William Hill have delivered their 2019 profits, which have beaten their estimates although at the same time they have warned about the upcoming ban on credit card betting.
William Hill expected profits of around £143 million in 2019, and the final figures show that they have made £147 million. These are big numbers, although their operating profit is actually down by 37% based on the previous year, a considerable drop.
The lower figures were expected based on the number of betting shops that they have had to close in 2019 due to the FOBT regulations that have come into play. The cost to close these shops is very high, which forced William Hill to lower their expectations for 2019. This included the cost of redundancies as well as the cost of closing retail units, it has certainly been a busy year for those paying out anything based around the costs of closing stores.
Huge Betting Shop Closures in 2019
Throughout the year, William Hill closed more than 700 betting shops from their portfolio. This was after the maximum stake on an FOBT machine was cut from £100 down to just £2 in one move, something that was always going to have a huge impact on the betting industry, and we are seeing the effects of that now.
Net revenue was also down, dropping by 2% to £1.58 billion while operating cash flow dropped 7%. Something that increased was the debt that William Hill are mounting up, this now stands at £535.7 million.
Much of this has been added to due to the purchase of Mr Green. That deal alone cost William Hill £242 million in early 2019, a big expense just before the FOBT stake limit came into play.
Upcoming Credit Card Ban Will Affect Profitability
One area of concern that has been flagged up by William Hill is the upcoming credit card ban. This will come into play in the UK on April 1st and will ban people from betting with credit cards, forcing them to use other alternative payment methods if they want to continue betting with companies like William Hill online.
William Hill has said that credit cards account for 5% of their betting digital revenue, something that will so no longer be there. This equates to a cost to the company of between £5 and £10 million, so we are talking about a considerable amount.
Of course, some of those players who currently use credit cards will move onto another payment method and keep betting, but some of them will be lost either because they don’t want to, or can’t, deposit and bet using other methods.
Expansion Continues in the US
One area where William Hill are not slowing down their investment is the US market. They have been a market leader over there for a long period of time, and continue to lead the way and be big players. It is expected that in 2020 they will continue this strategy, ensuring they have a strong foothold in a large number of areas that are legalising sports betting.
Their growth in the US market was deemed to be the highlight of the 2019 financial report. Net revenue in the US grew by 38% in 2019 year on year, and they now have a nationwide market share of 24%, showing that they have really taken a leading role in the improvements of betting in the USA.
Nevada was the first place where William Hill made their mark, but we are now seeing them move into other states and offer sports better there. Already in 2020, we have seen a couple of moves from William Hill that suggests they are going to keep up their emphasis on the US market.
The first was them signing a deal with CBS, one of the biggest sports networks in the US. This deal will see the William Hill brand promoted and exposed on the CBS sports digital platform, getting William Hill and their odds in front of many sports fans.
The second move has been an entry into a new market, the market of Michigan. This is another state where William Hill will operate, and another chance for them to shine. There is still a lot of work to do, and far more investment needed so the real rewards are yet to come from this project, but there is no doubt that the company sees the US market as being hugely important in the future and something they want to really work hard on.
With the number of people in America, the lack of sports betting opportunities and the appetite for it, you certainly cannot blame Hills for what they are doing, and in the long run, it is expected to pay real dividends for them.