William Hill reins in profit expectations, warns of U.S. losses

(Reuters) - British gambling firm William Hill WMH.L cut full-year profit expectations on Tuesday, blaming tougher regulations and higher taxes, and warned of more losses in the United States as it steps up expansion.

FILE PHOTO: A pedestrian walks past a William Hill betting shop in London, Britain July 25, 2016. REUTERS/Neil Hall

Shares in the company fell as much as 9 percent.

European gambling companies have been looking to expand across the Atlantic as Britain introduces tighter regulations - particularly on lucrative fixed-odds betting terminals (FOBTs) - and as U.S. states ease curbs on betting.

“In three years time, we should clearly see the U.S. being profitable,” Chief Executive Philip Bowcock told Reuters, adding higher advertising costs for the company’s mobile platform would hit earnings for 2-3 years.

William Hill has earmarked about 120-130 million pounds for 2019 to fund its U.S. expansion. However, the business there is expected to make a loss of up to 20 million for the same period.

The company is also preparing for a hit from the UK government’s plan to cut the maximum stake on FOBTs to just two pounds from 100 pounds from October next year. The terminals allow players to bet on simulated events such as roulette, blackjack, bingo, and horse races, but have been criticised by social campaigners for being addictive.

William Hill reiterated its expectation to shut about 900 UK shops, which could result in loss of about 4,500 jobs.

The company said it would look to provide other gaming options, such as sports betting terminals, and added it was in talks with landlords to lower rents.

William Hill, which was founded in 1934 as a postal and telephone betting service and operates in eight countries, said it expected regulations and taxes would reduce profit at its online business by 20 million pounds this year.

It forecast a total operating profit of 225-245 million pounds for 2018, down from 291.3 million pounds in 2017. Analysts had on average forecast a profit of 242.6 million pounds, according to a company-compiled consensus.

At 0900 GMT, William Hill shares were down 5.3 percent at 202.2 pence, the biggest fall on the UK mid-cap index .FTMC.

In a separate statement, Bowcock said he was aiming to turn the company from a mainly UK-focused business to one that is “digitally led, internationally diverse and sustainable”, adding he aimed to at least double profits between 2018 and 2023.

Credit Suisse analysts described that target as “very punchy,” and said the near-term forecast for the U.S. business was slightly disappointing.

Reporting by Shashwat Awasthi and Arathy S Nair in Bengaluru; Editing by Saumyadeb Chakrabarty and Mark Potter