William Hill owner warns on profits following ‘customer friendly’ sports results

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William Hill owner 888 has issued a profit warning, blaming the impact of compliance and regulatory changes and “customer friendly” sports results cutting into margins.

Betting group 888 said it now expected third-quarter revenues to fall by 10 per cent year on year to about £400mn, adding that fourth-quarter revenues would be “sequentially higher” than the third quarter but “lower year over year by a mid-single-digit”.

Lord Jonathan Mendelsohn, 888’s executive chair, said the outcome of the drop in revenues was that full-year earnings before interest, tax, depreciation and amortisation would be “below our prior expectation”. Ebitda margins are now expected to be between 18-19 per cent, down from an earlier projection of more than 20 per cent, the group added.

888 pointed to compliance changes in some markets, “customer friendly” sports results throughout September and “the ongoing impact of safer gambling changes within the UK”, announced by the government earlier this year, for the decline in revenues. The UK is 888’s biggest market, accounting for around two-thirds of group revenues.

The profit warning follows a trading update from Ladbrokes owner Entain earlier this week, which cited similar reasons for a “high single-digit” drop in revenues year on year. Shares in 888 were down by more than 16 per cent to around 92p in morning trading in London on Thursday.

888’s revenue slowdown will present another challenge to its incoming chief executive Per Widerström, who will have to steady the ship after a series of management changes and compliance failings. The company is also grappling with 888’s large debt pile, after its £1.95bn acquisition of William Hill’s non-US operations from Caesars last year.

In July, the UK’s Gambling Commission put 888’s licence under review over concerns about the backers of FS Gaming Investment Consortium, which built a 7 per cent stake in the gaming operator, and their links to a bribery investigation by the UK tax authority.

Mendelsohn, who has been serving as interim chief executive, said he was “very confident” that Widerström and newly-appointed finance chief Sean Wilkins “will lead the business through its next phases of growth”.

David Brohan, a leisure analyst at Goodbody, called the trading update “disappointing” and said he now expected to downgrade 888’s full-year ebitda projection by 9 per cent to £320mn. This year “was always likely to be a challenging year for the group; however the earnings recovery potential remains strong,” he added in an analyst note.