Punter-friendly horse racing and football results in December will cost industry giant William Hill (WMH) £20m - and could hit profits at rivals too.

Interim chief executive Philip Bowcock says operating profit in the year to 27 December is now expected to be at the low end of a range between £260m to £280m.

Expect similar profit downgrades from William Hill rivals Ladbrokes Coral (LCL) and Paddy Power Betfair (PPB), says David Jennings, analyst at investment bank Davy.

William Hill share price

PROFIT SWING

‘While this statement will come as no surprise, the scale of the profit swing is somewhat higher than might have been expected,’ writes Jennings in a commentary today.

‘Then again, from speaking to the company, it appears that the gross win margin swing in the last nine weeks was such that this shortfall can be entirely explained by adverse sports results.’

Retail gross win margin, a key measure of performance, was 14.5% at William Hill in the last nine weeks versus a long-run average of between 17% and 18%, adds Jennings. Online margins were 5% versus a long-term expectation of between 7% and 8%.

WINTER WOE

Weak results in the fourth quarter are particularly damaging for gambling companies because it is usually a period when margins are above average.

Earnings forecasts for future years are not being changed because adverse sports results tend to average out over time adds Jennings.

Shares in William Hill trade 3.5% lower at 287p, Ladbrokes trades 2.0% lower at 120p and Paddy Power Betfair is 0.3% weaker at £87.92.

A key risk on the horizon for William Hill and rival Ladbrokes are the results of a government review into retail gaming machines stakes and prizes expected to be published sometime in the first quarter of 2017.

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Issue Date: 09 Jan 2017