William Hill tumbles over FOBT hurdle, while US expansion kicks in

The FTSE 250 group reported a £819.6m loss before tax for the 26 weeks to 27 June, down from a £93.1m profit a year earlier. This included £882.8m non-cash impairment taken as a result of the government's triennial review into FOBTs and also £29.9m of exceptional costs relating to restructuring, which is expected to see further costs of around £15m in the second half.

During the period the company generated a 3% increase in revenue to £802.6m, with gross win from the World Cup of £11.0m in the half and more to come in the second half. While online gambling and the US delivered improved net revenue, betting shops saw weaker trends.

At the underlying level, group operating profit fell 12% to £113.6m as a $17.2m investment in US expansion to take advantage of the overturning of the previous ban on sports betting, while adjusted operating profit from UK retail fell 7% as net revenue fell 3% but costs cut 2%. The online sportsbook increased net revenues 18% as new accounts swelled 16%, with online gaming revenue up 4% with continuing improvements in cross-selling.

Excluding the Australian business, which was sold in April, adjusted operating profit from existing operations were up 1% to £130.8m.

With operating cash flows of £110m and the sales of Australia and its investment in Canadian gambling firm NYX helped net debt fell sharply to £272m, though the dividend was held flat at 4.26p.

Chief executive Philip Bowcock said that the major regulatory decisions in the UK and US provided "greater clarity over the challenges and opportunities that lie before us".

Looking at the UK retail business he said the company was "beginning to put in place plans to mitigate the impact of the Triennial Review", while in the US, investment has been made to move quickly into newly regulating states. "We will continue to invest in the US to ensure we are well placed to capture the substantial potential available to us."

In addition to Nevada and Delaware, William Hill has two operations in New Jersey and a deal signed with 11 casinos in Mississippi and one in West Virginia to run a sports book.

William Hill shares fell 9% to 266.6p on Friday morning, levels that were last seen in November.

Broker Shore Capital said underlying operating profit was slightly behind its expectations in part due to the weighting of World Cup gross win towards the second half, though online was also behind expectations but the group’s existing US operations sharply ahead of forecast.

Analyst Greg Johnson noted that as well as £17m operating investment in US expansion, a further $50-60m of start-up cos were potentially due in the second half "resulting, with the US break-even as a whole (including its existing operations) for the full year".

"The group continues to make good progress at this early stage in the potentially game changing US sports book market. Encouragingly, daily wagering at its two sites in New Jersey is already equivalent to 25% of its Nevada operations."