William Hill set for online lottery expansion, UK taxes hit profits
William Hill recorded a “good operational performance” in the six months through to June 30 by expanding into the lotteries market by taking a stake in NeoGames, but the UK Point of Consumption tax and increased duty on gaming machines hit the group's profits.
The bookmaker posted net revenue of £808.1 million (€1.1 billion/$1.3 billion) in the first half, a figure that represents a slight increase on the £805.2 million it recorded during the corresponding period in the previous year.
Operating profit was down 12% on a year-on-year basis to £155.7 million, while pre-exceptional profit before tax dropped 11% to £131.3 million.
In addition, profit before tax slumped 35% year-on-year to £78.7 million, with profit after tax also falling 30% to £69.5 million.
Basic earnings per share dropped 30% to 7.9 pence, but the bookmaker was able to pay out a dividend per share of 4.1 pence, up slightly from 4.0 pence last year.
Speaking about the results, chief executive James Henderson admitted William Hill had been impacted by the UK’s new Point of Consumption tax and a hike in machine games duty during the period, but said it was still able to make “excellent” progress with key strategic priorities.
“We have delivered a good operational performance in the past six months during a period of significant regulatory and taxation change for the industry,” Henderson said.
“Whilst factors such as the Point of Consumption Tax and the increase in the machine games duty rate have impacted our cost base as expected, we continue to progress our strategy and invest in our long-term growth drivers.
“We are making excellent progress across our three strategic priorities, particularly in technology where Project Trafalgar will give us the ability to bring our customers a faster and more stable online service, a much improved mobile experience and an enhanced in-play product range on mobile devices.
“Looking ahead, the board is confident that the group remains well positioned to gain share in key markets, notwithstanding the impact of increased taxes and regulation.”
Henderson also noted William Hill is likely to receive a significant boost from its decision to expand into the lotteries market, a move that will be supported by its acquisition of a stake in NeoGames.
Under the deal, William Hill will take a 24.9% stake in the online lottery software and services provider for a total cash consideration of $25 million.
The agreement also includes the option for William Hill to acquire the remaining 70.6% share in NeoGames after either three or five years.
The bookmaker’s current stake in the company will grant it certain shareholder rights as well as being able to nominate two representatives to the NeoGames board of directors.
William Hill has also agreed to fund some $15 million in working capital if required.
“The emergent online lottery market is an exciting new opportunity in the gambling sector and NeoGames is a disruptive technology operator offering customers a great experience and lottery rights holders a compelling alternative to established retail lottery operators,” Henderson said.
“This agreement gives William Hill good optionality in a new market that is increasingly attractive to gambling customers.”
Ilan Rosen, chief executive of NeoGames, added: “We are excited by this strategic investment and partnership with William Hill which, apart from being a strong vote of confidence in our company and future expansion plans by one of the leading players in the gambling world, also opens up promising areas for synergies between our companies in the online lottery market, bringing William Hill's expertise and excellence in areas such as sports betting and omni-channel growth.”
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