British bookmaker Ladbrokes has reported a £51.4m loss for the first half of the year weeks after announcing a £2.3bn merger with Coral.
The firm tumbled into the red after taking a £78.9m charge largely due to a write-down in value of shops in UK and Ireland, and the cost of closing down a number of them.
Chief executive Jim Mullen said the aim to “create a better business” with clear targets over the next couple of years removed “short-term thinking that had come to dominate our actions”, but would hit current profits.
Mr Mullen, who took over as boss earlier this year, added: “Our first-half results reflect the challenge facing Ladbrokes. While we have some encouraging customer trends, we need to reset the business and invest.
“The results clearly show why we need to change, and why we need to do so quickly.”
Headline revenue rose 1.3% to £585.4m for the six months to the end of June. The rise would have been 4.2% excluding the impact of last year’s World Cup.
Turnover from UK betting shops was up 1.2% and from digital was ahead by 6.9%. Online sports betting and gambling are key areas of growth for the industry.
But operating profit even excluding one-off charges was down 31.5% to £38.9m, largely reflecting changes to online betting and gambling machine taxes.
Write-offs took a further chunk out of earnings, including a £58.3m pound impairment after a review of UK and Ireland shops and software, and a £17.1m hit on the closure of outlets including 40 in the UK in the first half.
Ladbrokes had 2,169 shops in Britain at the end of June. It is planning a total of 60 closures for 2015.
Its merger with Coral is expected to see it overtake William Hill as the biggest bookmaker in Britain, though it is expected to have to dispose of some stores to satisfy any concerns about the deal from competition regulators.
Mr Mullen said: “The proposed merger with the Coral Group represents an exciting opportunity for the business but, with completion some way away, the focus for me and my team must be on the here and now.”
Analysts at Numis believe a lengthy probe by the Competition and Markets Authority could mean the merger not finalising until the second half of next year.
At the time the deal was announced last month, Mr Mullen said Ladbrokes was embarking on an urgent three-year investment programme to boost revenues in its shops and grow its online business.
He warned it would mean operating profits for this year £20m lower than expected and slashed the full-year dividend by a third.
For the half-year it was down by more than three-quarters, from 4.3p to 1p.