William Hill reported a loss of £64m in the first half of the year as it coped worse than its rivals with the impact of curbs on fixed-odds betting terminals (FOBTs), a change that has cost the company nearly £1bn.
Shares in William Hill rose by more than 5% in early trading as the markets responded with relief that its results were no worse than expected.
But the figures indicated it had struggled to manage regulatory change to FOBTs, with revenues from high-street bookmaking down 12% as a small increase in sports betting was wiped out by a 25% slump in income from the machines.
Maximum stakes on the controversial machines were slashed from £100 to £2 in April – halfway through the six-month period – after the government concluded they were a “social blight” with links to addiction.
William Hill would have reported a £51m profit if not for the FOBT curbs but instead slumped to a £63.5m loss as it took a £97m one-off accounting charge related to the impact on the value of its bookmaking business.
Coupled with the £883m hit reported in its full-year results in March, William Hill has now taken £980m in cumulative FOBT charges and announced plans to close 700 shops, putting about 4,000 jobs at risk.
Prior to the change, William Hill made more money from the machines than it did from traditional bookmaking.
By contrast Flutter Entertainment, formerly known as Paddy Power Betfair, was making twice as much from sports betting than it did from machines and has suffered a much smaller decline in revenue since the FOBT curbs, down 4% in the first half.
The retail estate of GVC, which owns Ladbrokes Coral, has suffered worse than Flutter but not as badly as William Hill, with first-half revenues down 10%.
Despite difficulties in its high-street business, William Hill’s overall group revenue rose slightly, up 1%, thanks to the acquisition of online casino Mr Green.
But the company’s online operation, which accounts for 45% of revenue, suffered a 9% decline in profit to £54.3m as customers made smaller bets and costs rose.
The increase in costs was also linked to FOBTs because the government increased the duty on online betting from 15% to 21% to offset expected loss of tax on the machines.
William Hill, like its British rivals, has been expanding rapidly in the US, where the supreme court reversed a decades-old ban on sports betting last year.
The US now accounts for 7% of group revenue, with income reaching $1bn in the first half of the year, although the cost of the investment is among the factors that curbed profit.
The relative weakness of the pound against the dollar has boosted that side of the business too. In its more established Nevada business, revenues were up 16% in dollar terms but 23% in sterling.
But William Hill’s FOBT-related difficulties were among factors that meant shareholders’ half-year dividend was cut from 4.26p per share to 2.66p.
The firm’s chief executive, Philip Bowcock, said: “We are making good progress against the five-year strategy we outlined last year, delivering strong revenue growth in the US and other international markets and positioning William Hill well for future growth.
“In retail we took the tough decision to announce a consultation process over the proposed closure of around 700 shops to protect the long-term future of the business following the introduction of the £2 stake limit. The response of our colleagues has been incredibly professional during this difficult time and I would like to thank each and every one of them for that.”
Analysts at Jefferies said 2019 was a “transition year” for William Hill after the FOBT changes and pointed out that it was well-placed to grow in the US, which could also make it an attractive acquisition prospect.
The company reportedly held talks with the US casino operator Caesars Entertainment last year and analysts have long predicted further consolidation in the sector.