Luck against William Hill as it issues profit warning

Shares drop 27.4p, or 8% to 318p - their lowest level in nearly three years

Favourites romping home in major horse races in the UK and Australia, American football results going with form and a bigger betting tax bill has forced William to issue a shock profits forecast.

Even a run of bad form from Chelsea in the Premier League was not enough to recover the amount of money Hill lost on races like the St Leger. It said it now expected full-year operating profits to be at the bottom end of analysts’s ranges, which had stretched from £290.9m to £312.1m. That was already down on last year’s £335m.

Hill’s shares dropped 27.4p, or 8 per cent to 318p on the warning. That is their lowest level in nearly three years and way below the 432p they peaked at in May shortly before its attempt to take over rival gaming group 888.com for £720m ended in failure.

“We always expected a tough quarter, but clearly it’s been a lot tougher than anticipated,” said Nick Batram of Peel Hunt as he cut his view on the stock from buy to hold.

James Henderson, the chief executive, said: “Not only are we paying significantly more gambling taxes this year, but we were also up against really tough comparatives from last year’s outstanding gross win margin. This tax impact – and the gross win margin swing – are by far the biggest adverse year-on-year changes in today’s numbers.”

He said that the previous year’s third quarter had benefited from including the final two weeks of the Fifa Wold Cup in Rio and that new or raised UK taxes on betting had cost an extra £23m.

But analysts also pointed out that after its failure to reach a deal with 888.com, William Hill has been left standing as its rivals get together in a frenzy of consolidation which has seen Paddy Power merge with Betfair in a £5bn deal and Ladbrokes strike a £2.3bn deal with Coral.

Third quarter operating profits fell 31 per cent on revenues that were down by 9 per cent, Hill said. The gross win margin in its retail business fell from 197 per cent to just 16.6 per cent.