William Hill Online Q1 profits down 38%
Unfavourable sporting results and PoC tax hits bottom line despite growth in sportsbook and gaming revenues
William Hill reported a 38% year-on-year fall in Q1 online profits this morning despite a 9% rise in revenues, as the operator felt the dual effect of the UK Point of Consumption (PoC) tax and a run of customer-friendly sporting results.
In a trading update this morning, the international operator said the implementation of the PoC tax in December and a hike in Machines Games Duty (MGD) resulted in £20m of additional costs across the whole business, while the new taxation regime saw the cost of online sales increase to 22% of net revenue compared to 9% in Q1 2014.
The fall in operating profit followed a difficult quarter for UK-facing sports betting operators due to a series of punter-friendly results and what William Hill described as its “largest ever loss-making week” in January at £14m.
The unfavourable results saw the firm record a lower than expected gross win margin for its online sportsbook at 7%, albeit only 0.1% down on Q1 2014, but net revenues increased 11% year-on-year on the back of 16% growth in wagers.
Gaming revenues grew 8% overall, powered by casino and bingo which grew 10% and 8% respectively, although poker revenues tumbled 32%. The firm said mobile gaming revenues were up 48%, contributing 37% of total gaming revenues.
Chief executive James Henderson said the company was in a strong position going forward following substantial investment in its technological capabilities.
“As expected, Group operating profit was impacted by a £20m increase in gambling duties following the introduction of POCT in December 2014 and the increase in MGD rate in March 2015,” Henderson said.
“However, we are well positioned to benefit as the UK online market evolves following the introduction of POCT, with ongoing technology investments expected to benefit both product and customer experience and with a substantial marketing commitment,” he added.
Meanwhile, the operator’s Australian business reported a 20% reduction in profits due to increased costs associated with the migration of Sportingbet to the William Hill Australia brand along with increased race field fees.
The rise in fees also had a knock-on effect on turnover as staking fell 8%, although win margin increased from 8.7% to 10.2%.
Total William Hill revenues, including its retail arm, were up 1% year-on-year while operating profit was down 19%.
William Hill’s share price on the UK stock exchange was 358.8p at the time of writing, down 13.5p after early morning trading.