Bookmakers ‘went mad’ at Cheltenham race to the bottom

Ladbrokes chief executive Jim Mullen said rivals "abandoned bookmaking principles" as the industry racked up record losses during last month's Cheltenham horse-racing festival.

“The sector went mad,” Mr Mullen said of the four-day spectacle, one of Britain’s biggest betting events.

Competitors’ offers such as giving customers their money back for wagering on a loser were “far too expensive” to deliver a sustainable return, he said.

Ladbrokes competes for business with William Hill, Paddy Power Betfair and Coral Group, with whom it plans to merge.

Race to the bottom

“It was a race to the bottom,” Mr Mullen said. “And that is not a race that Ladbrokes is going to be joining. We withdrew from the mad race.”

The betting industry had its worst-ever Cheltenham, with losses estimated to have exceeded 60 million pounds ($86 million) as many races were won by the favourite, and bookmakers scrambled for business with offers of free bets and money-back promises.

Ladbrokes was still able to report an 11 per cent increase in net revenue and wider margins on Thursday, as it won on soccer and benefited from an outsider winning this month’s Grand National, Britain’s biggest betting race.

“We have had an encouraging start to the year,” said Mullen, who is seeking to rebuild the Ladbrokes brand by pumping money into marketing. The bookmaker added 43,000 active customers in the first quarter.

Its shares rose 3.2 per cent to 120.2 pence in London on Thursday morning. The company faces a payout of £3 million in the second quarter should Leicester City win English soccer's Premier League, Mr Mullen said.

Leicester was backed at 5,000-to-1 at the start of the season and now leads the standings by five points with four matches remaining.

One customer stands to win £100,000 pounds for a £20 bet. Another who bet £50 pounds has already accepted £72,000 pounds after settling his bet early.

“No one sheds a tear for a bookie, and I am not crying over Leicester,” Mr Mullen said.

"They deserve it. Leicester's success at such long odds has boosted publicity around the sport and the industry, while Ladbrokes got some money back when the team defeated wealthier rivals such as Chelsea and Manchester City. "

- Bloomberg