Today's first-half results from gambling group Ladbrokes Coral(LSE: LCL) show that it's making encouraging progress. The recently merged group saw proforma operating profits grow by 7% to £158.3m on the back of a robust increase in online revenues and lower operating costs at its retail business.
Progress with the integration of the two bookmakers is going better than many analysts had expected, with the merged group on course to generate £150m in annual synergies by 2019, more than double the group's original estimate. And on the back of these upbeat expectations, the group doubled its interim dividend from 1p per share, to 2p per share.
As I write, Ladbrokes Coral shares are trading at about 117p, which puts the stock on a 2017 forward P/E of 9.8, and gives it a prospective dividend yield of 3.9%. This indicates that it offers very good value for money, with the average UK-listed company trading at 14.1 times forward earnings and expected to yield just 2.8%.
However, looking ahead, the declining profitability of its shop estate could be a cause for concern. In the past six months, revenues from the group's UK retail operations fell by 6% with a 7% decline in comparable over-the-counter wagering. Retail gaming revenues seem to be on a long-term structural decline, and still account for roughly two-thirds of the group's revenues. There is also regulatory uncertainty ahead, with the proposed reduction in the maximum stake on fixed-odds betting terminals being the biggest worry.
Nevertheless, in my view, the market has already priced-in most of these risks. Instead, I believe investors are not fully appreciating the size and scale advantages of the merged group. As such, with modest near-term earnings growth and a re-rating of the stock, I reckon Ladbrokes Coral could offer significant total returns to its shareholders.
Also reporting its first-half results on Thursday was logistics and supply chain solutions company Eddie Stobart(LSE: ESL). The firm, which was spun-off from Stobart Group in 2014, reported double-digit growth in revenues and operating profits during the first half of the year.
The company's underlying revenues increased by 13% to £286.8m from £253.6m in the same period last year. Meanwhile, underlying earnings before interest and tax rose 14% to £16.9m, on the back of margin improvement and new business growth.
Going forward, management expects full-year results to be in line with market expectations, following an encouraging start to the second half. The group is on the lookout for new acquisitions to drive continued earnings growth, and is keen to use its acquisition-led strategy to leverage cross-selling opportunities, implement synergies and strengthen its service offering.
The company's low valuation and attractive yield make the stock seem to me like a tempting buy. Eddie Stobart trades at just 14.6 times expected earnings in 2017 and has a prospective dividend yield of 3.5%.
Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.