Bookmaker William Hill plc (LON:WMH) is to “remodel” its in-store offering as it blamed declining footfall on Britain’s high streets for a 15% slump in annual profits.
As with shopping, gambling is becoming increasingly popular online, while regulatory changes, such as new limits on fixed odds betting terminals, have also dented betting shops’ profits.
READ: William Hill a ripe takeover target, says Berenberg
Without giving any exact figures, profits in William Hill’s retail division fell year-on-year, “challenged by wider high street conditions”.
The online business produced a “good underlying performance”, the FTSE 250 group said, although new customer checks aimed at protecting problem gamblers weighed on profitability.
As a result, adjusted operating plunged to £234mln in 2018 from £291mln a year earlier.
READ: William Hill makes big move into the US
Given the struggles at home, UK bookmakers have been looking abroad for growth opportunities, and a “pivotal” decision by US lawmakers last year opened the door to a huge new market.
On the back of that, William Hill made its biggest move yet into the potentially very lucrative US market by partnering up with multi-billion-dollar casino chain, Eldorado Resorts.
As part of the alliance, William Hill has opened sportsbooks in a handful of Eldorado’s 21 properties across three states, with more set to follow in the coming months.
Mr Green acquisition nears completion
Bosses said they had seen “excellent growth” in the existing US business, which, excluding “significant expansion costs”, broadly broke even last year.
William Hill is also looking to build a presence in Europe and it launched a £240mln bid for Swedish digital gaming company Mr Green at the end of October.
The company confirmed this morning that 92% of Mr Green’s shareholders have accepted its offer. Those who haven’t accepted yet have until the end of the month to do so, although William Hill is calling for compulsory acquisition of the remaining shares.
Boss looking forward to 2019
“2018 was a pivotal year for both William Hill and the wider industry,” said chief executive Philip Bowcock.
“We now have greater clarity around the key challenges and opportunities for our business. In 2019 we will remodel our Retail offer while building a digitally-led international business, underpinned by a sustainable approach as part of our Nobody Harmed ambition.
He added: “With rapid expansion underway in the US, building on profitable foundations, and the acquisition of Mr Green nearing completion, we look forward to making further progress this year.”
Attractive yield
“With profits in the UK retail estate fading, and the group counting the cost of enhanced due diligence online, William Hill is doubling down on international expansion.
The acquisition of online gaming specialist Mr Green will bolster European revenues and bring much-needed online diversification, while the opportunity in the US is significant.
Despite looking good on paper, the strategy comes with risk attached. There are plenty of European competitors fighting for a foothold in the US, and as the UK government’s FOBT restrictions proved, extra regulation is a constant worry.
Still, with the shares trading close to 50% below where they were last April, the expected yield has been pushed up to 5.8%. That could interest value-seeking investors.”
Shares dropped 2.5% to 171.4p on Monday morning.
--Updates for share price and analyst comment--