William Hill saw their pre-tax profits fall to £78.7m in the first six months of this year, down 35 per cent from £121.8m which was reported last year.
The fall in profits can be blamed on a huge tax hit, as the group paid an additional £44m in gambling duties, after changes to the taxation of online betting and fixed-odds betting were introduced.
Point of Consumption Tax came into effect late last year, which applies to gambling profits generated from UK customers, and Machine Games Duty increased to 25 per cent in March.
Shares in the bookmakers fell by 4 per cent, although the group had bought a 29.4 per cent stake in online lottery firm NeoGames for £16m.
With the groups purchase of NeoGames and an increased dividend to 4.1p, Ian Forrest, investment research analyst at The Share Centre, explains what the news mean for investors.
“Alongside its interim results this morning, bookmaker William Hill announced the £16m purchase of a 29 per cent stake in online lotteries company NeoGames. The results additionally showed revenues in the first six months remained almost flat at £808.1m, although pre-tax profit fell 11 per cent to £131.3m. Investors should acknowledge that this was due to higher regulatory costs and tax issues, such as the new point of consumption tax and the machine games duty.
“Those currently invested in the bookies will be pleased to see that the group increased its interim dividend slightly to 4.1p, and said it is seeing good momentum with its Australian business, despite having to write down some of the value. Furthermore, the US operation is enjoying strong wagering and profit growth, whilst the acquisition of online lotteries group NeoGames will provide further exposure to the US.
“Today’s news provides investors with some cheer but also makes clear the scale of the impact from the new taxes and regulations on the betting industry in the UK. The good news is that William Hill is expanding overseas and online, so over the long run the issues in the UK will become less significant. Consequently, we continue to recommend investors ‘buy’ William Hill due to the potential growth in its mobile and online operations, while its selective international expansion should provide regional, regulatory and economic diversification.”