British bookmaker William Hill said it expected operating profit in 2014 to finish in the higher end of market forecasts of between £341m and £366m following a huge boost from the World Cup.
Net revenue increased by 23 per cent in the 13 weeks to the end of September with operating profit rising by 89 per cent.
New Chief Executive James Henderson said: “The group performed strongly in Q3 driven by both favourable sporting results and the continued development of our UK and international businesses. Positive sporting results in the quarter, including a strong end to the World Cup, have moved us close to or ahead of normalised gross win margins on a year-to-date basis.”
Compared to the last World Cup in 2010, this World Cup saw an 80 per cent increase in amounts bet with William Hill. Sportsbook amounts wagered grew 18 per cent in Q3, which included two weeks of World Cup betting. Mobile Sportsbook turnover grew 38 per cent and accounted for 48 per cent of the total Sportsbook turnover in the period. In-play and pre-match turnover grew at 35 per cent and six per cent respectively. The Sportsbook gross win margin in Q3 of 9.4 per cent was ahead of William Hill’s long-term expectation.
Gaming net revenue (comprising 87 per cent Casino, eight per cent Bingo and five per cent Poker) continued to grow strongly, benefiting from our investment in mobile gaming together with a wider differentiated product range. The quarter also saw some increased gaming traffic during the World Cup period as well as a soft comparative in the prior August. Total gaming net revenue was up 23 per ent. Within this, Casino net revenue grew 29 per cent, with our Vegas category accounting for 60 per cent of Casino net revenue. Bingo net revenue was four per cent higher and Poker was down 20 per cent. Mobile gaming net revenue grew 116 per cent and increased to 31 per cent of Online gaming net revenue.
Mr. Henderson added: “Looking beyond the effect of these sporting results, the underlying performance across the Group is good. Online gaming continues to benefit from our investment in mobile and Sportsbook turnover growth remains healthy, with in-play turnover growth a particular feature, up 35 per cent in Q3. In Retail, net revenue growth of nine per cent reflects a favourable sports margin, the benefit of the World Cup and a strengthening of machine gross win growth rates, despite the impact of 82 shop closures during the quarter.
“Our international businesses are performing well. The progress made to date in William Hill Australia is delivering strong profit growth. Our work to optimise the customer base, following the onset of increased race field fees, has improved the gross win margin, with slightly reduced amounts wagered, as expected. More importantly, we are well positioned to compete during the busy Spring Carnival period. The management team look forward to presenting the business at our capital markets day in Sydney on October 22.
“In Italy, we became number one in online sports betting in July with a 14 per cent market share and in Spain we have further increased our online sports betting market share to 20 per cent. William Hill US has continued to show growth in both wagering and profits. We continue to monitor closely potential developments in land-based sports betting in New Jersey.”
Net revenue grew strongly in the period, with growth in both OTC and in gaming machine net revenue. Although OTC staking was slightly down in the quarter, this was more than offset in revenue terms by the benefit of positive football results.
“Having seen good growth from the new Eclipse gaming machine, we have decided to roll it out to the second half of the estate from October 2014,” Mr. Henderson added. “Gross win per machine per week was eight per cent higher at £921. Following discussions with the Department of Culture, Media and Sport, and in anticipation of legislation being progressed this autumn, we are preparing for the introduction of the ‘£50 journey’ in H1 2015 to promote account-based staking on gaming machines over £50 to help encourage responsible gambling.”
Operating costs were in line with expectations.
“We opened 14 shops in the period and closed four in the normal course of business, plus an additional 82, giving an average of 2,392 shops and 2,371 at the period end,” Mr. Henderson added. “Having announced the expected closure of 109 shops following the upcoming increase in Machine Games Duty (MGD) announced in the Budget, 70 of these shops were closed at the end of July, 12 in August and we anticipate closing a further 27 shops by the end of the year, adding an additional net £4m of exceptional costs to the £16.6m provision taken at the half year.”
Analyst Ivor Jones, of Numis Securities, said: “This is a soundly financed market leader with a growing and under-appreciated international footprint.”