Covid-19 leads to 57% drop in William Hill revenue

William Hill has reported a 57% year-on-year decline in net revenue during the seven weeks to 28 April as almost all areas of the bookmaker’s business were negatively impacted by the novel coronavirus (Covid-19) pandemic.

However, the operator has significantly reduced outgoings and taken advantage of government support, and now expects the impact on earnings to fall below its initial projections.

For the 17-week period from 1 January to 28 April, revenue was down 27% from the prior year. UK online revenue fell 11%, with international online revenue – largely due to the acquisition of MRG Group – up 21%. Retail revenue was down 35%, with the US reporting a 16% decline. The operator did not provide exact figures in the update. 

The bookmaker split its trading update into two sections; the 10 weeks through to 11 March, covering the period leading up to the widespread outbreak of the coronavirus, and the later seven-week period.

Looking at the period prior to the main outbreak of coronavirus – the 10 weeks to 10 March – and William Hill said overall revenue was down 5%, with gaming revenue falling 24% and sportsbook wagers remaining flat year-on-year.

The bookmaker’s online business performed well during the period, with total revenue up 16%, boosted by a 9% rise in gaming revenue but also hampered by a 6% drop in online sportsbook wagers. UK online revenue climbed 7% while international online revenue jumped 35%.

Like-for-like retail revenue was down 3%, as gaming revenue fell 30% but the amount wagered at physical sportsbooks climbed 17%.

In addition, William Hill reported significant growth within its US business in the earlier part of the year, with overall revenue up 30% year-on-year, helped by a 26% increase in the amount wagered at sportsbooks in the country.

However, for the seven weeks from 11 to 28 April, in addition to the overall dip in revenue, gaming net revenue slipped 33% while the amount wagered across online and retail sportsbooks fell 70% year-on-year.

Overall online revenue was down by 21%, with UK online revenue slipping 33%, though this was partially offset by a 5% rise in international online revenue.

While gaming revenue for the period was up 6%, the sporting disruption resulted in amounts wagered on sports falling 56%.

Retail was badly hit, with overall like-for-like revenue for this area of the business plummeting 85%, as shops were forced to close in a number of markets due to social distancing measures. Retail gaming revenue dropped 82% while sportsbook wagers were down 83%.

Looking at the US and revenue was down 90% year-on-year, while bets placed at sportsbooks plummeting 86%

Despite the disruption caused by the pandemic, William Hill noted that it took a number of actions to help mitigate its impact, including furloughing all shop staff and taking advantage of government schemes to help pay employees. The bookmaker topped up wages to ensure all staff received 100% of their wages during the furlough period.

Other actions included cutting staff costs by deferring recruitment, cancelling salary increases and bonus payments and incentive schemes for 2020, cutting marketing spend, and also changes to supplier management, including cost deferrals and reductions.

William Hill said that as a result of these actions, it was able to reduce monthly cash outflow to approximately £15m (€16.9m$18.3m).

At the end of the combined 17-week reporting period, unrestricted liquidity was in excess of £700m, while the bookmaker said it was able to utilise £425m worth of revolving credit facilities to maximise liquidity.

Other strategies implemented to help retain cash included suspending dividend payments until further notice, deferring non-essential capital expenditure and focusing on rigorous working capital management.

In addition, William Hill was able to agree a covenant waiver with its lending group of banks, covering the period up to and including December 2020. As a result, the net debt covenant has been amended to 4.5x in June 2021 and 4.0x in December 2021, returning to 3.5x in June 2022.

In March, William Hill outlined a scenario whereby limited sporting activity until autumn and one month of shop closures would lead to a drop of between £100m and £110m in earnings before interest, tax, depreciation and amortisation (EBITDA) for the year.

However, as a result of mitigation activities, the bookmaker said it is performing ahead of the initial scenario, which now incorporates three months of shop closures.

In addition, for each further month of shop closures, William Hill said this would lead to a reduced EBITDA impact of £12m to £15m, assuming the government would continue to financially support furloughed staff. This week, the government said it furlough scheme would now run to October, though employers would be expected to share the cost from August.

“William Hill has overcome many challenges in its 86-year history, and I am exceptionally proud of the team and their response to the Covid-19 pandemic,” chief executive Ulrik Bengtsson said. “We have worked hard to protect them, and in turn they have done the same for our customers.

“We reacted quickly to the cancellation of sports activities and the closure of our retail estate. We took immediate measures to save costs, reduce cash outflow and minimise non-essential expenditure by negotiating with our suppliers, cancelling pay rises and executive bonuses and suspending the dividend.

“We have preserved liquidity and amended the terms of our net debt covenant, leading to significant, balance sheet headroom. This will enable us to continue to invest for growth, most notably in the US, as plans there to roll out sports betting continue apace.”

Bengtsson said that William Hill also remains committed to customer protection during the coronavirus outbreak, setting out how the bookmaker made a six-fold increase in the volume of responsible gambling messages sent to players.

William Hill has also committed to pledges put in place by the UK’s Betting and Gaming Council and voluntarily adopted the TV and radio gaming advertising ban, which will remain in place until 5 June.

“We remain focused on player safety employing ever more customer protection,” he said. “We are taking care of our teams, securing as many employment opportunities as possible and we are ready to power up the business as soon as Covid-19 restrictions permit.”

Looking to the future, Bengtsson said William Hill will continue to monitor the latest advice and guidance from governments in terms of coronavirus, with the aim of proceeding with a staged reopening of the UK retail estate in the second half of 2020.

The bookmaker also noted a number of recent developments, including the return of club football in Germany, with the Bundesliga set to resume behind closed doors this weekend.

Horse racing, which contributes nearly a third of online UK sportsbook activity, has resumed in France and is also expected to return behind closed doors in the UK from June.

“Our strategy for the company remains a simple one – to win with our customers, build agile collaborative teams, and get things done – execution,” Bengtsson said. “We are developing products that we are proud of and that will improve William Hill's competitiveness for the long term.”

Analysts from Regulus also gave their view on the report, suggesting that the US digital business is the only segment within the operator that is almost guaranteed a rapid rebound.

According to Regulus, online excluding the US is more likely to recover more gradually, even without material negative regulatory-political intervention, though to some extent this could be improved by R&D and management action.

However, Regulus raised concerns over the bookmaker’s land-based activities, saying that, at its heart, William Hill remains a retail business.

“The extent to which William Hill can shift its operational improvements into the level of strategic re-engineering necessary for it to thrive rather than just survive in a post-Covid world remains to be seen – but it is almost certainly a bigger challenge than anything the beleaguered group has faced yet,” Regulus added.