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Shares of William Hill plc (LSE:WMH) were down modestly in London today and were probably not influenced by the company’s third quarter results as much as the it would have liked them to be. In fact, the share price closed at 363.40 yesterday, gaining nearly ten points in early trading to open at 373.00 today. Whilst the early trading indicated a favorable response to the report, the fact that the stock closed down (0.17%) at 362.80 may also indicate that investors did not consider the report to be as spectacular as it appears on the surface. I am one who tends to agree with that thinking.
An Excellent Report
James Henderson, who became CEO of WMH in August, commented that “The Group performed strongly in Q3 driven by both favorable sporting results and the continued development of our UK and international businesses. The period saw good gaming growth in both major channels and sports net revenue growth significantly boosted by a favourable year-on-year swing in win margin. Positive sporting results in the quarter, including a strong end to the World Cup, have moved us close to or ahead of normalized gross win margins on a year-to-date basis.” He cited significant gains in market share in Italy and Spain as contributing to over results.
Highlights of the report include:
- Total group net revenue up 23%
- Total group operating profit up 89%
- Online operating profit up 126%
- Retail operating profit up 31%
Looking strictly at the financials may cause us to overlook certain other highly-relevant statistics, such as:
- Online wagering increased by 18%
- Mobile wagering increased by 38%
- Mobile gaming increased by 116%
- U.S. wagering increased by 21%
- U.S. mobile wagering increased by 88%
The disturbing underlying factors
Investors in any almost any other business would be handing out high-fives on results such as these. Since positive investor response was extremely short-lived, it gives me pause to wonder why. Let me make it clear that I am not invested in William Hill. Nor do I gamble. Nor do I have anything against people investing in the company. But I do see indications of broader economic concerns related to the success of the company.
Here’s what bothers me. Why, in tight economic conditions, would a company of this nature see such dramatic increases, especially in the numbers of people gaming and wagering? And what does that say about the level of desperation among the populace at large?
I have to make an assumption, right or wrong, that most of the wagering is not done by retail investors. Therefore, the wagering must be done by people who are looking for a quick buck and who ignore investing altogether. That would include an enormous number of people.
These are people who ignore the odds and who are willing to rely solely on chance to win some money. All too often they are people who can ill-afford to lose, because they desperately need more money. However, the odds being what they are, these people keep on playing and keep on losing.
Does the growth in the number of plays and the number of players indicate that the working class economic condition is much worse and more widespread than most of us think and what the government is reporting?
I don’t know the answer, but I have my suspicions. Historically, I believe, these conditions are precursors for economic earthquakes.
That’s just my opinion. What is yours?
