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William Hill will have few regrets over US and CEO bets

13th January, 16:24

Bookmaker William Hill directs hyperactive punters to responsible gaming charity GambleAware, to help them avoid "Bet Regret: the sinking feeling you get the minute you make a bet without thinking it through. Often when . . . chasing losses". But the FTSE 250 group does not seem to follow its own advice: four months ago, after reporting more pre-tax losses, it took yet another roll of the dice -- appointing its third new chief executive in just over three years. And Monday's trading update makes this look like a bet it didn't need to place.

Operating profit for 2019 now looks set to come in at between £143m and £148m, about 12 per cent ahead of analysts' consensus estimates, prompting the release of the numbers a week ahead of schedule. William Hill said this was partly thanks to profit from its retail business exceeding a previously guided range of £50m to £70m -- and this despite the closure of 700 betting shops after a regulatory crackdown on fixed-odds betting terminals. It also noted that its expanding US operation would not make the possible £20m loss it had allowed for -- and this because of strong wagering growth, as well as "disciplined" investment. A new chief executive appeared unnecessary, especially as the appointment has now been followed by the chief financial officer's departure.

However, a closer look at the results suggests William Hill's decision was a well- informed gamble. Its UK retail performance was only really down to such unlikely sporting outcomes as Manchester City drawing matches, 5-4 favourite Cyrname finishing 21 lengths back in the King George VI Chase, and Sarah Jessica Parker encouraging bets on women's darts in north London. Its US performance -- with sports betting still in the process of being legalised -- was only break-even, at best. More tellingly, though, its online operations in all countries continue to disappoint, with the UK increasing revenue no faster than the wider market for a third consecutive quarter while international revenue, which is more than a third of the digital total, was flat. Switching horses from Philip Bowcock, who was unable to land merger deals with online players, to chief digital officer, Ulrik Bengtsson, therefore looks both GambleAware and self-aware.

William Hill's UK retail business can only benefit from a bigger push into digital channels now that its betting shops have undergone their enforced "remodelling strategy". Its international business should be lifted by expansion of its online-only gaming acquisition Mr Green. Its US business provides even greater potential as a digital sports betting partnership with casino group Eldorado, which has 23m customers. This looks more of a winner since Eldorado took the risk of buying Caesars Entertainment's 34 outlets for $17bn including debt.

Analysts at Shore Capital describe the deal as "a game-changer" that could make William Hill's US business worth more than its current market capitalisation, if it can retain a 5 to 10 per cent US market share. Given its share stood at 26 per cent in November, recent investors look unlikely to experience bet regret.

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