William Hill Shifts from Australian to U.S. Gaming Market
William Hill is pulling back from its Australian business holdings, after a pre-tax loss caused the company to write down the value of its Australian business. William Hill claimed in a report to shareholders that the write down was due to a crackdown on gambling in Australia.
At the same time, the UK bookmaker said it plans to increase investments in America, to capitalize on the expected opening up of the sports betting market.
William Hill is the second largest bookmaker in Britain, though it has complained that the 15% Point-of-Consumption tax imposed on it had caused business to slow in the UK. Now William Hill faces similar Point-of-Consumption taxes in Western Australia, South Australia, and Victoria.
Last year, the company was hit with a £6.2 million penalty by the Gambling Commission due to lax controls in the UK. William Hill’s UK operations might be hamstrung by potential changes in the fixed-odds betting terminals (FOBTs) laws, which the Labour Party wants passed.
William Hill USA
William Hill entered the US gaming market in 2012 and currently has the potential to be one of the top bookmakers in America, if the United States Supreme Court overturns the ban on sports betting.
The US Supreme Court is deliberating currently on whether or not to repeal the Professional and Amateur Sports Protection Act 1992. If the high court overturns PASPA in the Christie v. NCAA case, more than 13 other key states have plans to make immediate changes to introduce enabling regulation.
If so, then William Hill’s US investments would act to offset the hit they are taking from regulatory changes in Australia, as well as any potential fallout from new regulations on fixed-odds betting terminals in their UK shops.
William Hill Maintains Optimism
Last month, the bookmaker’s executives mentioned in a report to shareholders that it had launched a strategic review of its Australian operations. William Hill admitted that, due to mounting regulatory and tax headwinds, this could include a sale of William Hill’s Australian business.
Despite the fact that William Hill has remained one of the few profitable betting operators after the banning of credit betting, the proposed introduction of a 15% point-of-consumption tax in 3 key Australian states has caused the company to flee before their profitability declines. (Note: South Australia already imposed a POCT last year.)
William Hill Company Profile
The bookmaker was founded in 1934, but only acquired its Australian business in 2013. Due to the collapse in value of their Australian ownership, they mentioned that it had taken a £238.3 million impairment charge against it. Exceptional costs totaled to £335 million for the year.
William Hill is Britain’s second biggest betting shop operator, behind only the Ladbrokes Coral Group. Along with their 2,345 outlets, William Hill Online is a growing operation.
Even with the regulatory uncertainty, the company continued to improve and reported an 11% increase in adjusted operating profit to £291.3 million in the year to December 26, making them just slightly ahead of their forecast last month which was £290 million. Their net revenues up to £1.71 billion which is a 7 percent increase. Dividends for the year are up 6% and total 13.2p.
“At or Above Market Growth Rates”
William Hill mentioned that both its online and retail operations were growing “at or above market growth rates” and both their online sports betting and gaming revenues were delivering double-digit growth.
Along with many other bookmakers, William Hill reaped the benefits from a good run of football and horse racing results. Bookmakers did well with six 0-0 draws in the English Premiership in December alone, compared to the usual ten for the whole season.
A scoreless draw is the bookie’s perfect outcome. Betters put money on one team to win over the other, both to teams to score, or a player to make the first goal, but rarely bet on a 0-0 draw.
2018 World Cup a Reason for Optimism
Greg Johnson, an analyst at Shore Capital Markets, praised William Hill’s performance, despite the various setbacks. Noting that the issued had caused less than a 1% decline, Johnson said, “After a couple of years in the doldrums, William Hill produced a significantly improved performance in 2017.”
Greg Johnson mentioned a rise in operating profits and adjusted earnings per share, along with a drop in net debt.
For that reason, Johnson said 2018 should be an excellent year for William Hill, given the upcoming World Cup in Russia. Johnson said, “Current momentum appears solid, 2018 is a World Cup year and the group has (around) £15 million of the £40 million on stated cost inefficiencies to be realised. Potentially offsetting this is the withdrawal of credit betting in Australia, tough margin comparatives and at best flat market in UK retail.”
William Hill Transformation Program
With the Australian write-off and the CEO Philip Bowcock’s £61.7 million transformation program, William Hill suffered a £74.6 million loss for the year. 2018 did not begin well, due to the £6.2 million penalty imposed by the UK Gambling Commission for its failure to protect consumers, as well as the company’s inability to maintain suitable money-laundering controls.
Chief executive Philip Bowcock said that the company was hopeful for a better year in 2018. He mentioned that company would see a huge benefit if the ban was lifted in the United States allowing regulated sports betting markets across many American states.
Bowcock said that in order to address the issues emphasized by the commission the company would be, “Taking a number of steps as a matter of urgency. While it is imperative that the gambling sector (as a whole) embraces this, there is no doubt that leading brands like William Hill must play a key role in setting the right standards and taking greater account of all our stakeholders.”
“William Hill begins 2018 in a stronger position after a year of significant change for the business. We continue to gain ground in the UK, where customers are responding to our improved Online and omni-channel offers. We are a leader in sports betting in the US and are well-positioned to benefit should more states start to regulate if the pending Supreme Court decision is positive.”