For some time now, British gambling operators have been facing considerable difficulties due to a tighter regulatory regime. Some of them tried to oppose the UK Government’s measures and even claimed that the crackdown imposed on fixed-odds betting terminals (FOBTs) would make them close some of their high-street betting outlets and fire some of their employees.
There has been a gleam of hope for British gambling companies that overseas operations could help them offset the negative impact that projected shop closures and reduced maximum FOBT stakes are expected to bring. A few months ago, the US Supreme Court eliminated the federal ban on sports betting which had been on the industry for more than two decades and a half under the Professional and Amateur Sports Protection Act of 1992 (PASPA).
The latter effectively banned sports betting on the territory of the US, except for a few states only but was eventually declared unconstitutional in May 2018. That was the time when some of the largest UK gambling companies, including William Hill, Paddy Power Betfair and 888 Holdings saw a promising new market to offer their services in. Their shares rose and a number of partnership deals were announced.
But was it a little bit too early for companies to rejoice? Probably.
UK Bookmakers Suffer Stock Price Drop in the US after Announcement
As Casino Guardian reported earlier in January, the US Department of Justice made a U-turn on its previous stance that the Wire Act of 1961 outlawed only interstate online sports betting.
About a week ago, the US Department of Justice issued a new legal opinion on the matter, saying that the federal law was actually clear enough and all kinds of interstate online gambling operations are illegal. The opinion came unexpectedly and resulted into an immediate stock price drop of British investors who have been aimed at having an expansion into the newly-legalized and lucrative sports betting sector of the US. According to the new legal opinion, the 2011 stance on the Wire Act was a misinterpretation.
After the announcement of the reversal of the DoJ’s own opinion, shares of several UK bookmakers fell, with some analysts saying that the change of stance was “rather disturbing” to a sector which has been relatively new and lacked clear nationwide regulation.
William Hill Warns of 15% Decline in 2018 Adjusted Operating Profit
The aforementioned new legal opinion of the US Justice Department made William Hill issue a note in advance of a trading statement, warning about the possible effects that the issue could have on its performance.
Today, the British bookmaker revealed that it would remodel its retail business in 2019 after it warned that its full-year adjusted operating profit for 2018 was expected to suffer a 15% decline from the result posted a year earlier. Back in November, the operator cut its profit forecast because of stricter regulatory conditions in its domestic market, particularly due to the tighter regime on FOBTs, but also warned of more losses in the US. Now it turns out that the US business of the operator had pretty much broken even.
Still, the adjusted operating profit of the company for 2018 was now expected to be £234 million, which is slightly higher than the previously projected estimate of £232.2 million.
The company further revealed that it plans to remodel its retail business in 2019 so that it makes further progress, especially considering the US expansion, as well as the acquisition of Mr Green.