There are few more satisfying sporting pursuits than taking a few quid off the bookies and there’s nowhere better to do it than at the Cheltenham Festival. Every year, a heaving mass of humanity, a colourful mixture of the curious, corporate guests and serious punters, assemble on the banks of the Severn, seemingly intent of downing as much pig roast and Guinness as they can, while regularly smacking down great wads of twenties to men protecting well-worn briefcases stuffed with cash.
Not as though there’s much need for security: anyone making a grab for one of these bags would never get away, such is the density of spectators.
Irrespective of your end-of-day cash balance, any day at Cheltenham is enjoyable – assuming you’re not driving – because it confirms that not everyone bets online.
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Tens of thousands of people filing through the gates this week have been content to accept what looks like a £5 minimum bet policy and should they be handing over more than £500, a goodly number of punters are prepared to negotiate the odds they’re receiving – and succeeding.
There’s no such interaction with an online bookie operating from a remote territory, the name of which sounds vaguely familiar, though you’re not quite sure where it is.
Betting markets dictate the day at Cheltenham; without the bookies and the characters who surround them, none of the eccentrics, self-styled pundits or day-trippers would bother attending. Thankfully, their continued presence ensures the Festival resembles a nineteenth century gathering. Everyone comes to bet, have some fun and hopefully go home ahead of the game after taking ‘the enemy’ to the cleaners. Was it ever thus?
Ever since the 1853 Betting House Act, an attempt to prevent people from placing cash bets in offices and pubs, an uneasy truce has existed between bookies and punters who recognise they need each other to ward off ‘reformers’ concerned at curbing their mutually beneficial financial arr-angements.
A National Anti-Gambling League was formed in 1890 and while this was a minority movement, a few racecourses were actually closed down.
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Nevertheless, betting’s hold on society was, and remains, acceptably strong as anyone fortunate enough to spend a day in Gloucestershire this week would appreciate.
Two of the most prominent organisations at Cheltenham (as they are every year) are Ladbrokes and William Hill, colossal organisations (combined market capitalisation: £4.7 billion) who have experienced vastly different fortunes over the past decade.
Both revel in Cheltenham’s bustling, market-like atmosphere, even though the pair, plus Coral and Betfred, are effectively responsible for making betting markets around which other, smaller firms, operate.
In truth, the importance of ‘live’ cash punters, queuing in time-honoured fashion to place their wagers, is gradually receding and Ladbrokes, which has trailed in Hills’ wake (the latter is now more than twice the size of the former in terms of market value), not only intends closing around 50 betting shops, it also plans to replicate its rival’s online success.
Following an often fractious link-up with Israeli technology firm Playtech, William Hill embarked on a seemingly unstoppable run as its online offering, coupled with a smart marketing campaign, began to differentiate it from Ladbrokes. The scale of the divergence is apparent in Hill’s accounts.
In the year ending 2009, the company’s turnover was £998 million and pre-tax profits £121 million. By the end of last year, turnover had reached £1.48 billion, while pre-tax profits had more than doubled since 2009 to £257 million.
Shareholders have reaped the benefits of William Hill’s success as the annual dividend has almost doubled (from 6.9p to 11.6p) over the same period as the company’s share price has risen from 168p to Wednesday morning’s 375p.
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Ladbrokes, by contrast, have endured a torrid time. Indeed, last September, it issued its fourth profit warning in just over twelve months after admitting that the move to a new gaming technology platform would have a “greater disruptive impact than expected”.
Significantly, Ladbrokes is betting that Playtech’s technology can perform similar wonders for its online offering as it did for William Hill.
While Cheltenham holds some importance for Ladbrokes, particularly in terms of generating profits from its still wonderfully-named ‘high-rollers’, who contributed £5.9 million to its operating profits last year, the bookie’s focus is on having a user-friendly, technologically-competent website ready for the World Cup which starts in mid-June.
Twelve months ago, Ladbrokes’ share price was 238p; by yesterday lunchtime, its shares were trading at 159p, a fall of more than a third.
This miserable performance, at a time when equity markets have been exceptionally buoyant, mirrors the company’s financial performance last year, when net operating profits tumbled by almost 33 per cent.
Moreover, although its ‘high-rollers’ contributed £5.9 million of operating profit last year, in 2012, that figure was £30 million.
Despite these setbacks, Ladbrokes believes it continues to make significant operational progress. Its longer-term strategy can be determined by looking at where it is attempting to improve.
Apart from a new contract with Playtech, designed to accelerate digital revenue growth, it has also launched a new mobile site on the Mobenga platform. Tellingly, while Ladbrokes will become a ‘net closer’ of betting shops, it actually opened 121 new ones last year in what it describes as “higher football locations” and plans to roll out its new ‘Clarity’ gaming machines prior to the World Cup.
Richard Glynn, Ladbrokes’ chief executive, admitted that, “financial results for 2013 were disappointing,” but went on to say that the migration to Playtech, due to start next month, combined with, “capability upgrades…will begin to deliver tangible benefits from the World Cup onwards”.
Mr Glynn has more riding on the World Cup than on anything in the Cheltenham Gold Cup, for he is likely to be out of a job by August unless he achieves tangible results in his attempt to overhaul Ladbrokes’ under-performing digital business. He has already achieved several retail targets and launched a mobile sportsbook which enables punters to bet using their smartphones, but investors require evidence of more in the fierce battle for greater online market share.
As this week’s Cheltenham Festival has shown Mr Glynn, our propensity to enjoy a bet and endure an often anxious, uneasy relationship with bookies has remained unchanged for more than 150 years.
He will be hoping to build upon this before the World Cup kicks off in June; should he be able to do so while offering punters similar levels of enjoyment, he could succeed.