23rd Apr 2015 10:58
LONDON (Alliance News) - William Hill PLC Thursday reported a drop in operating profit in the first quarter of 2015 during what the company said has been a slow start to the year, following its largest-ever loss-making week in sports betting in January.
The bookmaker reported a 19% decline in operating profit to GBP16 million in the quarter ended March 31, which it said was hit by a GBP20 million cost from the point of consumption tax and an increased rate of Machines Games Duty.
William Hill also said that sports betting revenue was hit by its largest ever loss-making week in January. It said punter-friendly results in the third week of 2015 led to a GBP14 million loss.
Over-the-counter gross win fell 4%, the bookmaker said, while gross win per gaming machine per week was 4% higher at GBP965. Sportsbook's gross win margin was 0.1 percentage point behind last year at 7%, and lower than its expected first quarter trading range.
The cost of sales increased to 22% of net revenue, compared with 9% the year before, which William Hill said resulted from the introduction of the point-of-consumption tax.
However, mobile gaming performed well, up 48% to 37% of gaming net revenue, and overall net revenue was up 1%.
These results come after Ladbrokes had on Wednesday also posted a drop in profit in its first quarter, which it too said was hit by tax hikes and better-friendly results.
William Hill did say however Thursday that wagering trends improved in the remainder of the first quarter quarter, as online wagering grew 20% in February and March, and 29% for the Cheltenham festival. Sportsbook wagering growth totalled 16% for the quarter.
The company noted that it has launched in Australia where the migration of Sportingbet customers to William Hill is now complete, but said that wagering reduced by 20% on a local currency basis, primarily hit by the reshaping of the client base following increases in race field fees in July.
Net revenue in Australia fell 8% as the improvement in gross win margin from 8.7% to 10.2% didn't fully offset the wagering decline. The company also issued increased free bets following its launch and said overall operating profit was down 37%.
William Hill US wagering continued to perform strongly, up 30% on a local currency basis, it said, but gross win growth was flat as sporting results, driven by the Super Bowl, were less favourable than in 2014.
The bookmaker added that it has started to roll out a '£50 journey' limit on some of its gaming machines, which is on track to be implemented by April 2. It will provide greater scrutiny of customers' staking at higher levels with a view to improve analysis of customer behaviour and identifying potentially harmful customers.
"Looking forward, as the end of the football season draws closer, we have not as yet made up the shortfall arising from the GBP14 million loss in Week 3 given the relatively weak first quarter sports betting margin," Chief Executive James Henderson said in a statement.
"Without sporting results, we are making good progress on our key projects for the year, including in-house development of our responsive design front-end through Project Trafalgar, an enhanced bonus engine to further increase the competitiveness of our proprietary Vegas casino platform and the completion of our Eclipse machine roll-out in Retail," he added.
Commenting on the William Hill results, Numis analyst Ivor Jones said: "There is scope for the shares to perform once sporting margins normalise, we have lapped the World Cup, the cost of increased duties have been absorbed, and the political risk associated with the General Election is clarified. Until then we expect the shares to struggle to make progress."
William Hill is one of the worst performers in the FTSE 250 Thursday morning, down 3.3% at 359.90p.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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