William Hill issues profit warning after Cheltenham and online losses

Bookmaker’s shares slide after bad run of results and customers imposing betting limits on themselves

Dire horse racing results at the Cheltenham festival and high-value internet gamblers imposing restrictions on their own betting have triggered a profit warning for bookmaker William Hill.

In a surprise trading update on Wednesday, the bookmaker said it expected operating profit for this year to fall to between £260m and £280m, from £291m last year. Analysts’ average forecast was for profit of £307m from a range of £284m-318m.

William Hill shares fell 11% to 329p and were the biggest fallers in the FTSE 350 group of leading shares after a second profit warning in five months. Shares in rival bookmaker Ladbrokes fell more than 2%.

James Henderson, William Hill’s chief executive, said the worst Cheltenham in living memory and unfavourable European football results meant online revenues were about £15m worse than expected with almost three months of the year gone.

Customers choosing to opt out of gambling online will cut online profits by up to £25m this year, he added.

Bookmakers said last week’s Cheltenham was the worst ever for them as three out of four favourites in championship races won and the second-favourite won the fourth. Overall, nine favourites and one joint favourite won in the 28 races over four days.

Henderson apologised to analysts for publishing a trading statement so soon after the company’s results on 26 February.

He said: “Events have moved at a pace and we have seen two issues come together in accelerated fashion and I felt it was appropriate to provide an update. I can’t remember having four loss-making days at Cheltenham in my career.”

Investors were more concerned by a jump in customers opting out of gambling than the short-term pain caused by Cheltenham. The rapid rise had City analysts clicking on William Hill’s website to learn how the opt-out system functions.

Under rules introduced by the Gambling Commission in October to combat problem gambling, online customers can tell a bookmaker they want to take between 24 hours and six months off from gambling while keeping their account open. They can also close their account for between six months and five years by ticking a box online instead of calling the bookmaker as before.

Customer “time outs” on their gambling have increased by 50% from the start of this year, affecting 3,000 accounts a week at a cost of £2m so far. Customers “self excluding” have doubled and those customers had typically spent three or four times the average, Henderson said.

Paul Hope, the Gambling Commission’s Consumer consumer policy director, said: “We expect operators to put social responsibility at the heart of their business. Recent changes we’ve made to our regulations have provided consumers with more effective tools to manage their gambling. It is up to consumers to decide how best to use them.”

Henderson said opting out was on the rise across the industry but William Hill was affected heavily because it is the UK’s biggest online operator with higher spending customers.

Henderson said the Cheltenham results and the rise in opt-outs would not probably not have prompted a profit warning on in isolation but the combined impact meant “it was appropriate to go to the market”.

He said: “The opportunity to put the tools in people’s hands is to make it an automated process and perhaps this has prompted people to do it a bit more than recently.”

From next year, gamblers will be able to exclude themselves from all online bookmakers in one move instead of doing so with individual companies, potentially putting further pressure on the bookies.

Henderson said: “One of the analysts asked me: ‘What are you forecasting for 2017?’ but it’s almost impossible to forecast what is going to happen in the future. All we can do is update the market.”

William Hill’s shock update followed an earlier warning in October when it said a string of favourites winning horse races had affected results. Last month the company mainly blamed new gambling taxes for a 22% fall in operating profit from £372m a year in 2014.

The betting industry has been under attack from MPs and campaigners over its reliance on compulsive fixed-odds betting terminals in branches, often in poor parts of the country. The government introduced a point of consumption tax in December 2014 and increased the duty on machine games from 20% to 25%.

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