January 29, 2013 8:27 pm

William Hill boosted by online gambling

Surging demand for online gambling has boosted profits by a fifth at William Hill, as the gambling company warned that regulatory difficulties could see it withdraw from Germany.

The bookmaker said it would consider closing its German business – worth about £6m per year in operating profit – after a stricter gambling regime prompted it to close its sports betting website there last year.

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The announcement came as the company said operating profits grew by 20 per cent to £330m in the 53 weeks to January 1 compared with last year, bolstered by a 12 per cent rise in group net revenues.

Online net revenue grew by 27 per cent year-on-year while revenues from the company’s retail shops grew by 6 per cent.

Ralph Topping, William Hill’s chief executive, said the company had benefited from a run of sporting wins in its favour.

“Performance was robust in retail and profits continued to grow strongly in online, with sporting results going in our favour in both channels,” he said. “It was a year in which we have made substantial strategic progress [with] both the pending acquisition of Sportingbet’s online business in Australia and the current Playtech call option process expected to conclude during early 2013.”

In December William Hill tabled a long-awaited formal offer for Sportingbet and described the deal as laying the foundation for its betting operations “for the next 30 years”.

Mr Topping said the £485m cash and shares deal that the group had put together with GVC Holdings would deliver higher-quality earnings, less exposure to the UK market and more exposure to regulated online revenues.

Separately, the company is considering a buyout of its online gambling joint-venture with Playtech. William Hill said the valuation done by three banks – one appointed by William Hill, another by Playtech and an independent – would be finished by the end of February.

It will then have to decide whether to activate a call option for Playtech’s 29 per cent shareholding of William Hill Online, one of the biggest online gambling operations in Europe. Analysts said the decision will hang on the price. Their estimates have ranged from £300m to £493m.

William Hill shares rose 2 per cent to 374p.

FT Comment

William Hill investors will be pleased with the company’s ongoing double-digit online growth. Alas, Europe’s regulators are less so. The company said shutouts from overseas markets could cost up to £9m in operating profits per year. That would be more than outweighed by potential new earnings Down Under if the company completes the acquisition of Sportingbet’s lucrative online Australian business. A potentially bigger question will arrive next month when it has to make a decision on buying out Playtech from their joint venture – and how to fund it. Given the strength of online, the price is not expected to be cheap. Trading at more than 13 times estimated 2013 earnings, William Hill is dearer than rival Ladbrokes but a significant discount to Betfair on 22 times. Until its future becomes clearer, that looks fully valued.

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