William Hill (LON:WMH) reported a 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 illegal 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.