Hills takes $200m in first full period of NJ trading

William Hill is aiming to double profits and achieve US earnings of $300m by the end of 2023 as part of a five-year plan for international growth.

The company has today outlined three priorities which include driving digital growth in the UK and internationally, growing a “business of scale” in the US, and remodelling UK retail as it responds to FOBT changes. CEO Philip Bowcock said the main thrust of the strategy is to reshape the company from being “predominantly UK-centric and land-based to being a leading gambling business that is digitally led, internationally diverse and sustainable”.

The strategy was unveiled as it announced in a trading update that it took in $200m in bets in its new US markets during its first full quarter of trading in New Jersey. Hills said the figure, which covers expansion states New Jersey, Delaware, West Virginia and Mississippi, was “in line with expectations”.

However, Hills’ overall figures will be cause for concern as it forecast a dip in profits this year. Full-year operating profit is expected to be in the range of £225m to £245m, assuming normalised gross win margins in the remaining weeks of the year. It reported adjusted operating profit of around £290m in 2017.

Total net revenue for the period between late June and late October was down 4% year-on-year. Online and retail were down 5% and 4% respectively despite the period including the latter stages of the Fifa World Cup. Its share price was down 5% in early trading on Tuesday morning.

The revenue decline was in the main, it said, due to adverse sporting results, with three loss-making weeks of horseracing during the summer and customer-friendly football results during the international break in October. However, Hills said it continued to see double-digit growth in new accounts.

For the financial year to date Hills said online net revenue is up 4%, with sportsbook up 8%. Retail net revenue is down 4% for the year, with sportsbook falling 6%.

CEO Philip Bowcock said the company expects a £20m hit to profits this year due to regulatory and tax changes. Next year’s figures are set to be hit by up to £25m following the introduction of the UK’s new Remote Gaming Duty, which will increase from 15% to 21% in October 2019.

With the company seeing a 29% rise in turnover in Nevada so far this year, CEO Bowcock explained the importance of the company’s drive across the US and unveiled plans for $70m of technological improvements, including a bespoke Player Account Management system from NeoGames, which will boost its performance in the coming 12 months.

The targets for the next five years will be spearheaded by growth in digital and US expansion as well as “product innovation to offer alternatives to B2 gaming” on the high street.

Hills wants to grow digital revenues to reach around £1bn (in constant currency) by 2023, which would represent a CAGR of 10% and a doubling of profits. It said it will aim to do this by continuing to build its core UK market while also diversifying internationally, with evidence of this being its strong opening in many US states and recent bid for Mr Green.

In the US, William Hill said “our goal is to be the market leader and we intend to enter every state that regulates sports betting with mobile and/or land-based operations depending upon each state’s regulations”. While uncertainties remain as to exactly which states and how many will legalise sports betting and online gaming in the coming years, Hills has given a target figure of $300m in EBITDA by 2023, up considerably on the $50m it currently makes.

Bowcock said: “We are outlining today ambitious growth targets that take account of both the near-term challenges and longer-term opportunities ahead for each of our three divisions.

“We will meaningfully reshape William Hill over the coming years, moving from a business that is predominantly UK-centric and land-based to being a leading gambling business that is digitally led, internationally diverse and sustainable.

“With more markets opening up to online gambling around the world – including the US – we can build on the heritage of the respected William Hill brand to take a leading position on the gambling world stage.”