Ladbrokes has finally settled its long standing dispute with the tax man, and expects to receive an £80m repayment of corporation tax this year.
The refund relates to a number of tax years up to December 2007, and the company will also receive a £262m tax credit in its 2010 accounts. The news has lifted the bookmaker's shares 5.2p to 162.6p. Nick Batram at KBC Peel Hunt said:
An £80m tax rebate from HMRC is a welcome bonus that we hadn't accounted for. Whilst it doesn't change the fundamental challenges facing the group it is another positive piece of news following the Canal+ joint venture and the exit
from Italy.
Panmure Gordon analysts Simon French and Lindsey Kerrigan said the settlement would tidy up and strengthen the group's balance sheet, but were still wary about the outlook:
[The settlement] will reduce the net finance charge by £20m in 2010. This leads to 13.5% increase in 2010 earnings per share to 15.1p and 5% per annum in 2011 and 2012 to 14.1p and 14.5p respectively.
This announcement will be well received by the market and we increase our price target to 141p but retain our sell recommendation as we continue to believe the turnaround job for incoming chief executive Richard Glynn will take longer to achieve than the market currently believes.
