UBS has said that while the recent re-rating at Ladbrokes is 'justified', it is time to pause for breath as it downgraded its rating for the High Street bookie from 'buy' to 'neutral'.

The broker said: "Over the last 12 months the stock has risen c53% as profit growth, particularly from UK Retail, has meant any worries over the 'structural decline' of retail have proved to be unfounded, and as the management begin to roll out the significant IT improvements.

"The latter are far from complete but already the improved trading systems are improving margins and the timetable set in June 2012 for the roll out of the sportsbook website and new mobile platform remain intact."

After having achieved solid earnings growth in 2012, progress in 2013 is expected to be held back by an increased machine gaming duty, a higher assumed tax rate, increased depreciation and higher costs in UK Retail.

If the improvement in the Digital operations accelerates, the stock could see some upside, the broker said.

"But having seen a strong re-rating we believe the stock is now close to a fair value short term".

UBS has raised its target price for the shares from 220p to 240p.

The stock was down 1.44% at 232.2p by 11:16 on Wednesday.

BC

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