Surprise soccer results boost profits for Ladbrokes

By Paul Sandle

LONDON (Reuters) - Soccer club Leicester City's fairy-tale triumph in the English Premier League and surprising results in the European Championship boosted first-half profits at Ladbrokes (LAD.L) and put it on track to beat expectations for the year.

The Premier League victory by the 5,000-1 outsiders cost Ladbrokes about 3 million pounds ($4 million), it said on Thursday, but the triumphs of Leicester and other underdogs through the season cost many more customers their bets on the likelier winners.

The bookmakers' wins in soccer more than offset the worst results on record for bookmakers at the Cheltenham Festival horse races in March and a string of wins by the favourites at Royal Ascot in June.

Leicester's victory had also reinvigorated the market, Chief Executive Jim Mullen said, with fans backing other unfavoured teams in the hope that lightning strikes twice.

"History would strongly dictate that such a run of results in our favour would see customer staking suffer, but encouragingly these numbers firmly buck that trend and combine strong staking and a good margin," he said.

"All 500-1 and above shots were about 10 percent of our stakes. It's now 30 percent because of Leicester, so all the fans of Middlesbrough and Burnley are getting on," he said.

Shares in the British bookmaker were up nearly 4 percent at 144 pence by 1110 GMT, as analysts at Deutsche Bank said market forecasts for full-year operating profit were likely to increase 5-8 percent.

"Favourable gross margins (football good, horses bad) do not fully explain the strong performance. We think this underscores increased confidence in the underlying Ladbrokes' marketing and product offer," they said.

Mullen also said the company has been investing in new products and increased marketing online and in its betting shops ahead of its 2.3 billion-pound merger with rival Coral, which was approved last month.

The groups have to sell 350-400 of their shops before the deal goes ahead to satisfy the competition regulator but Mullen said he hoped to complete the disposals by the end of September.

Ladbrokes operates around 2,227 betting shops in the UK and Coral around 1,850.

Mullen said he was particularly pleased with the performance of its in-store business in the first half. "If you have the right product, the right environment and customer service that is best in sector, it will come through in the customer metric, and we are now seeing OTC (over-the-counter) staking up 1.3 percent," he said.

The group's operating profit in the half year was up 34 percent at 52.3 million pounds, beating UBS's forecast of 49 million pounds, on revenue 13 percent higher at 661.8 million pounds.

The company said the consensus market forecast for its full-year operating profit was 95.5 million pounds before Thursday's results.

(Editing by Greg Mahlich)