William Hill warns gambling crackdown will hit online earnings

Bookmaker blames regulatory and tax changes for revising down full-year profit expectations

In February the UK’s Gambling Commission imposed penalties of  £6.2m on William Hill for breaching anti-money-laundering regulations

In February the UK’s Gambling Commission imposed penalties of £6.2m on William Hill for breaching anti-money-laundering regulations

 

William Hill has revised down expectations for its full-year profits following a British government crackdown on the UK gambling sector.

The bookmaker said in a trading update on Tuesday that its full-year operating profit would be £225 million to £245 million (€258m to €280.7m) against analysts’ earlier expectations of up to £260 million because of a dent to earnings from its online operations.

Its share price fell as much as 8 per cent in early morning trading.

In the period from June 27th to October 23rd, William Hill’s online net revenues fell 5 per cent, while revenues from its betting shops were 4 per cent lower.

The UK government has forced bookmakers to step up controls in areas such as money laundering and problem gambling by carrying out extra checks on people betting online.

UK chancellor Philip Hammond also plans to increase from 15 per cent to 21 per cent the tax paid by gambling companies that base their operations offshore but service customers in Britain.

“Adverse regulatory and tax changes will impact online profit growth in 2018 and 2019, including enhanced customer due diligence processes and an increase in remote gaming duty to 21 per cent,” said William Hill chief executive Philip Bowcock.

“The gross effect of these is to reduce profit by £20 million in 2018 and a further £25 million in 2019,” he added, while forecasting that its online business would return to profit growth from 2020.

Speaking to analysts after the trading update was published, Mr Bowman admitted William Hill was “having to do more checks on higher-staking customers”. This follows a sustained campaign by the UK gambling regulator to stop British-run online gaming platforms being used by money launderers and to prevent them exacerbating problem gamblers’ addictions.

Penalties

In February, the Gambling Commission imposed penalties of at least £6.2 million on William Hill for breaching anti-money-laundering regulations. An investigation by the regulator had found that 10 customers were allowed to deposit funds linked to criminal offences, resulting in gains for William Hill of about £1.2 million.

The regulator has also fined 888 Holdings and SkyBet for failing to do enough to protect vulnerable customers, such as those with gambling addictions.

The British government plans to cut the maximum amounts people can gamble on fixed odds betting terminals, which are highly profitable machines betting groups place in their high street shops.

William Hill is now pinning its hopes on expansion in the US, where the supreme court in April reversed laws that previously banned wagers on sports such as football, basketball and baseball in most states. In the half year to October 23th, the group’s US revenues rose 6 per cent. “Our goal is to be in every [US] state,” Mr Bowcock said.

Diversifying

The UK bookmaker last month also made a £242 million recommended cash offer for Swedish online casino operator Mr Green & Co, which operates across Europe.

Mr Bowcock said the lacklustre trading in the first half of William Hill’s financial year “reinforces the importance of diversifying online outside of the UK”.

After the first hour of London trading, shares in William Hill shares had recovered slightly to trade 6 per cent lower at 201.3p. – Copyright The Financial Times Limited 2018