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 is online. Where William Hill has forged ahead Ladbrokes has been slow to keep pace.
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. 
There are also problems approaching for the online gambling industry. Point of Consumption Tax will take between £270m and £300m from the industry. Punters may receive less value, which in turn will create less revenue. Marketing budgets will be hit with affiliates likely to feel the pain. Some consolidation is inevitable with the smaller operators losing out.
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. 
On the positive side we are approaching an election in the UK within the next two years. Governments have a way of making the economy improver leading up to elections and the housing market is in a better place today than it was last year. That will help the betting shops.
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. 
If we see a European style QE then sunny times are here for a while at least. However the party holding the balance of power in Germany is the CSU and their leader still thinking of Germanys great inflation and says he is having nothing to do with QE!
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.