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William Hill takes huge betting shop write-down as fixed odds crackdown prompts 'cultural change'

Last updated: 11:15 03 Aug 2018 BST, First published: 08:35 03 Aug 2018 BST

FOBT machine
World Cup was good for William Hill

Bookmaker William Hill plc (LON:WMH) saw its shares drop on Friday after the group revealed it has taken a huge write-down on its betting shops estate as a result of the crackdown on fixed odds betting machines.

The bookie took a charge of £883mln in its latest half-year due to government-imposed reductions in the amount that can be wagered on FOBTs, which have been described as the 'crack cocaine' of gambling.

READ: Bookies recover poise as UK government's worst case cut in FOBTs maximum stake was expected

Hill had already warned that the new £2 staking limit on FOBTs in shops would cut Retail's gaming revenues by 35-45% and operating profit, after mitigation, by £70-100mln.

That would make 900 shops or 38% of its estate loss-making it said today, with exceptional charges of £50,000 to £60,000 per shop.

Re-shaping the portfolio might take three years, Hill said.

Overall, the bookmaker took £916mln in one-off charges in the first half with costs of £29.9mln for the closure of the Tel Aviv office and other restructuring costs.

World Cup overshadowed

The impairments overshadowed a good World Cup for the bookie, with £11mln of gross win recorded in this half year and £32.8mln for the tournament overall.

Underlying interim profits rose by 1% to £130.8mln, though Hill also shelled out £17.2mln to expand in the US following the relaxation of sports betting legislation there.

Net revenue rose by 3% to £803mln, while the dividend was unchanged at 4.26p.

“During the first half, our online business continued to deliver double-digit growth,” said Philip Bowcock, chief executive, adding that the changes to the retail estate marked a significant cultural change for the company.

“Gambling-related harm is a serious issue and it is important that we face up to this challenge.”

In a note to clients, analysts at Shore Capital maintained a ‘hold’ rating on William Hill and said: “Forecast wise, we see some modest downside risk to our underlying 2018F operating profit estimate of £288m (PBT: £258m; EPS: 25.5p) although including start-up losses could reduce this by c£50m which we expect to be clarified later.”

They added: “Overall, an ok statement from Hills with solid progress online and momentum building in its US operations. Valuing the core operation, and adjusting for the US opportunity, on 15x EPS equates to c250p per share, suggesting there is some £400m implied from the US opportunity, where early noises are encouraging.”

In late morning trading, William Hill shares were 7.4% lower at 270.60p.

 -- Adds analyst comment, updates share price --

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