William Hill talks up US opportunities amid second half struggles

William Hill talks up US opportunities amid second half struggles

Tuesday, November 6, 2018 Posted by News Team
William Hill
Company sees online struggle in period covering the FIFA World Cup and start of football season

William Hill chief executive Philip Bowcock has hailed the significant progress made in the nascent US sports betting market after the company posted declines in online and retail revenue for the current trading period.

Despite the operator taking approximately $200m in bets in the US for the period from June 27th to October 23rd, its core online and retail businesses both struggled. As a result group revenue fell 4% year-on-year. 

The operator’s trading update for the period revealed a 5% decline in online net revenue for a period that included the final rounds of the FIFA World Cup and the start of the European football season. The World Cup contributed to a 2% increase in sportsbook stakes, but sportsbook margin declined 0.2 percentage points to 7.8% for the period. 

“Looking at the second half performance so far, we have benefited from the later stages of the World Cup but otherwise football and racing margins have been weaker than expected, including three loss-making weeks on horseracing during the summer and customer-friendly football results during the international break in October,” Bowcock said. 

Retail also struggled, with total net revenue for the period down 4%, with amounts wagered falling my the same percentage. Bowcock blamed this on “wider high street conditions”, with both gaming and sportsbook revenue falling. 

Growth came from the US, where the existing businesses - predominantly Nevada - saw total net revenue grow 6% year-on-year, with sportsbook stakes up 17%. 

William Hill is now taking bets in Delaware, New Jersey, Mississippi and West Virginia as well as Nevada. It has also struck deals with Eldorado Resorts, Golden Entertainment and IGT to give it access to 17 additional states, as and when they pass betting regulations. 

The operator will look to continue this growth with a new proprietary technology platform that is due to go live in 2019, supported by NeoGames’ player account management system.

“It has been another busy period for William Hill, with significant progress made on our plan to capitalise on the emerging US sports betting opportunity following the Supreme Court’s decision to overturn PASPA in May,” Bowcock said. “I’m pleased to report that we’ve built on our market leading position in Nevada to make rapid progress in other states as they legalise sports betting, and are the only company to be taking sports bets in the first five states to have regulated.”

For the year to date group revenue has remained flat, with a 4% increase in online revenue offset by a 4% decline in retail. The US has seen revenue grow 29% for the period, albeit from a lower base. 

However, Bowcock added that adverse regulatory and tax changes would impact online profit growth in 2018 and 2019. The operator expects to see profit decline by £20m as a result of enhanced customer due diligence processes in 2018, while the increase in remote gaming duty to 21% from October 2019 will lead to a £25m hit in 2019. 

The company will also be hit by the cut in fixed odds betting terminal maximum stakes to £2 from October 2019. It is to take a number of mitigation actions as a result, though the benefits of these actions is not expected to flow through to the bottom line until 2020.

“The net effect in 2018 is expected to be lower given the offsetting positive impact of online’s otherwise strong underlying performance, and from 2020 onwards the online business is expected to return to strong operating profit growth,” Bowcock said.

Full-year operating profit for 2018 is expected to be in the range of £225m to £245m, assuming normalised gross win margins in the final weeks of the year. 

The operator has also announced the proposed £242m acquisition of MRG, which Bowcock said was a key part of a strategy to develop a “digitally led, geographically diverse gambling business”.

“[This] acquisition will bring us an enlarged pan-European footprint in faster growing digital markets, an established Malta hub from which to expand online internationally and a team with a proven track record of consistently strong revenue growth.”

The company has also entered into a new bank loan agreement, entering into a new five-year, £390m revolving credit facility with a syndicate of banks on October 2nd. This expires in October 2023, replacing the company’s existing revolving credit facility, which was due to expire in May 2019. 

“We are continuing to experience a period of significant change for our industry and have already made important changes over the last two years to transform our digital business, broaden the management team and enhance our financial flexibility ahead of key regulatory changes,” Bowcock said in conclusion.

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