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By Malcolm Stacey | Saturday 4 August 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello Share Pushers. First of all, an admission of bias. I avoid investing in gambling firms. This is because I like to think my money goes into making stuff or providing services which actually add to world values. And I think most gambling is often a waste of money with little concrete being produced. I realise this is kill-joy puritanism, but I can't help it.
But even if I held no such prejudice I would not invest in William Hill (WMH) at the moment. The first-half results are worrying. The company made a pre-tax loss of £819 million pounds.
The main culprit for this discouraging number is that the government has put a £2 cap on gambling machines, instead of the old £100 maximum bet. The company reckons the cap will cost it £882 million pounds.
That it should be so high means that large numbers of people must have been inclined to pile in much more than £2 a go into these 'fixed odds betting terminals'.
Maybe many of them could afford it, but it's likely that more could not. I would hope that most fair-minded people would support the £2 cap and indeed would like it to be even lower.
Underlying profits also fell for William Hill. They toppled back by 12% to £113.6 million. That's partly because of all those cancelled horse races caused by the late severe winter.
Eight betting shops were closed during the six month period. Will more follow? And where does William Hill go from here? Well, it has a fast growing presence in the USA. And you'll have read recently that betting restrictions are being weakened there.
That might help to put William Hill on a better footing. Also, this is a long-established firm with long experience which may be able to turn the ship around.
It should be suggested, by the way, that other British betting firms, will also suffer due to the £2 cap. And if I held those shares I might be looking to see if I might be wise to duck out there, too.
When you're not in the Punter's Return.
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