William Hill Experiences Profit Boom Despite Betting Shop Closures
London based bookmakers, William Hill, have seen a massive increase in its operating profits after favorable sporting results have helped the group see an 89% climb in profits as well as a 23% increase in the group’s net revenue.
New CEO James Henderson, who took the position after nearly 30 years with the company, can enjoy an encouraging start to his reign after the Soccer World Cup helped boost the group’s third-quarter results as well as a positive return on their online investment which saw online operating profits rise by 126%.
Commenting about the results, Anderson said: “Positive sporting results in the quarter, including a strong end to the World Cup, have moved us close to or ahead of normalized gross win margins on a year-to-date basis. Looking beyond the effect of these sporting results, the underlying performance across the group is good. Online gaming continues to benefit from our investment in mobile and Sportsbook turnover growth remains healthy”.
Earlier in the year, William Hill’s outlook did not look so bright as the group announced plans to close 109 betting shops. The plans announced in April, they said, were due to the Government’s surprise hike in betting taxes on all high-speed, high-stakes gambling machines.
The Chancellor of the United Kingdom raised duty on machines that were able to charge more than £5 to play, by 20% to 25%. This, William Hill said, will effectively wipe out a significant portion of revenue from the extremely lucrative FOBT’s (fixed odds betting terminals), which account for half of the company’s gross profits.
Since the announcement of the closures in April this year, only 82 shops have closed.
As well as the investment made in the online gaming sector, William Hill has expanded internationally opening up operations in Italy, Spain, Australia and the United States where sports betting has been legalized in New Jersey, with the group partnering up with casinos and racetracks in the Garden State.
“This is a soundly financed market leader with a growing and under-appreciated international footprint,” said Ivor Jones, and analyst for Numis Securities who has an “add” recommendation on William Hill stock.
Jones has forecast an annual operating profit in the region of 362 million pounds for the betting company in 2014, a figure that’s up from 335 million last year.
The increase is even more impressive when considering the betting industry is in the midst of massive regulatory pressures in the Britain after the government has begun to tighten controls on betting shops as well as increasing taxes for both online gambling and high-stakes gaming machines.The new measures brought forward the by the British Government are expected to cost the online gambling and sportsbetting industry nearly 400 million pounds a year and are likely to decrease profits in 2015, despite the cost-cutting plans made by the company to soften the impact of the new regulations.
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