Clash Of The Titans: Ladbrokes vs William Hill
By Warwick Bartlett
There was a time not so very long ago when this contest was a walkover for Ladbrokes. Ladbrokes, labelled by the racecourse tic-tac men as the ‘Magic Sign’, were market leader. In fact, practically every senior executive in the gambling industry had passed through Ladbrokes. The company was the betting sector’s university.
Today, William Hill is the market leader and CEO Ralph Topping told The Times in May 2013 that the traditional rivalry between Ladbrokes and William Hill was now consigned to history.
According to a Morgan Stanley note to investors (July 2013) £100 invested in William Hill when it created William Hill Online would now be worth £524. Over the same period the same investment in Ladbrokes would now be worth just £206.
William Hill’s market cap of £3.29 billion is 82% higher than Ladbrokes at £1.80 billion. Yet both companies operate similar numbers of betting shops in the UK.
The difference for William Hill was Playtech and the new sports betting platform. Having tried and failed with their own software development, Topping quickly dumped the in-house development when he took over and went for the Orbis service used by most of the larger bookmakers.
But the real difference was the Playtech deal. Playtech taught William Hill a lot.
Ladbrokes now have a deal with Playtech. The deal is complex and geared to an increase in EBITDA for Ladbrokes, so Playtech has been given the incentive to work hard to make it a success. Playtech effectively owns 27.5% of any upside profit in Ladbrokes Digital, which could give Playtech £70m next year. It is a good deal for Playtech.
The betting shop is also under attack. Speaking at GES in Barcelona Ladbrokes’ CEO Richard Glynn stated that £30m of extra costs and taxes had been taken out of the business through media rights and Machine Games Duty.
But nothing is certain. The European Union has fixed nothing with the Euro crisis, and the sense is that everything is on hold until after the German election this coming September. At that point something will have to be done about Spain, Portugal, Italy, Greece, Cyprus et al and the fallout could reach the UK.
So will Ladbrokes make a comeback? The shares are selling at a significant discount to William Hill and maybe worth a punt. Not for widows and orphans.