William Hill profits pummeled by record football losses and new taxes
First quarter profits shrank at William Hill in part due to the bookmaker's worst ever loss-making week from football betting and the new UK betting taxes.
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Operating profit for the 13 weeks to 1 April fell 19% on net revenue up 1%.
Profits were hit by a £20m payment of point of consumption tax (POCT), which is focused on online gambling, and March's increased 25% rate of machines games duty (MGD), which targets fixed-odds betting terminals.
Read more: Ladbrokes falls at the first as quarterly results disappoint
The third week of the financial year saw the group suffer a £14m loss from punter-friendly football results, dragging gross win margins below the expected trading range for what is typically a stronger quarter.
Yet, online wagering grew 20% in February and March, and 29% for the Cheltenham horseracing festival.
Hill's underlying profit performance, adjusting for the tax changes, was strong, reflecting continued volume growth, tight cost control and risk management.
After 108 betting shops were closed last year, the retail division's performance improved in February and March in both wagering and gaming, giving a flat operating profit on net win margin down 2%.
Online net revenue up 9% but operating profits down 38% due to the tax levy, but chief executive James Henderson said the company remained "well positioned to benefit as the UK online market evolves", with continued investment in technology and marketing.
In Australia, the migration of acquired Sportingbet customers to williamhill.com.au was completed successfully, with over 95% of Sportingbet VIP clients now using the site since launch and numbers of new and active users moving in the right direction.
With US wagering on a local currency basis 30% ahead of last year, the stateside arm generated 10% growth in net revenue and 1% in operating profit.
"Looking forward," Henderson concluded, "as the end of the football season draws closer, we have not as yet made up the shortfall arising from the £14m loss in Week 3 given the relatively weak first quarter sports betting margin.
Excluding sporting results, he said there was good progress on key projects for the year, including in-house development of a new online front-end, an enhanced "bonus engine" to increase competitiveness of the proprietary Vegas casino platform and the completion of the Eclipse machine roll-out in the retail chain.
Analyst Greg Johnson at Shore Capital saw the results as "a pretty mixed bag, with the comments around “yet to recoup the £14m shortfall from week 3” suggesting modest downside to our forecasts of £267m".
Yes he retained a positive stance due to the potential for growth in the online division.
Shares in William Hill were down 3.3% to 360.1p by 08:18 on Thursday.