Online continues to drive growth for William Hill, delivering the bulk of the +3% rise in group revenues to date this year. US revenues got a big lift from Mayweather-McGregor bout, the richest fight in history. Meanwhile UK retail revenues rebounded in the Jun-Oct quarter as revenues from fixed odds betting terminals continue to rise.

Online, for a long time the area where William Hill was behind the curve, continues to perform very well. In the 17 weeks to date in the second half, amounts wagered rose +13% and revenues climbed 6%, meaning growth accelerated from the first half. But the costs of winning and doing business is higher, hitting margins, which declined 0.8 percentage points to 7.6%. The cost of sales was  16% higher with the addition of the horseracing levy and Point of Consumption tax on gaming free bets. Higher marketing spending meant operating costs were +8% higher.

Retail net revenue rose 3%, with Sportsbook net revenue up 2% and gaming net revenue up 4%. Punters spent less, with Sportsbook amount wagered -1%, but this was down the absence of any big sporting event over the summer and the rollover of Euro 2016 from the year-ago period. Gaming net revenues +4% highlights persistent reliance on fixed-odds betting terminals. No word in the statement on the impact from the review of FOBTs. Year to date, retail revenues are flat, with online revenues +5% higher.

The US business goes from strength to strength. Amounts wagered rose 33% and net revenue was 28% higher.  Undoubtedly we can put a large chunk of this improvement down to the Mayweather-McGregor fight in Las Vegas in August.

However with the potential for US sports betting liberalisation next year, William Hill is looking very well placed to exploit the opportunity when it comes. Merrill Lynch, which recently double-upgraded the stock to buy, gives William Hill 55% of the Nevada sports betting business. YTD US revenues are +31% higher.

Australia is tough and will get tougher. The credit betting ban has been passed (commences Feb 2018) and there is the potential for a so-called ‘Point of Consumption Tax’ to be adopted by individual states. Amounts wagered -5%, revenues -2% is broadly in line as management is already manage the transition to the new regime. YTD revenues are still +11% higher with amounts wagered +26%.

However with the regulatory clampdown it’s all about managing the decline and this means cost control is paramount. Like the UK’s Triennial Review, however, the share price already reflects the worst of the Australian regulatory impact.

Cost saving programme going well and set to deliver £40m of annualised savings but it comes at a cost – 1.5-2 times the annual savings in 2017 and 2018, so a return on this programme is some way off.

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