William Hill confirms lower 2018 profits as it comes close to securing £242m Mr Green & Co purchase
William Hill today confirmed a likely fall in profits for 2018, revealing its bottom line will be 15 per cent down on the year before.
Shares dipped by 2.6 per cent in early trading today after falling five per cent when the betting firm first warned of the profit drop last November.
Read more: William Hill warns of lower 2018 profits
Operating profit of £234m is in line with adjusted guidance of between £225m and £245m, after raking in £290m in 2017.
More strenuous laws on customer due diligence online and a decline in high street sales were to blame, William Hill said, even ahead of April's cuts to how much people can bet on fixed-odds betting terminals.
However, underlying profit grew by four per cent, the betting firm said in an update ahead of its full year results on 1 March, stripping out the impact of new digital customer due diligence measures and the costs of expansion in the US.
Hill chose to expand in the US following the widespread legalisation of sports betting, and reported "excellent growth" as its business is live in seven US states and managed to break even despite the firm's investment in the expansion.
Philip Bowcock, William Hill’s chief executive, said: "2018 was a pivotal year for both William Hill and the wider industry. We now have greater clarity around the key challenges and opportunities for our business.
"In 2019 we will remodel our retail offer while building a digitally-led international business, underpinned by a sustainable approach as part of our nobody harmed ambition."
Calling the news "not a major shock", AJ Bell investment director Russ Mould said that the upcoming restriction in maximum stakes on fixed-odds betting terminals from £100 to £2 “will necessitate a big restructuring of the company’s high street business in 2019”.
“Key to its hopes of returning to a sustainable growth path are its efforts to expand in the US, where the rules are generally being loosened, rather than tightened as they are in the UK. It is no surprise to see investment being poured into this expansion,” he added.
Meanwhile William Hill is set to secure its £242m takeover of a Swedish gaming company by the end of the month to give it a base outside of the UK following Brexit.
The takeover will see the betting giant hold at least 92 per cent of shares in Mr Green & Co, which is listed on Nasdaq Stockholm.
The gambling firm already bought a 13 per cent stake in Mr Green back in October when it made a bid for the gaming business, and has since acquired another 79 per cent of shares.
The firm has now extended its offer acceptance period to 31 January to allow remaining shareholders to sell their stakes in Mr Green, and will call for an extraordinary general meeting to appoint a new board of directors and for the compulsory acquisition of the last shares.
William Hill’s bid for the Swedish firm sent its shares up six per cent last year as investors welcomed the measures the betting company is taking to secure an international presence in the face of Brexit uncertainty.
Read more: William Hill makes £242m bid in Brexit hub push
While it has a base in Gibraltar, Mr Green holds remote gambling licenses in Sweden, Denmark, Italy, Latvia, Malta and the UK and Ireland, and operates in 13 countries.
“We get a ready to go international hub,” Bowcock said at the time of the bid.
He added today: "With rapid expansion underway in the US, building on profitable foundations, and the acquisition of Mr Green nearing completion, we look forward to making further progress this year."