UK-listed bookmaker William Hill reported Q1 revenue up but profits way down as punter-friendly sporting results and new taxes did a number on Hills’ numbers.
In a trading update released Thursday, Hills reported group revenue up 1% but operating profit down 19%. In addition to what Hills called its “largest ever loss-making week” – a £14m football shellacking in Week 3 – Hills booked £20m in additional costs thanks to the new 15% online point-of-consumption tax (POCT) and the March 1 implementation of the new 25% Machine Games Duty.
The POCT pushed William Hill Online’s cost of sales to 22%, up from 9% in Q1 2014, resulting in a 38% decline in online profits. Online sportsbook revenue (excluding Australia) rose 11% and betting handle rose 16%. Online gaming revenue was up 8% while mobile gaming revenue rose 48%. Breaking down the gaming chart, casino revenue was up 10% and bingo up 8% but poker continued its long slide toward irrelevance, falling 32% year-on-year.
William Hill Australia profits were down 39% thanks to higher marketing costs associated with its rebranding operation as well as the “reshaping of the client base following the increases in race field fees in July 2014.” Betting handle was down 22% but gross win margins rose 1.5 points, limiting the overall revenue decline to 8%.
Australian operating costs fell 4% on synergies derived from the Tomwaterhouse.com integration. Hills says it successfully completed the migration of Sportingbet’s clients to Williamhill.com.au and over 95% of Sportingbet’s VIP clients have placed a wager with the new site since it launched.
William Hill US enjoyed a 30% boost in wagering but gross win was flat as the Super Bowl headed a list of unfavorable sports results.
Retail profits were flat despite a 2% fall in revenue. OTC wagering was down 4% while machine gaming revenue rose 1%. Hills says it’s on track to complete the rollout of its new Eclipse gaming machines in Q2. Hills also launched its new ‘£50 journey’ project, which hopes to provide greater scrutiny of customer staking at higher levels on fixed-odds betting terminals.
Hills shares were down 3% to 361.2p on Thursday. Despite the profit carnage, Hills CEO James Henderson claimed his firm was “well positioned to benefit as the UK online market evolves.” Henderson said Hills was making good progress on Project Trafalgar, its in-house development of a responsive design front-end.
Hills also announced it had secured new football advertising contracts with BT Sport and Sky TV. When the new season debuts in August, Hills will have the right to air the first promos during BT Sport’s half-time break. The Sky deal also covers sports other than football. Hills offered no specifics on the cost of each deal although Henderson said the company “probably paid a little bit more to get those two packages but it was what we wanted.”