Ladbrokes transformed by departing CEO? Don’t bet on it

Ladbrokes’ share price has fallen behind during Richard Glynn’s tenure as chief executive. Photograph: Alan Crowhurst/Getty Images

Ladbrokes’ long-term shareholders may choke on this line in Wednesday’s announcement of chief executive Richard Glynn’s looming departure: “Ladbrokes has been transformed,” declared chairman Peter Erskine. In fact, the entire statement read as a hymn of praise for Glynn’s “considerable achievements” since his arrival in April 2010. Ladbrokes is “a far stronger company as a result of his work” and “the changes made are now deeply embedded in the organisation”.

The only hint that Glynn’s reign may not have been a complete triumph on every conceivable measure came in the board’s acknowledgement that the “recovery programme has taken longer to deliver than initially anticipated”. Never mind, the delay is attributed “in great part” to “economic and regulatory headwinds”.

Now look at the share price during Glynn’s time: at 114p, it is a quarter lower than when he arrived, albeit there was an opportunity for investors to escape at 240p last year. William Hill, blasted by the same supposed economic and regulatory winds, has seen its shares rise 80% in the same period.

To be scrupulously fair to Glynn, there is no disputing the fact that he inherited a mess. Ladbrokes’ long record of under-investment in digital and online technology was appalling. And Glynn, finally, may have got to grips with the online offer courtesy of a deal with Israeli firm Playtech, albeit years after William Hill used the same outfit to get a head start. Ladbrokes hasn’t issued a profit warning for a while, and current trading was reported to be in line with expectations.

Jolly good, a level of stability has been achieved. But does that really amount to “transformation,” as Erskine would have it?

What really matters is relative progress against the competition, and rivals have not been standing still. Share prices can be wrong, but rarely by such extremes. Five years ago William Hill was a couple of lengths ahead of Ladbrokes, now the gap is about a furlong.

As for those regulatory obstacles, bookies can be shameless. Electronic roulette wheels were, and remain, an extraordinary gift to the industry by the New Labour government – the large chains got a little piece of a casino on the high street. George Osborne’s tweak in the rate of duty on the machines, from 20% to 25% from next March, is not a reason to bleat.

ECB inaction

The eurozone economy gets worse but the European Central Bank does nothing. It’s a familiar script and very likely to be repeated today.

Mario Draghi, president of the ECB, hamstrung by German objections to outright quantitative easing, is likely to be obliged to sit on his hands at the monthly meeting to consider monetary policy.

In the meantime, major economic indicators are flashing red. November’s purchasing managers’ index, sampling opinion across thousands of companies, sunk to a 16-month low. Meanwhile, the rate of inflation across the eurozone stands at only 0.3% and the falling oil price may soon drag it even lower.

There is a fair argument that full-blown QE by the ECB (as opposed to buying of corporate bonds and asset-based securities, which is already happening) would be ineffectual at this point. Yields on sovereign debt are already on the floor, after all.

All the same, the ECB’s arsenal is limited. Full-blown QE would at least help to push the euro lower, which is probably the best medicine for the zone’s exporters. If not now, then when? January is the market’s current guess. A year ago would have been better.

War chest

A happy man after the autumn statement was Ian Spreadbury, a bond fund manager at Fidelity. His funds have been a big holder of the 3.5% War Loan, which was issued to help finance the first world war. The Treasury will now redeem at par, crystallising a nice gain for investors, just as Spreadbury had anticipated.

Osborne’s move provided a small piece of theatre in the Commons but the maths also seems correct. Yields on long-dated government debt are low, so why not take advantage of the opportunity to refinance? Actually, the question is what took Osborne so long. Ignore his boasts about the market’s confidence in his economic plans, redemption has been logical for ages.