William Hill profits take a hammering

Investors used to significant year-on-year improvements in profits at online and land gambling group William Hill plc have a new experience to digest today with the release of the company’s not-so-stellar third quarter results.

The company reported that a combination of unfavourable horse racing results, lower Australian action and the imposition of a new UK point-of-consumption tax on internet gambling has resulted in a profit plunge of 39 percent in Q3-2015 and a warning that annual profits will likely be toward the low end of City forecasts.

In a trading update, Will Hill said weak sporting results affected its UK retail, US and Australian businesses in the three months to the end of September. Horse racing results went against the bookie, although football returns were good.

Trading was also hit by falling revenues in “non-core” markets for online gambling, such as Portugal, the company revealed.

The new UK point-of-consumption tax in online gambling cost the company GBP 23 million in additional government duties, whilst group net revenue fell by 9 percent, and operating profit plunged 39 percent.

Operating profits at its retail division were down 31 percent while online fell 37 percent.

CEO James Henderson, said: “Whilst good operating cost discipline has partially offset the weaker than expected results and non-core market impacts, the board now expects full-year operating profit to be around the bottom of the analyst consensus range.”

Henderson said that the growth in the online division’s core markets – the UK, Italy and Spain – remains strong for both betting and gaming.

Analysts’ forecasts for operating profit in the year to the end of December ranged from GBP 290.9 million to GBP 312.1 million. The equivalent figure last year was GBP 372.2 million, suggesting that annual profit this year will fall by about 20 percent.

The company’s market-leading position in the UK is under threat from the mergers of Gala Coral with Ladbrokes and Paddy Power with Betfair .