Taxes, poor sporting results and Australia do a number on William Hill’s profits

TAGs: Australia, machine games duty, Point of Consumption Tax, William Hill

william-hilll-profit-plungeUK-listed bookmaker William Hill saw its shares fall 8% on Friday after the company warned that taxes and poor sporting results had done a number on its Q3 profits.

Revenue in the 13 weeks ending Sept. 29 fell 9% from the same period last year, while operating profit plunged a hefty 39%. Hills said profits were laid low by a poor comparison with stellar win margins in the previous reporting period and £23m in additional retail and online taxes in the UK. The company now expects full-year results to come in “around the bottom” of analysts’ forecasted range of £290.9m to £312.1m.

Online betting turnover was up 2% overall, driven by gains in the UK (7%), Italy (12%) and Spain (2%), while ‘non-core’ markets fell 14%. Overall online betting revenue fell 9% as margins slipped nearly one full point.

Online gaming revenue improved 2%, led by gains in the UK (15%), Italy (15%) and Spain (40%), with the latter market benefiting from this summer’s introduction of slots. However, non-core market gaming revenue fell 40%. Hills’ in-house Vegas casino product’s performance improved 19% while non-Vegas casino, bingo and poker fell 17%, 5% and 28%, respectively.

The cost of online sales was up 175% due to £18m in new online point-of-consumption taxes. The extra tax was more than enough to offset an 11% fall in marketing expenses, most of which was attributed to lower online affiliate costs.

At the retail level, revenue fell 8% year-on-year and operating profit declined 31% thanks to £5m in additional taxes following the increase in the Machine Games Duty. OTC betting turnover improved 2% despite the lack of World Cup wagering but margins fell 3.1 points, pushing OTC revenue down 14%. Gaming machine revenue fell 2%.

In Australia, betting turnover fell 31%, revenue dropped 36% and operating profit tumbled a whopping 91%. On the plus side, new accounts rose 15% and actives improved 10% since the re-launch of the William Hill Australia brand in February, although this was offset by declines in the legacy Centrebet and brands.

Hills’ down under operations will get a boost now that Hills has signed on as the first betting sponsor in the history of the Australian Open tennis tournament. The meet is the country’s largest annual sporting event and Hills says it is extending its product range to take advantage of tennis’ status as a key driver of in-play wagering.

While still only 3% of group revenue, William Hill US continues to post impressive gains, with turnover up 35%. Poor NFL results pushed gross win down 16% and costs rose 6%, making for a small operating loss in Q3.

Speaking to analysts on Friday, CEO James Henderson said the slow online sports wagering growth was in part due to Hills’ being preoccupied with the ongoing rollout of Project Trafalgar, the overhaul of Hills’ online presence via an improved mobile experience, more responsive front end and personalized customer service. Henderson said the completed rollout will “hopefully translate into wagering increases.”

Henderson also said Hills was a “big scale player” that will be able to compete with the new Paddy Power-Betfair, Ladbrokes-Coral and behemoths. That said, Hills had an abortive flirtation with 888 Holdings earlier this year and Henderson said Hills would continue to “look at opportunities” to increase its scale “if there’s a need.”


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