a slightly stronger increase of 2% based on the third quarter of 2014 without World Cup revenue added to the top line. Ladbrokes said that external headwinds such as the machine games duty and other hiked betting taxes weighed down the results.

"These numbers reflect the first 68 days of activity since we announced our organic plan to aggressively invest and grow our recreational and multi-channel customer base particularly across UK Retail, Ladbrokes.com and Ladbrokes Australia," the firm's chief Jim Mullen stated.

"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 also said that the increased marketing spend is set to significantly increase the firm's customer base. The online gambler hopes to expand in terms of regulars and small betters.

Ladbrokes and rival Gala Coral rubber stamped their merger after months of talks in July, paving the way for the creation of a betting giant worth £2.3bn (€3.25bn, $3.56bn), dubbed Ladbrokes Coral. On Thursday, Mullen said that the tie-up was on track and the firm has raised £1.35bn in debt to finance the merged group.

The new firm will become the UK's biggest high street bookie with 2,100 stores, overtaking rival William Hill. The combined revenue of the two companies equates to £2.1bn. The merger would see the FTSE 250 listed Ladbrokes hold 51.75% of the new business. Ladbrokes' CEO Jim Mullen has been appointed chief executive of the merged entity and Gala Coral's chief exec will be named deputy executive chairman for a year after completion.