William Hill races off thanks to wagering growth in first quarter

William Hill cleared the first quarterly fence, with growth in wagering and revenue across all four of the bookmaker's divisions but win margins tightening.

As a group, net revenue in the 17 weeks to 25 April rose 9% as online returned to strong growth following a stumble last year.

Philip Bowcock hailed the positive start to the year and said the transformation programme was progressing well, on track to deliver £40m of annualised savings by the year-end.

"Overall, we are in line with market expectations for 2017 at this early stage in the year."

Retail, representing over half of group sales last year, saw net revenue rise 1% after a flat year, with sportsbook amounts wagered up 2% thanks to more horseracing fixtures.

Retail's gross win margin eased down 0.8 percentage points to 18%.

Online, which represents more than a third of revenues, saw net revenue jump 16% as amounts wagered rose 9% and was the only arm to grow gross win margin, enjoying a 1.2% increase to 7.5%.

From April, the betting industry will begin paying a 10% levy on UK horseracing gross win to go towards funding UK horseracing, which the company said was expected to cost £5m this year.

Australian revenues grew an impressive 41% as amounts wagered surged 53% sterling terms which greatly benefited from exchange rate fluctuations, though gross win margins shrank 1.2 percentage points to 8.2% due to punter-friendly horseracing results.

The US business grew amounts wagered 12% in dollar terms, which resulted in a 29% reported rise to lift net revenue 19%, with gross win margin 0.5 percentage points lower at 6.2%.

Hill's shares jumped 2% to above 308p in early trading on Tuesday but after the first hour of trading had eased to 302p.

Analyst George Salmon at Hargreaves Lansdown said after something of a losing streak, the company was focused on just getting the house in order under newly promoted CEO Bowcock.

"One challenge is to breathe new life into the Australian business. With the average Australian adult losing close to $1,000 a year, bookmaking is big business Down Under. William Hill has poured plenty of money in to build its stake over the years, but results have been mixed at best. In this regard, it’s encouraging to see stronger growth so far this year," he said.

"The elephant in the room for the bookies is the looming uncertainty over fixed odds betting terminals, or FOBTs. Calls for a crackdown on these machines are getting louder all the time, and with 30% of net revenue coming from its fleet of gaming machines last year, increased regulation would certainly hurt.”

Neil Wilson at ETX Capital said the government’s review of FOBT "could blow a hole in revenues as these machines contribute such a large amount to earnings".

"There is already a fair bit of the risk baked into the share price but we must await the review to see how tough or lenient the government will be on the industry. An extreme clampdown here could make improving online revenues look relatively unimportant.”