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You can find the current article at its original source at https://www.theguardian.com/business/nils-pratley-on-finance/2018/nov/06/william-hill-takes-a-big-punt-on-the-us-market
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| William Hill takes a big punt on the US market | William Hill takes a big punt on the US market |
| (25 days later) | |
| Farewell to the FOBTs, if only in supercharged form. William Hill is off to the US to seek its fortune. That, at least, was the gist of chief executive Philip Bowcock’s pitch to investors that set the eye-catching ambition to double operating profits in the next five years. | Farewell to the FOBTs, if only in supercharged form. William Hill is off to the US to seek its fortune. That, at least, was the gist of chief executive Philip Bowcock’s pitch to investors that set the eye-catching ambition to double operating profits in the next five years. |
| Unfortunately, he started with a step backwards, since the FOBTs, meaning that the soulless fixed-odds betting terminals are still making their presence felt, even before the government cuts maximum stakes. “Adverse regulatory and tax changes” will hit profits by £20m this year and £25m next, and the blame can largely be pinned on the machines. | Unfortunately, he started with a step backwards, since the FOBTs, meaning that the soulless fixed-odds betting terminals are still making their presence felt, even before the government cuts maximum stakes. “Adverse regulatory and tax changes” will hit profits by £20m this year and £25m next, and the blame can largely be pinned on the machines. |
| The tax changes are to compensate the Treasury for loss of revenue when stakes are cut. The regulatory demand to get tough on money laundering and suchlike has followed partly because the entire bookmaking industry, via its belligerent defence of FOBTs in the face of overwhelming evidence of consumer harm, made itself an object of suspicion. The shares fell 6% and stand close to a six-year low. | The tax changes are to compensate the Treasury for loss of revenue when stakes are cut. The regulatory demand to get tough on money laundering and suchlike has followed partly because the entire bookmaking industry, via its belligerent defence of FOBTs in the face of overwhelming evidence of consumer harm, made itself an object of suspicion. The shares fell 6% and stand close to a six-year low. |
| William Hill warns gambling crackdown will hit full-year profits | |
| Still, the vision of profitable expansion in the rapidly legalising US market is intriguing. William Hill says it wants to be in every US state and be the market leader, which, if it happens, would clearly be an achievement, given America’s huge potential. | Still, the vision of profitable expansion in the rapidly legalising US market is intriguing. William Hill says it wants to be in every US state and be the market leader, which, if it happens, would clearly be an achievement, given America’s huge potential. |
| The hard part to believe, though, is that local operators will let Europeans collect the winnings. William Hill stands a better chance than most, it should be said. It has a longstanding legal operation in Nevada and is now the only firm with operations in all five states to have legalised. But regulated US markets, whatever it says on the tin, can also be protectionist places where the home side usually wins. | The hard part to believe, though, is that local operators will let Europeans collect the winnings. William Hill stands a better chance than most, it should be said. It has a longstanding legal operation in Nevada and is now the only firm with operations in all five states to have legalised. But regulated US markets, whatever it says on the tin, can also be protectionist places where the home side usually wins. |
| Bowcock, bravely or naively, set a target of boosting top-line profits in the US from $50m to $300m by 2023. If that’s credible, the gamble on rapid expansion is clearly worth taking. But you can’t blame investors for deciding that they’ll believe the US bonanza when they see it. The problems at home are real – success in US is several years away. | Bowcock, bravely or naively, set a target of boosting top-line profits in the US from $50m to $300m by 2023. If that’s credible, the gamble on rapid expansion is clearly worth taking. But you can’t blame investors for deciding that they’ll believe the US bonanza when they see it. The problems at home are real – success in US is several years away. |
| Greene King’s troubled brew | Greene King’s troubled brew |
| Rooney Anand, long-serving chief executive of Greene King, will step down next year, and the brewer and pubs chain is planning a big bash, if chairman Philip Yea’s words are a guide. “I should like to take this opportunity to thank him publicly on behalf of the board, colleagues and shareholders for all he has done for them,” gushed Yea. | Rooney Anand, long-serving chief executive of Greene King, will step down next year, and the brewer and pubs chain is planning a big bash, if chairman Philip Yea’s words are a guide. “I should like to take this opportunity to thank him publicly on behalf of the board, colleagues and shareholders for all he has done for them,” gushed Yea. |
| So, what’s he done for shareholders? The company’s PR firm needed no invitation to push this “key statistic” for Anand’s tenure: “Ten-year total shareholder is nearly 200%.” Hold on a minute, though: Anand has been chief executive for 14 years, so why are you quoting a number for only the last decade? | So, what’s he done for shareholders? The company’s PR firm needed no invitation to push this “key statistic” for Anand’s tenure: “Ten-year total shareholder is nearly 200%.” Hold on a minute, though: Anand has been chief executive for 14 years, so why are you quoting a number for only the last decade? |
| The answer, of course, is that the scoreboard is more flattering if you start counting from November 2008, when most share prices were whacked after the collapse of Lehman Brothers. Greene King fell as low as 300p. But the share price when Anand became chief executive in May 2005 was roughly 500p. There have been excursions along the way to 900p, but the current price, within a penny or two, is once again 500p. | The answer, of course, is that the scoreboard is more flattering if you start counting from November 2008, when most share prices were whacked after the collapse of Lehman Brothers. Greene King fell as low as 300p. But the share price when Anand became chief executive in May 2005 was roughly 500p. There have been excursions along the way to 900p, but the current price, within a penny or two, is once again 500p. |
| In other words, on a 14-year view, all the work on shareholder returns has been done by dividends. What’s the true return for investors under Anand? After some prodding, the company coughed up a figure of 84%, which works out at a compound annual rate of about 4%. No investor ever got rich on that. | In other words, on a 14-year view, all the work on shareholder returns has been done by dividends. What’s the true return for investors under Anand? After some prodding, the company coughed up a figure of 84%, which works out at a compound annual rate of about 4%. No investor ever got rich on that. |
| To be fair to Anand, Greene King has done better than most rivals in a soggy sector that has had to absorb rises in the minimum wage and business rates and the 2007 smoking ban. But, come on, the 200% boast is grossly misleading. Put it in the slops tray. | To be fair to Anand, Greene King has done better than most rivals in a soggy sector that has had to absorb rises in the minimum wage and business rates and the 2007 smoking ban. But, come on, the 200% boast is grossly misleading. Put it in the slops tray. |
| If the energy tariff cap fits … | If the energy tariff cap fits … |
| Good luck, Dermot Nolan, chief executive of Ofgem – you’ll need it next February. That is when the energy regulator, having just set a default tariff that will “save” 11m customers £76 on average, must rework its models to take account of the latest wholesale prices. Those prices are rising, with an inevitable knock-on effect on the new maximum default tariff. It is possible that the entire “saving” could be reversed. | Good luck, Dermot Nolan, chief executive of Ofgem – you’ll need it next February. That is when the energy regulator, having just set a default tariff that will “save” 11m customers £76 on average, must rework its models to take account of the latest wholesale prices. Those prices are rising, with an inevitable knock-on effect on the new maximum default tariff. It is possible that the entire “saving” could be reversed. |
| The design of the system is sensible, since companies still have to be able to make an economic return. But the government’s insistence on using the word “cap”, with its suggestion of permanence, was the wrong way to describe a tariff that can move in either direction every six months. Ministers, you can be sure, will let Nolan catch the flak. | The design of the system is sensible, since companies still have to be able to make an economic return. But the government’s insistence on using the word “cap”, with its suggestion of permanence, was the wrong way to describe a tariff that can move in either direction every six months. Ministers, you can be sure, will let Nolan catch the flak. |
| William Hill | William Hill |
| Nils Pratley on finance | Nils Pratley on finance |
| Gambling | Gambling |
| Fixed-odds betting terminals | Fixed-odds betting terminals |
| Greene King | Greene King |
| Energy bills | Energy bills |
| Energy industry | Energy industry |
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