William Hill on the buying trail

BOOKMAKER William Hill has unveiled a £12.2m loss for the first half of the year and warned that since the end of June the group has experienced 'a run of less favourable results with horseracing margins running below management's expectation of the long-term norm'.

But stripping out £49.1m in exceptional costs and £43.5m in interest payments underlying profits rose 32% to £80.1 million, in line with expectations and an interim dividend of 2.9p is being paid.

In its first set of results since floating on the stock market in June, turnover at Britain's second-largest bookies' chain galloped ahead 47% to £1.59bn, boosted by a number of seasonal and one-off factors.

In the previous period, race betting was seriously hit by poor weather and foot-and-mouth, which resulted in cancellation of the Cheltenham Festival. Betting in 2002 was bolstered by dropping the tax charges on UK bets and the World Cup.

William Hill chief executive David Harding said: 'These figures establish us as the most profitable gambling business in the UK. They certainly meet all the expectations we set during the float and provide a very solid foundation for future growth.'

Harding is now in acquisition mode. Since the end of the first half he has bought H&K Commissions, a 35-strong chain based in north east London and Essex, for £20m. This brings the group up to 1537 units, and Harding sees no reason why it should not reach 2000, but he said: 'I'm much more interested in profits than the number of shops.'

Harding is also lobbying the Government to keep deregulation of gambling at the top of the agenda.

The biggest opportunity for William Hill lies in the opportunity to fill its shops with one-armed bandits and gaming machines, which may be allowed by the end of 2004. Ideally Harding would like five per shop.

All the exceptional costs for the half- year were related to the flotation, refinancing debt obligations and incentive payments, and Harding said that future interest payments would be around one-third of current levels.

Full-year profits will depend on sporting results in the second half of the year. Harding said six of the past eight weeks had been very tough but short term fluctuations were a part of the business. The shares fell 13 1/2p to 260p.