30-second summary
- William Hill is going to be hit hard by new UK regulations
- Slashing the max stake on fixed odds betting terminals will decrease store revenues by 45%
- As a result, 38% of their stores will become unprofitable and will likely close
- The company will rely heavily on its US operations in the future
Big changes coming
Trying to adapt to new UK regulations, William Hill could close as many as 40% of its betting stores in the UK. As a result of the changes, the company expects that these stores will no longer be profitable. This means that in the next couple of years, more than 900 stores could close down, which would put 4,500 jobs in jeopardy.
On April 1, a new law will take effect, slashing the maximum stake a player can make on a fixed-odds betting terminal to £2 ($2.61). The previous maximum stake for these terminals was £100 ($130.51), and they were a major source of revenue for bookmakers across the region.
However, there has been a sustained campaign to have these terminals curtailed because they are terribly addictive. Some have even been calling them the “crack cocaine of gambling” due to their addictive nature. It is hoped that by slashing the maximum stakes that can be bet at these terminals, people will not suffer disastrous losses as they previously may have. In its previous form, it is very easy to rack up debt quickly.
Disappointing figures
Currently, there are about 2,300 William Hill stores across the UK. The company posted poor results for the first half of 2018 and is hoping that these closures do not materialize. But they may be unavoidable with the new regulatory changes.
They will certainly be planning to remodel their current stores to emphasize their more profitable products. They would also have a staggered closure of stores rather than doing so all at once. With the new regulations coming into place on April 1, there could be shop closures before the end of the year.
Every one of these shops has at least five employees, so this could jeopardize as many as 4,500 jobs. The costs of each closure would be in the range of £60,000 ($78,300), and the closures could cut their operating profits by as much as £100m ($130.5m) a year.
William Hill is expecting that second half figures for 2018 will also be down following their loss of £820m ($1,070) in the first half of 2018. This loss was largely because of a £915m ($1,194) accounting charge that was a result of slashing the maximum stakes on fixed odds betting terminals.
Disregarding this one-off cost, they would have seen profits of £96m ($125m) for the first half of 2018, a decrease of 13% from the previous year. It is believed that curbing the maximum bet on the terminals will cause revenues of their stores to fall by as much as 45%, making 38% of these stores unprofitable.
US market a saving grace?
William Hill has been focusing on expansion into the nascent United States sports betting market. Sports betting became legal in the country following the ending of the federal ban in May 2018. Since then, William Hill has been moving quickly to become a leader in this space.
So far, eight states have opened sportsbooks and many other states looking to do so in the coming year. William Hill is vying with bookmaking rival Paddy Power (through their majority stake in FanDuel) and Draft Kings as the major operators in the US sportsbook market.
They now have a presence in many of the states where sports betting is legal. One of their first moves following the ending of the ban was to open a sportsbook at the Monmouth Park racetrack in New Jersey.
The state legalized sports betting on June 14, and they have been posting strong results ever since. William Hill is in partnership with the Ocean Resort Casino in Atlantic City, having a mobile sports betting offering in the state. The company is also in charge of the Rhode Island sportsbook offering and has a presence in West Virginia and Pennsylvania.
El Dorado deal
One of William Hill’s biggest deals to date in the United States is its partnership with El Dorado Resorts. The announcement of this deal came on September 5, 2018. It is a 25-year partnership with the NASDAQ-listed casino group.
The partnership will give William Hill a presence in 13 states after it becomes official in the coming months. The company will be the exclusive sports betting partner for the casino group, including for their online operations.
Currently, the casino group owns 21 properties in 11 states, with access to 23 million customers. An acquisition of Tropicana Entertainment is in the works, which will give them 26 properties in 13 states. The Eldorado will gain a 20% stake in the EU operations of William Hill, along with $50m ($65m) worth of William Hill stock.
With the UK government putting in stricter rules and increasing taxes, William Hill’s US expansion could be the company’s saving grace.