UK bookmaker William Hill took a major profit hit in the first half of 2019 due to retail gaming declines, UK online struggles and US sports betting expansion.
On Friday, Hills reported that its revenue in the six months ending June 30 was up 1% to £811.7m while its adjusted operating profit fell by one-third to £76.2m and its pre-tax profits were down 47% to £50.8m. In non-adjusted terms, Hills actually lost £63.5m before tax.
Hills blamed the declines on the stake reduction on the fixed-odds betting terminals in its UK betting shops, the preparations for closing hundreds of shops as result of that stake reduction, as well as the rising costs of expanding its US operations into states that have legalized sports betting.
Hills CEO Philip Bowcock said the company was “making good progress” on its five-year strategy, which sounds like one of those five-year plans the Soviets used to roll out to make everyone forget about how bad things were at present. Investors appear to have bought it and merrily whistled past the graveyard, pushing Hills’ share price up 6.3% by the close of Friday’s trading.
Hills’ online revenue was up 14% to £367.3m, largely on the strength of its acquisition of European operator MRG (formerly Mr Green). While international online revenue was up by two-thirds to £122.4m, Hills’ UK online numbers were down 1% to £244.9m.
UK online betting turnover was down 5% in H1, which pushed overall online betting revenue down 7% to £152.4m, but gaming saved the day, rising 37% to £215m. That wasn’t enough to offset the rising cost of doing online business in the UK, which pushed the segment’s operating profit down 9% to £54.3m.
The UK customer stats were even more alarming, as unique active customers were down 11% and new account sign-ups fell 9%. The UK stats only managed to be as not awful as they might have been due to average revenue per user rising 8%.
Hills’ retail revenue was down 12% to £391.5m and operating profit slid 43% to £42.7m. Gaming revenue fell by one-quarter to £186m, more than offsetting betting’s 4% rise to £205.4m. Hills says it’s sticking to its plan to close 700 betting shops, most of which the company says will be gone by Q4, and that there are no plans to increase that number.
For reporting purposes, Hills now splits its William Hill US division in two: US Existing (aka Nevada) and US Expansion (everywhere else). Existing revenue was up 4% to £38.4m despite reduced margins, as betting stakes shot up 23% year-on-year.
Expansion revenue was only £900k in H1 2018, compared with £14.5m in the first half of 2019. Hills is now operational in eight US states and claims to have captured a market-leading 27% of the nation’s regulated betting business. The Expansion segment handled over $500m in H1, about two-thirds of what it handled in Nevada.