William Hill in profits warning after disastrous Cheltenham

The FTSE 250 company said lower revenues would knock back online profits by between £20m and £25m for 2016, following a rise in the number of customers taking forced breaks from gambling.

The firm said it had been hit by an “acceleration” in the number of online customers taking “time outs”, where they can lock themselves out of their accounts, and “automatic self-exclusions”, which force gambling addicts to take a break.

It said the “worst” Cheltenham horse racing results in recent history coupled with poor results on European football also knocked its performance, with online gross win margins hitting 6.2 per cent for the period to March 20 - 1.9 per cent below expectations.

The company’s share price also took a hammering, down more than 10 per cent. James Henderson, chief executive of William Hill, said: “Today’s statement reflects the combined effect of our assessment of the impact of recent regulatory changes and unfavourable sporting results including the worst results at Cheltenham in our recent history.

“We are also experiencing softer UK growth as a consequence of acquiring lower value customers. While the rest of the group is performing in line with our expectations, we continue to focus on improving online’s performance so that we can, once again, outperform the market.”

However, the group said it had identified a number of key areas to shore up the business following the appointment of interim managing director Crispin Nieboer, including cutting costs.

It said the wider William Hill Group “continues to trade well” and is in line with the firm’s expectations, thanks to “favourable” UK football results and strong performance for its US business following the Super Bowl result in February.

The group - which employs 16,000 people and runs about 2,370 UK outlets - said its operating profit for 2016 is now expected to be between £260m and £280m. William Hill is a major employer in Yorkshire, with more than a fifth of its global workforce in the region. In Leeds alone William Hill employs 1,300 people, mainly in its technical and trading teams.

William Hill also confirmed that it is in advanced talks with a partner about a possible investment in gaming platform OpenBet.

The profit warning comes after the firm announced in February that pre-tax profits had fallen 21 per cent to £187.4m in the 12 months to December 29, after new online and gaming machine levies set it back around £87m during the year.

Charles Huggins, investment analyst at Hargreaves Lansdown, said 2016 was supposed to have been the year when William Hill’s online business “regained its mojo”.

He added: “The challenge for William Hill is to reduce reliance on problem gamblers and recruit more “recreational” clients.

“These are punters who don’t take it seriously enough to really know what they are playing at, and can therefore be relied upon to bet money at poor odds, in return for a bit of a thrill.”

Analysts at Liberum reduced EBITA forecasts by 12 per cent in 2016.

“A loss making Cheltenham festival and generally softer win margins was no surprise. A significant change in online customer behaviour was,” Analysts at Liberum said.

Charles Huggins, investment analyst at Hargreaves Lansdown, said: ‘The bookie doesn’t always win, as William Hill demonstrated with a profit warning today. Revenues have been hit by a string of bad sporting results, and a rise in problem gamblers being locked out of their accounts. 2016 was supposed to be the year when William Hill’s online business regained its mojo, following a number of operational challenges last year.

“The fact that the group has already warned of lower profits from this division, barely a month after issuing full year results, is very disappointing. We can forgive the group an unfavourable run of sporting results, which is clearly outside of its control and to be expected from time to time. The acceleration in the number of time-outs and automatic self-exclusions in its online business is more worrying.”