William Hill predicts lower full-year profit as UK regulation bites
Hills says its Online business is feeling the effects of “adverse regulatory and tax changes”, with profit expected to be reduced by £20m in 2018
William Hill Online’s profit is expected to fall by £20m in 2018 and a further £25m next year as the operator continues to feel the pinch of UK regulatory changes, including an increase in Remote Gaming Duty.
In a trading update this morning, the London-listed bookmaker said its digital division would not return to “strong operating profit growth” until 2020 despite strong underlying fundamentals.
“Adverse regulatory and tax changes will impact Online profit growth in 2018 and 2019, including enhanced customer due diligence processes and an increase in Remote Gaming Duty to 21%,” Hills CEO Philip Bowcock said.
“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,” he added.
Paddy Power Betfair said last week changing regulation and increasing taxes around the world world would cost it £115m a year.
William Hill today revealed Online net revenue was up 4% year to date compared to 2017, with gaming up 1% and sportsbook up 8% despite a 3% fall in sportsbook amounts wagered.
Bowcock hailed the improvements made to its digital arm in 2018, saying: “Our greater mass market focus is successfully driving new accounts growth, up 11% YTD.”
“As expected average revenue per user is 19% lower, reflecting the more sustainable customer base we are building, with mass market actives up 28% YTD,” Bowcock added.
In line with this strategy, Hills recently announced it had made an offer to acquire Swedish operator MRG (Mr Green) for £242m in an effort to boost Online growth and make the business more geographically diverse.
The US sports betting market has also been an area of focus for William Hill in 2018, with the bookmaker now taking sports bets in Delaware, New Jersey, Mississippi and West Virginia since the US Supreme Court repealed PASPA.
“Our goal is to be in every state,” Bowcock said. “Supported by the extensive experience of our US Existing business in Nevada, we’re building a network of market access agreements, including our strategic partnership with Eldorado, expanding our relationship with Golden Entertainment and exclusively partnering with IGT for sports lottery opportunities.
“We’ve opened 18 new sports books and launched our initial mobile offering in New Jersey.
“We’re also progressing a new technology solution to go live in 2019, incorporating the newest elements of the Group’s existing platform and a bespoke Player Account Management system from NeoGames, whose solution is more feature-rich than any sports betting platform currently live in the US.”
Group net revenue for the year to 23 October is flat, with the company’s retail business down 4% year-on-year following a 6% fall in sports betting and a 2% decline in gaming.
William Hill’s share price was down 5% to 202.43 on the London Stock Exchange at the time of writing.