William Hill Advances As US & Online Offset £2 FOBT Hit

William Hill reported 1% increase in net revenue in its Q3 as online and US revenue offset falls in UK retail sales.

William Hill reported 1% increase in net revenue in its Q3 as online and US revenue offset falls in UK retail sales.

Is been a tough year for the gambling sector and investors were braced for a hit when the government announced the implementation of a £2 limit on Fixed odds betting terminals (FOBT) back in April.

700 stores were close hitting revenue and profits. Like for like revenues across retail fell 16% in Q3. Gaming revenues in the stores that remain has dropped by over a third. Some customers have instead turned to sports betting which saw 13% growth. Whilst the retail business has clearly taken a hit, the damage is consistent with expectation. 

William Hill’s share price dropped sharply back in March when the government announced the £2 limit. However, the share price was able to stage a solid recovery by seeking to expand online and into other markets to help mitigate the negative impact of the limit. Online revenue in Q3 grew an impressive 26%

£2 online limit?
Regulation is becoming an increasingly big headache for investor in William Hill and the gambling sector as a whole. In early November a cross party parliamentary group recommended a similar £2 limit to inline gambling transactions. Needless to say, shares tanked heavily. We can see from these results that online is an important part of William Hill's strategy. If this too is hit with £2 limits the impact could be significant.

International Expansion
With UK regulation increasingly under the spotlight, international expansion is more important than ever for gambling firms and their profitability. 
After an attempt to break into Australia that is best forgotten, William Hill appears to be doing better with cracking the US, where the law changed in 2018 to allow sports betting in some states.

William Hill said that it now has a 26% share of the US market, not bad given the intense competition with gambling firms keen to expand into a potentially enormous market. William Hill is currently operating in 10 of the 13 states in which sports betting is legal and the US business saw revenue grow 53% in dollar terms.
Going forward investors should keep a close eye on the US expansion. If the £2 online limit comes into play, William Hill will be even more dependent on the US.

Levels to watch
Despite a 10% fall at the beginning of the month, William Hill bounced off a low of 165P and is clawing back those losses.  The stock is up 1.4% following today’s results. A breakthrough immediate resistance at 184p could open the doors to 193p before targeting 206p. On the downside support is at 165p.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.