Hills hopeful on Australia's emerging potential
Operator looking beyond 2013 to reap rewards from Australian expansion
William Hill CEO Ralph Topping has backed Australia to become a key market for the bookmaker in years to come, following the acquisition of Sportingbet’s Australian operations, but it’s not going to be a short-term fix.
In fact, Hills suggest it won’t be until the second half of 2014 that it starts to see significant revenues from the region with the firm facing strong competition from the likes of PaddyPower in the region.
Hills secured its entry into the market through its £459m acquisition of Sportingbet’s Australian business in March this year, a deal which Topping lauded as being integral to the company’s growth strategy.
Early signs are that this will be the case. In the 15 weeks from completion to the end of the H1 period, the Australian business generated £30.8m in net revenue from amounts wagered of £422.3m at a gross win margin of 7.8%.
The division posted an operating profit of £3.7m and while wagering fell 6% on the same period in 2012, net revenue grew 36% and operating profit grew 46%.
However based on the significant integration job and shortcomings in the current offering, Peel Hunt analyst Nick Batram said the Australian Sportingbet business now looks likely to contribute less than originally expected over the course of 2013. Hills said in a statement these improvements would continue throughout the second half and into the first quarter of 2014.
And Simon French, an analyst with Panmure, said Hills has a fight on its hands in a market dominated by local brands and the aggressively marketing tactics of Paddy Power.
Indeed as French points out, the company has acknowledged a need to bring its digital and marketing capabilities up to European standards in order to target recreational customers. Topping has posted a team of senior online specialists in Australia to work on improving the proposition.
“At the moment the cost per player acquisition in the market is about £700, which is seven to 10 times what’s experienced in Europe,” French said, adding that while in the short term performance is behind where it was expected to be, Australia remains a huge opportunity for the company.