# William Hill PLC Could lose up to £100m in Revenues

- Link: https://www.directorstalkinterviews.com/william-hill-plc-lose-100m-revenues/412751266
- Published: 2018-05-17T08:38:09+01:00
- Author: Giles Arbor

**William Hill PLC** (LON:WMH) today noted the announcement by the Department for
Digital, Culture, Media and Sport (DCMS) on the Triennial Review.

DCMS is reducing the maximum stake on B2 games from £100 to £2. Given the Government
has specified its intended outcome, William Hill is providing preliminary guidance
on the potential impact in order to help investors and analysts with their own modelling.
However, a regulatory change of this nature is unprecedented and its impact on customer
behaviour will not be fully known until some years after implementation. The initial
guidance provided, therefore, is necessarily based upon a series of assumptions 
based on William Hill’s knowledge at the time of writing. We will update the market
as appropriate during and after implementation.

· In the first four months of the current financial year, c70% of our total gaming
machine net revenue was generated by stakes in excess of the proposed £2 threshold.

· After making a number of assumptions on revenue substitution back into gaming 
machines and other products, and capture of revenue from other shops closing across
the industry, we estimate that the annualised impact of a £2 staking limit could
be a reduction in total gaming net revenue of 35-45%.

· At this point, preliminary estimates suggest that the stake limit could result
in c900 William Hill shops (c38% of our existing Retail estate) becoming loss-making.
A proportion of these would be at risk of being closed within a relatively short
time of the proposed staking change being implemented and, for the remainder of 
the estate, we will monitor the actual impact on the estate and performance over
the medium and long term.

· We currently estimate that this could reduce William Hill Retail’s annualised 
adjusted operating profit1 following mitigation measures by c£70-100m. We have assumed
a degree of mitigation but will continue to look at further ways to reduce the longer
term impact on profitability.

Notwithstanding this change, the Board’s current intention is to retain the existing
dividend policy to pay out approximately 50% of underlying earnings. The Group’s
balance sheet remains strong with net debt to EBITDA currently c0.5 times following
the receipt of proceeds from the Australia and NYX transactions.

> **Philip Bowcock, Chief Executive Officer, said:** “William Hill has a long and
> proud heritage as part of the UK high street and we know how important betting
> shops are to our customers and their local economies. The Government has handed
> us a tough challenge today and it will take some time for the full impact to be
> understood, for our business, the wider high street and key partners like horseracing.
> We will continue to evolve our Retail business in order to adapt to this change
> and we will support our colleagues as best we can. Despite the challenges presented
> by this decision, our teams will compete hard and offer great service to William
> Hill customers.”

**Paddy Power Betfair Plc** (LON:PPB) also made an announcement regarding the maximum
stake saying that they estimate that the direct, pre-mitigation, impact of this 
new stake limit would be a 33% to 43% decrease its total machine gaming revenue.
In 2017, this would have equated to a £35m to £46m revenue impact, representing 
2.0% to 2.6% of Group revenue.

Potential mitigation factors on the Group’s profitability include reduced direct
variable costs (including Machine Gaming Duty at 25% and supplier revenue share),
product development, substitution to other betting products and market consolidation.

> **Peter Jackson, Paddy Power Betfair CEO, said:** “We have previously highlighted
> our concern that the wider gambling industry has suffered reputational damage 
> as a result of the widespread unease over stake limits on gaming machines. We 
> welcome, therefore, the significant intervention by the Government today, and 
> believe this is a positive development for the long-term [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
> of the industry.”

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