In posting its half-year results for the 26 weeks ended July 2, 2019 today, William Hill spoke of a trading period dominated by transition, disruption, mitigation and diversification. Heavy focus was placed on the firm’s US aspirations which, investors hope, will alleviate some of the challenges posed by legislative turbulence in the UK market.
The headline figures showed group net revenue ahead by a mere 1% to $982.5m year-on-year against a 33% decline in adjusted operating profit to $92.2m due, said the bookmaker, to the reduced £2 stake limit on gaming machines applied in April and investment in its US expansion program to the tune of $12m.
CEO Philip Bowcock told investors: “In the US, we’re building a business with meaningful scale, handling $1bn of wagers in the first year alone. Our market share was 27% in the first half. We’re now live in eight states and we’ll be launching in two more shortly. We’re giving ourselves the best possible platform for serving all new states with the imminent launch of our new proprietary technology stack – the first solution designed and built for the very specific needs of this market.
“We’re excited by the potential of the Eldorado/Caesars combination which would immediately allow us to expand the cash generative retail business and offer significant digital and marketing opportunities.”
CFO Ruth Prior, on US figures, noted: “Here we have very strong momentum with 27% market share across all states that have regulated so far against our long-term ambition of 15%. In Nevada, amounts wagered grew 16% on a local currency basis, continuing to be driven by mobile growth in a market that has been regulated for some time.
“Mobile now accounts for 69% of Nevada wagering. It was an impossible task to match last year’s unusually high gross win margin and we’ve reverted to a much more typical level of 6.5%, meaning net revenue was down 2%. Our market share (Nevada) remains at 32%.”
Prior stated that in New Jersey, William Hill is the number one non-fantasy brand. “Our margins across mobile and retail are market leading in the state,” she said. “Market share for digital was 10% in the period and 16% as we exited the half. This is ahead of having the technology in place and ahead of significantly pushing our marketing or committing to a media partnership.”
She continued: “Other things to note; that’s $1bn of amounts directly wagered in the period. And 23% of the total amount wagered is coming from states other than Nevada and New Jersey. So please don’t underestimate the value of those smaller states, particularly when they also contribute early profit.
“Our aim is to be in every state that regulates. We are not represented yet in Arkansas and New York, the other two states that were regulated in the half. We are capital disciplined in our approach to our US investment and decided the access fees being sought by New York casinos would not allow a sufficient return. If the Eldorado/Caesars deal completes we will have access to New York. We have launched in New Mexico and we will be launching in Iowa and Indiana in the coming weeks, access coming primarily from our partnership with Eldorado.”
Talking more about potential expansion, Prior advised: “As anticipated, Nevada and retail profits are underpinning digital investment, with the division in a small profit for the first half. Direct wagering growth of 51%, if you include the service provider wagering, is over 90%. This shows we are able to serve customers across a portfolio of business models.
“Our US expansion business directly handled $241m in the period, making it already equivalent to nearly a third of what we do in Nevada. Gross win margins were in line with our expectations across the piece. We recorded a loss from the expansion business of $13.1m, down from last year when we were carrying a lot of start up costs ahead of starting to generate significant revenues. And we’ve invested CAPEX of $26m in our US business in the half, with around $18m going into the digital expansion – predominantly the technology platform.”
In closing the presentation, Bowcock stated: “A lot has happened in the first half. The market is moving fast and so are we. We’ve hit a good milestone on our road to building a scaleable business. You can see from public data that we’re outperforming on gross win margins and mobile is a big part of our business – it’s 67% in the first half. We’ve got a great combination of mobile and retail, with 24 sportsbooks live outside of Nevada which is giving us profitability, cash and brand awareness to support our digital expansion.”
He added: “At the capital markets day we said we expected to see $65m in EBITDA from Nevada land based and mobile and from US expansion in the retail business. Adding in Caesars casinos already gets you to the $100m EBITDA to support the digital investment. These are good stepping stones to our $300m EBITDA target. Beyond that we gain access to the pivotal state, New York.”
