Failure to manage JV biggest risk of year, says William Hill
Failure to effectively manage Playtech JV identified as one of biggest risks William Hill faces in 2011, it reveals during its annual results this morning.
Failure to effectively manage its joint venture with Playtech has been identified as one of the biggest risks William Hill faces this year, Britain’s biggest bookmaker has revealed during its annual results this morning.
The news comes only three days after it took out a court injunction against its partner to protect itself against the software supplier agreeing a similar deal with its main rival Ladbrokes. William Hill said it remains “committed” to the success of the William Hill Online joint venture and said further announcements would be made “as appropriate”. It added no further details regarding the injunction and a possible future court date.
The joint venture, signed in October 2008 with Playtech taking a 29% stake in the newly formed William Hill Online, was described by the bookmarker’s group CEO Ralph Topping two years ago as “transformational”. It has since significantly boosted William Hill’s online numbers and reaped enormous financial rewards for the software supplier.
Announcing a fourth quarter trading update in January this year Playtech said its share of profit from the JV was up 37% to 30.8m (£26.3m) for the full year compared to 22.5m in 2009, including 7m in the fourth quarter of 2010. In today’s announcement William Hill Online said that from its overall operating profit of £91.1m (a 22% increase on the previous year) in 2010 Playtech made £26.3m, a 30% increase on 2009 where it took a £20.1m share.
William Hill Online recorded strong revenue and operating profit growth in 2010 due mainly to its sportsbook performance. Its online net revenue grew 24% from £203.5m in 2009 to £251.5m last year, while its online operating profit grew 22% from £74.4m to £91.1m.
Amounts wagered in sports increased 57% year-on-year, including 114% growth in in-play betting. Sportsbook net revenue grew 95% with gross win margin increasing from 6.6% in 2009 to 8% last year. WHO said this was due to “structural improvements” in its trading approach to in-play and favourable football results, including during the World Cup.
Gaming net revenue grew 5% with casino growth described as “good” benefiting from an enhanced Flash-based product range, however the company added that due to its decision to withdraw from France in June year-on-year casino revenue was flat. Without going into further detail it added that this was offset by “strong growth” in bingo and an “improved performance” in poker from the second quarter onwards following the anniversary of its migration to Playtech’s i-Poker network.
Online costs, however, increased 36%, “reflecting the full-year effect of the operational expansion undertaken in 2009 to support future growth, increased employee compensation and our increased marketing investment”, according to the company.
The firm outlined a number of other potential risk factors for the coming year including: increasing regulation in online gambling; over reliance on third parties; failure to maximise UK and international online growth opportunities; adverse changes to taxes and the horseracing levy and the impact of the challenging economic climate.