Ladbroke moves to quash market rumours

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The Independent Online
LADBROKE, the hotels to betting group, moved this weekend to stamp out suggestions and market rumours that it was in difficulties with its bankers.

Its lawyers, Mishcon de Reya, said it had been brought to their attention that rumours were circulating around the City both about Ladbroke's relationship with its bankers and about chairman Cyril Stein's recently announced decision to retire at the end of this year.

It was made abundantly clear by the lawyers that the rumours are entirely false; to make certain that the rumours do not spread, Ladbroke obtained an injunction against a national newspaper preventing their publication.

The rumours came at the end of a week in which brokers reported brisk trade in the company's shares. One unusually large sale of Ladbroke shares was noted on Thursday.

Bankers contacted by the Independent on Sunday, all of whom declined to give on-the-record comments, said they had no knowledge of the company being in difficulty with its bankers. Ladbroke's lending bankers include Barclays, Sanwa, Banco di Napoli, Banca Nazionale del Lavoro and the Royal Bank of Canada.

Meanwhile, City stockbroking analysts are voicing growing concerns about the company's trading performance and its large borrowings, and have been especially nervous about the shares since Mr Stein's decision last month to step down as executive chairman of the group after 37 years.

The uncertainty over Ladbroke in the stock market is reflected in the fact that the company's share price is relatively low compared to its high dividend policy. The yield on the shares, at 7.7 per cent, is the highest of any FT-SE 100 stock.

Ron Littleboy, an analyst at Nomura, said that if it had not been for last year's enhanced scrip dividend issue, the company would be having problems paying its 4.92p interim dividend which becomes payable in January, costing pounds 56m. Last year Ladbroke announced an enhanced scrip dividend, which saved the company almost pounds 200m, according to Mr Littleboy, as it paid shareholders in extra shares rather than in a cash dividend.

The hotels and leisure team at Panmure Gordon have recommended that clients hold or sell Ladbroke shares. They comment that 'the main problems continue to be a dividend distribution out of line with the group's earnings, continued cash outflows and stubbornly high net debts of pounds 1.34bn'. They add that the 'increasing possibility of a dividend cut next March may cause income funds to look for a more secure income stream elsewhere'.

There have been question marks about the group's accounting policy, and fears that planned disposals, especially of properties and the Texas homecare chain, are not happening as quickly as anticipated. The DIY sector has been badly hit by price wars and a lack of demand because of the low volume of property transactions, and the group has suffered from the downturn in property valuations which has affected its own property investments.

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