Has William Hill Online sparked back to life?

William Hill’s Q1 ‘comeback’ was met with a muted fanfare from analysts who welcomed the return of the sleeping giant, although it was greeted with something of a shrug from the markets. Shares remained flat on the day with nobody understandably getting too worked up at 16% revenue growth. And in truth there was both good and bad news to take away for those cheering on a Hills’ return to the top.

The bare numbers made for good reading. The company reported online revenue growth of 16% year-on-year, with sportsbook net revenue up 26% on the back of 9% growth in turnover and a 1.2% improvement in win margin. Gaming also posted growth, up 8% year-on-year with both the UK and international markets seeing growth in the period. Coming after a year where online revenue fell 3% it would seem churlish to not view this as a success, and the broad response from the industry was positive.

The fact that growth was stronger than expected raised confidence the turnaround was progressing well and Paul Leyland from Regulus Partners said the improved results reflected a return to “sound operations management and delivery”. And it does appear the new online team is rapidly making progress in restoring the UK giant back to its best. But it’s also fair to view the Q1 numbers as somewhat underwhelming when placed in context.

The comparative period in 2016 was a fairly bleak one for Hills. Online net revenues was down 11% overall following a 17% fall in sportsbook revenue and gaming revenue down 5% due to a drop in the Playtech-powered casino. In comparison, Paddy Power Betfair posted 17% growth and Ladbrokes was up 38% in the period. In real terms then the Hills Q1 results are slightly ahead of their 2015 numbers and market share regains still seem a way away.

CEO Phillip Bowcock noted this to analysts and said he’d hope to “take some market share by the end of the year”. Bearing in mind the scale of the remedial work that needed to be done and the amount of senior management changes, this is a reasonable aim but with its key rivals facing significant operation distractions of their own and a very dry summer approaching, now would have seemed to be the time to make hay.

Gaming growth

Areas of progress in Q1 appeared to be focused on the Playtech-powered casino sub-vertical, which was the fastest growing gaming vertical in the quarter due to the introduction of single wallet and improvements in UX. Bowcock also said there had been an improvement in cross-sell metrics, which will have been music to the City’s ears. With the casino sector looking more competitive than ever through the addition of a number of new operators in the past 12 months, the ability to ramp-up revenues through cross-sell will be vital for Hills recovery.

But again it’s worth drawing attention to the comparatives. The casino vertical was down more than 5% in Q1 16 (with Vegas reportedly growing in the same period) so most of this growth can be reasonably classed as catch-up growth. The real question is can Hills push on from here? Its core in-house Vegas brand was previously the engine of growth and continues to have a number of exclusive games and major promotions attached to it, but little was said of its performance in Q1.

William Hill CEO, Philip Bowcock

Bowcock said most of the gaming UX work was done in H2 2016 so we should be beginning to see the benefits already, although one suspects there is still an amount of work required on the back-end around CRM and customer modelling. Hills historically was stronger in gaming than its peers so is growing from a far larger base, but it must be a priority for both Vegas and Casino to once more punch above their weight in the sector. And signs are not hugely encouraging there from Q1 so far.

Sportsbook, however, does show more green shoots. Revenue growth of 26% is some way above its peers for the period and points to substantial improvements made to the mobile app and some more focused marketing and product enhancements. Although navigation is not always the most intuitive, the new Hills app experience is not a million miles from Sky Bet with its #yourodds, recommended bets, value-enhanced racing offers and a clean, modern UX.

This should not be seen as a bad thing, with Hills clearly taking on the fastest-growing operator at their own game showing some confidence and ambition, although it should be noted desktop though remains a less than cutting-edge experience. Growth against weak comparatives could and maybe should potentially have been higher, but it’s clearly moving in the right direction. Its big challenge now will be to cut-through in a very crowded market with a proposition that differs from those it is taking head-on for new acquisitions and re-establishing the William Hill brand as a market leader. That is, of course, far easier said than done.

Money to burn?

One thing we don’t expect to see in the remainder of the year is Hills throwing marketing money at the problem. It appears to be taking a measured approach, closing product gaps, improving in-house expertise, fixing issues around tech and marketing and gradually scaling up in all areas. Bowcock noted to analysts they were willing to be more aggressive but wanted to remain “rational and profitable”, and the slight foot-off-the-gas approach currently taken from its merging competitors means there is no need to be forced into a marketing war just yet.

But that is to ignore the growth from the private sector and the likes of Sky Bet and bet365 in particular, not to mention the growing Betway business and the likes of BetVictor and the emerging Nordic brands. Hills is not yet back to a position of strength and arguably with both Paddy Power Betfair and Ladbrokes Coral fighting with one merger-focused hand tied behind their back, there is no better time to be big and bold. Growing in line with the market is, in this context, a little bit underwhelming.

There is though the elephant in the room of the storm brewing in Q3. The bottom-line hits from the racing levy, bonus tax and a potential FOBT stake reduction will, along with the lack of any major summer football tournament, make anyone cautious. And Hills will be hit as hard as anyone here. So perhaps an element of caution is wise until it has fixed all the problems that led to its brief fall from grace.

What is hugely important is it has stemmed the decline and returned to growth. If it can continue to build on this positive momentum and fulfil Bowcock’s promise to take market share in the latter half of the year, we could look back at Q1 as a real turning point. It may be too early to call this is a comeback, but there are more reasons to be cheerful than fearful heading into a very dry looking summer.