William Hill Revenues Increase in the First Half of 2017 but Profits Decline
William Hill Plc., one of the largest British bookmakers in the world, has released their financial figures for the first half of the year 2017. The 26- week results, H1 of 2017, were announced earlier this month on the 2nd of August 2017. The company reported a drop in profit for the six months leading up to the 27th of June 2017 while at the same time reporting a year over year growth in revenues.
Overall Financial Figures from H1 of 2017
The company that has businesses in Europe, USA and Australia have reported net revenues of GBP £837.0 million for the first half of the year, compared to GBP £814.4 that was reported during the comparative period from last year, H1 of 2016. This reflected a 3 per cent year over year increase.
Despite the growth in revenue, the company saw a decline in profits. Figures for profit before tax and interest for H1 of 2017 was reported at GBP £109.0 million, compared to GBP £122.0 million that as reported for the comparable period from last year. This marked a year over year decline in their half year profit of 11 per cent.
The company had a good start to the year 2017. Wagering growth was seen across all four divisions of the company. There was also growth in the gaming net revenue in both the Online and Retail sectors at William Hill Plc. The company also addressed the dip in profits for the half year and said that the gross win margins were affected by football betting so far this year. There were no major international football tournaments held over the first six months of this year. On top of that, the bookies suffered poor football results that weakened gross win margins.
The William Hill business is divided into four main divisions. These are the Online Division, Retail Division, William Hill Australia, and William Hill USA.
Online Division of William Hill Plc.
William Hill’s Online sector was responsible for 35 per cent of the Group’s revenue this half year, H1 of 2017.
They reported that GBP £2,485.0 million as wagered in their online sportsbook in H1 of 2017. However, H1 of 2016 had seen GBP £2,235.9 million wagered in their online sportsbook. This marked an 11 per cent year over year growth.
The company attributed this growth to the improvements in their mobile sportsbook services and marketing sector that have been working tirelessly over the last 12 months. Within this, the core market saw a year over year growth of 14 per cent. The UK market was also up by 13 per cent, while the markets in Italy and Spain were up by 20 per cent. Together these markets were responsible for 86 per cent of the wagering that took place during the period. Their other markets, however, saw a decline of 6 per cent.
The comparative period of 2016, H1 of 2016, also included three weeks of major football betting as a result of the timing for of the EURO 2016 games. When the wagers from these three weeks were discounted, the 2017 figures actually showed a 13 per cent year over year growth.
Sportsbook free bets in H1 of 2017 were 36 per cent higher than that of H1 of 2016. Free bets this year were equivalent to 1.3 per cent of total amounts wagered, while that from H1 of 2016 was equivalent to 1.1 per cent of total wagers.
Player win Margins were also down. H1 of 2017 saw a gross win margin of 6.9 per cent compared to 7.3 per cent from the year before. This was 0.4 percentage points below the prior year and also below their guided range of 7.5 to 8.0 per cent. This again was impacted by unfavourable football results in the later stages of the season. As a combined consequnce of this and rolling over the high margins from the EURO 2016 games, the Sportsbook net revenue was down by 1 per cent.
Net revenue for the sector saw a healthy 5 per cent year over year growth. Net revenue for H1 of 2017 was reported at GBP £290.0 million, while that from H1 of 2016 was reported at GBP £277.2.
Gaming net revenue on the other hand increased by a full 10 per cent compared to the same period from the year before. Both the core and non- core markets saw 10 per cent of growth each. This was in part accounted for by the improved product and user experiences for the casino verticals that were completed in the first half of the year. The single wallet integrated a seamless customer journey in to the Playtech Casino product from the OpenBet system. This was launched in February 2017.
Improvements were also made to William Hill’s mobile user experience. The company claimed that is why wagers in the mobile sector grew to dominate Sportsbook revenues even further in H1 of 2017. Revenues from mobile devices were responsible for 81 per cent of total sportsbook net revenue in H1 of 2017 and 61 per cent of gaming net revenue. H1 of 2016 saw mobile revenues claim 70 per cent of total sportsbook revenues and 51 per cent of gaming net revenues.
William Hill’s businesses in Italy and Spain also benefitted from the expanded product ranges in gaming. Total amounts wagered in H1 of 2017 were 9 per cent higher than that of the comparative period from the year before, H1 o 2016. However, gross win margins were down by 1.6 percentage points. Sportsbook net revenue for the half year was also 15 per cent lower. Overall gaming net revenue grew by 8 per cent, while overall net revenue was down by 5 per cent.
Cost of sales for the period, H1 of 2017, was down but operating costs were on the rise. Cost of sales for this year was reported at GBP £69.2 million compared to H1 of 2016, when they were reported at GBP £62.0 million. This marked a 12 per cent year over year gain for the company. Operating costs for H1 of 2017 were reported at GBP £136.6 million compared to a year before when they were reported at GBP £171.8 million. This marked a 5 per cent year over year loss.
Adjusted operating profits for the half year, H1 of 2017, were reported at GBP £57.2 million compared to H1 of 2016, when they were reported at GBP £43.4 million. This marked a 32 per cent year over year increase.
It was noted that the cost of sales had increased at a higher rate than net revenue over the first half of the year. This was because of a higher proportion of growth coming from the UK and gaming markets. Additionally, the horseracing levy for Online was also launched earlier this year in April 2017.
Operating costs in H1 of 2017 were reduced by lowering a number of external spend categories, as well as lower technology costs. Some of the company’s spending has also been delayed into H2 of 2017. Marketing spend was slightly lower year over year. This was because the amount that was invested in the EURO 2016 event from last year was largely redeployed.
Retail Division of William Hill Plc.
William Hill’s Retail sector was responsible for 55 per cent of the Group’s revenues this half of the year, H1 of 2017.
Retail sports wagering for H1 of 2017 was reported at GBP £1,204.2 million, compared to H1 of 2016, when it was reported at GBP £1,184.7 million. This marked a 2 per cent year over year increase.
The slow growth in sportsbook wagering was attributed to the absence of any major international football tournament in the first half of this year. This resulted in more horseracing fixtures and income from their 2,000 proprietary Self Service Betting Terminals (SSBTs). If the three weeks of betting from EURO 2016 in the comparator period is excluded, the figures suggest that sportsbook wagering was up by 3 per cent.
Gross win margins were also altered this year compared to last. H1 of 2017 reported gross win margins of 17.4 per cent compared to H1 of 2016, when it was reported at 19.0 per cent. The guided range for the year as a whole was between 17 and 18 percent. It was impacted by volatile sporting results across horseracing and football over the six months. The period of H1 of 2017 saw favourable results from the Tier 1 Cheltenham festival and the Royal Ascot. This softened the impact of the lower margin for Tier 2 and Tier 3 results, as well as the poor performance from the Aintree festival. Football results were strong at the start of 2017 but very poor towards the end of the season across domestic and European leagues.
Net revenue in the sector saw a 2 per cent year over year loss. While H1 of 2017 saw net revenues of GBP £460.1 million in the retail sector, for the same time last year, H1 of 2016, it was recorded at GBP £467.2 million.
Gaming net revenue saw a 3 per cent year over year increase. At the same time, gross win per machine per week was up from GBP £998 in H1 of 2016 to GBP £1,027 in H1 of 2017.
Cost of sales had improved in terms of year over year figures this year. H1 of 2017 saw sales cost of GBP £118.5 million compared to GBP £116.4 million from the year before. This marked a 2 per cent improvement compared to H1 of 2016. Operating costs also improved for the sector. For the first half of 2017, H1 of 2017, it was reported at GBP £260.7 million, while for H1 of 2016, it was reported at GBP £116.4 million.
The higher operating costs were said to primarily be reflecting an increase in cost for both staff and content. This was responsible for the reduced adjusted operating profits.
Adjusted operating profits for the retail sector in H1 of 2017 were GBP £80.9 million compared to GBP £94.4 million that was reported last year for the same period of time. This marked a 14 per cent year over year loss.
The average number of betting shops for William Hill also saw a slight increase. At the end of H1 of 2017, William Hill Plc. owned 2,376 high street venues compared to H1 of 2016 when the company owned 2,371. Five new licences opened and seven shops closed in the period of the first six months of the year.
William Hill Australia
William Hill Australia was responsible for 7 per cent of the Group’s revenue in the first half of the year, H1 of 2017.
Total amounts wagered in the 26 weeks leading to the 27th of June 2017 was ASD $1,479.5 million compared to the same time last year, H1 of 2016, when amount wagered was reported at ASD $1,156.6 million. This marked a 28 per cent year over year increase. When taking into account the foreign currency exchange rates, the total amount wagered in H1 of 2017 stood at GBP £887.0 million compared to the same time last year, H1 of 2016, when wagered amounts were reported at GBP £591.5 million. This marked a 50 per cent year over year gain. This went to show that the Australian sector of the business delivered good top- line growth for the first half of this year.
Gross win margins in H1 of 2017 were 8.0 per cent compared to the equivalent period from last year, when figures were reported at 9.9 per cent. Gross win margins were most likely down as their renewed focus on horseracing and racing results were weaker than expected.
Net revenues for the period, H1 of 2017, were reported at ASD $97.4 million. This marked a 5 per cent year over year gain compared to the same time last year, when net revenues were recorded at ASD $93.2 million. Again, taking into consideration the foreign currency exchange rates, the net revenues translated to GBP £58.5 million for H1 of 2017 and GBP £47.7 million for H1 of 2016. This marked a 23 per cent year over year increase.
Cost of sales for H1 of 2017 were reported at ASD $28.8 million compared to last year, when the figures were ASD $24.3 million. This reflected a 19 per cent year over year gain. When converted to British Pounds, the cost of sales for H1 of 2017 was GBP £17.3 million compared to GBP £12.4 million for the year before. This shows a 40 per cent year over year increase. Operating costs also went down for the company. In H1 of 2017, William Hill Australia spent ASD $67.5 million in terms of operating costs compared to the year before, when they had spent ASD $61.6 million. This reflected a 10 per cent year over year gain. When foreign currency exchange was taken into consideration, the operating costs for H1 of 2017 was GBP £40.6 million compared to the year before, when the figures were GBP £31.4 million. This marked a 29 per cent year over year gain. Adjusted operating profits for the sector in H1 of 2017 saw an 85 per cent year over year decline.
The increase in operating costs was primarily due to increased investment in content. This most notably would refer to the exclusive streaming rights that were acquired from New South Wales Racing vision to support William Hill’s focus on their horseracing product. The marketing expenditure and volume of free bets were weighted to the first half to support the company’s Australian Open sponsorship. These are expected to be lower in the second half of 2017, which would in return support an improved profit performance.
William Hill USA
The USA facing sector of the business, William Hill US, was responsible for 3 per cent of the Group’s revenues in the first half of 2017, H1 of 2017.
William Hill US saw a 30 per cent year over year increase in amounts wagered in H1 of 2017 compared to the same period from the year before. When foreign currency exchange was accounted for, the same growth translated to a smaller 13 per cent year over year increase.
Gross win margins for the first half of the year, H1 of 2017, was 5.9 per cent. This marked a small 0.2 percentage point increase compared to the same time last year, H1 of 2016, when the gross win margins were recorded at 5.7 per cent.
Net revenue for William Hill US was reported at GBP £24.6 million in H1 of 2017. This marked a 33 per cent year over year increase compared to the same time from last year, H1 of 2016, when net revenue was reported at GBP £18.5 million. However, when the same numbers were measured in the American local currency, it reflected a smaller 17 per cent year over year increase.
Operating costs for the half year, H1 of 2017, were higher by 43 per cent compared to the same time last year. When calculated in local currency, the year over year increase stood at 26 per cent.
The adjusted operating profit for H1 of 2017 was 19 per cent higher than the same time last year. It was reported at GBP £7.6 million for this year, H1 of 2017, compared to GBP £6.4 million that was reported last year for the comparative period of H1 of 2016. When the same figures were studied in the local currency it reflected a much smaller 3 per cent year over year increase.
During the first six months of this year, William Hill US expanded their business into a third state in the USA. The company also opened a race book for Caesars Entertainment in the state of Iowa. William Hill USA expanded their offerings in the state of Nevada, and opened another sports book. With this their market share calculated through the number of outlets in Nevada has reached 56 per cent.
Wagering in the USA via mobile devices was also on the rise. It accounted for 56 per cent of all bets taken in H1 of 2017 compared to 2016 when mobile bets accounted for around 52 per cent of overall bets.
The CEO’s Comments
Philip Bowcock, the Chief Executive Officer of William Hill Plc, offered some comments on the occasion.
He said that the first six months of the year has seen good progress and growth across all the divisions of the company.
Bowcock said. “The first half of 2017 has seen good progress against our three strategic priorities and wagering growth across all four divisions.”
He added that their new initiatives have not only improved customer retentions numbers but also increased customer acquisition number for the year so far.
He said, “Our product improvements combined with improved marketing have seen both existing customers respond positively and the number of new customers start growing again during the period.”
Bowcock mentioned the remarkable growth in the company’s online and retail sectors.
He said, “As a result we are seeing good momentum building in Online’s performance. In Retail we made market share gains, with growth in both sports betting, despite the lack of a major international football tournament, and gaming revenues.”
The William Hill CEO noted that their international businesses also continued to grow and improve in the first half of this year. He mentioned that the upcoming Spring Carnival will really help with the full year fiscal figures for William Hill Australia.
He said, “Internationally, our US business continues to perform well and in Australia, with the upcoming Spring Carnival key to the full- year results, we are competing hard and diversifying our product range.”
Bowcock further spoke about the initiatives that were taken by the company to deliver higher savings, better customer experience and improved gaming products over the last six months.
He said, “Earlier in the year we targeted GBP £40 million of annualised savings as part of our transformation programme and we are on track to deliver this by the year- end. In addition to these savings, the programme has sparked initiatives to further improve our products and customer experience, accelerate our top- line growth and increase efficiency.”
The CEO concluded by saying that he was pleased with the company’s overall performance so far this year and is confident that they will keep performing well into the second half of the year and even later in the future.
He said, “We are confident about delivering a good outturn in 2017 and beyond.”
Philip Bowcock was promoted from Chief Financial Officer to the Chief Executive Officer at William Hill Plc. earlier this year in March 2017.
William Hill Plc.
William Hill Plc., the London based bookmaker was founded against legal odds in 1934, when gambling was illegal in Britain. The company now operates worldwide and employs more than 16,000 people globally. The offices for the company were moved to Gibraltar in 2009 in a bid to avoid the high UK tax rates. Around the same time, the company also had to close most of their shops in Ireland. Their expansion into Italy and Spain remained fruitless because of the great recession. The company also placed a bid to enter the Indian gambling market. A more successful expansion only came their way in 2012, when William Hill took their business across the Atlantic and set up shop in the USA. William Hill also bought over three Australian brands, Sportingbet, Centrebet and Tom Waterhouse in 2013. These were later rebranded as William Hill Australia in 2015.
Meanwhile at home, William Hill was quick to embrace the changing habits of British gamblers. This included gamblers who had started using mobile devices such as smartphones and tablets to place bets online. Bets were also placed “in play” while watching sport like soccer on TV using the William Hill app. To start with, the bookie had introduced attractive products to match the demands of the new generation, but their lead vanished quickly and their apps failed to retain punters.
Nonetheless, the company did remain in the lead with traditional methods. With 2,370 bookmakers on the high street, they were still one of the leading providers for gambling services. This was especially true when it came to events such as traditional horse and greyhound racing and even gaming on land based machines.
The company has had an eventful few months since the dismissal of their former CEO. Right after the event, 888 Holdings and the Rank Group Plc. made a joint takeover bid to William Hill Plc., which was immediately rejected by the Board of Directors. William Hill also looked into a possible cross- continent merger with Canadian gaming company, Amaya Inc., but decided to back out of it in the end.