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Bets are off: Ladbrokes slammed in weak London trade
by Chris Marshall on Sep 26, 2013 at 09:48
Shares in Ladbrokes (LAD.L) slumped more than 9%, leading mid-sized London shares lower, after the betting company told investors that ‘disappointing’ earnings online meant profits would fall short of market expectations.
The bookies was the standout loser in a sea of red, most of which can be blamed on angst about US politicians’ ability to act before a looming debt deadline, alongside uncertainty over the fate of US stimulus.
Britain’s FTSE 100 dipped 0.1% to 6,541, in line with losses in Europe, Asia and the US, as markets remain in a ‘non-panicky limbo’ as Deutsche Bank’s Jim Reid described it in his morning note. Japanese shares had been among the major exceptions, making gains amid rumours that the government may cut corporation tax rates.
Ladbrokes’ 9.4% decline to 170p came as the company’s chief executive called trading conditions ‘challenging’.
Investors and analysts hadn’t expected good news, but were nonetheless disappointed with the company's forecast that full-year operating profits of between £10-14 million would be about half of what had been expected.
‘We continue to be frustrated by the lack of progress online and struggle to get a value of more than 140p per share for retail alone,’ Greg Johnson of Shore Capital said as he kept his ‘hold’ rating.
Some analysts said investors should hold on as things could get better from here. ‘Given that much of Ladbrokes’ pain is self-inflicted, there are genuine reasons to hope for a recovery and this could represent the nadir in the group’s fortunes,’ suggested Peel Hunt’s Nick Batram.
Shares in utility companies added to yesterday’s losses after Labour leader Ed Miliband said his party would freeze energy bills if it wins the next general election. Centrica (CNA.L) was down 2.1% to 367p, while SSE (SSE.L) fell 1.1% to £14.76.
Analysts have been advising investors to re-think their positions in the sector. JP Morgan this morning cut Centrica to neutral from overweight.
Nik Stanojevic of Brewin Dolphin concluded that although ‘news flow could be negative in coming months… overall our feeling right now would be to buy on any weakness resulting from this uncertainty’.
On currency markets, the British pound was down 0.2% at $1.6046 after second quarter GDP was left unchanged at 0.7% in a third and final reading from the Office for National Statistics.
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