Hills takes a £26m hit after crisis on website

Just weeks after chief executive David Harding quit Hills, which has yet to find his successor, Britain's second-largest bookmaker today admitted the extent of the crisis in its internet business.

It admitted it has been unable to offer in-running products enabling punters to bet on games in progress, typically tennis and cricket on a point-by-point or ball-by-ball basis. In-running betting is reckoned to be the biggest growth market in internet betting.

The failure of its in-house people to bring the online offering up to standard will see the bookie take a £26 million hit, reining back profits for the year. They are expected to be about £285 million before finance charges.

The news sent Hills' shares diving 11¼p to 422p.

In a statement to the Stock Exchange updating the City on its financial year just finished, Hills admitted: "The performance of the internet business - approximately 12% of the total group - has continued to be disappointing, reflecting the legacy of technology issues relating to the sportsbook as well as the competitive market environment. In light of the ongoing technology issues impacting the internet sportsbook, the board instigated an independent review in November 2007.

"Following this review, the board has decided to terminate the NextGen technology programme and to implement an externally developed third-party technology solution. This is expected to be implemented by the end of the year.

"This decision will result in an exceptional non-cash impairment charge in relation to the existing NextGen technology programme of approximately £22 million in the 2007 results and restructuring charges of approximately £4 million in 2008.

The programme to upgrade the internet technology has been going on for up to three years but Hills has finally decided to scrap it on the advice of its long-time IT consultants IBM and Deloitte & Touche.

"We have not been able to offer all the markets that we have wanted to, and therefore looked at the status of the programme," said finance director Simon Lane. "The conclusion is that it has been taking too long and will cost too much to complete in-house. Its a fast-moving market and we need to get there quicker."

Lane admitted Hills internet arm would be far bigger if its technology had been up to speed. He said the £4 million restructuring charge will see a dozen internal IT people laid off, as well as a number of other outside contractors working on the project.

Many pundits had expected the company to announce today that it will finally capitulate to sign up to Turf TV, the channel owned by the racing industry that beams races into betting shops. Instead, the group said it was "in discussions" with the channel. There has been a stand-off between racing and the bookies for months over price but Coral and Ladbrokes capitulated last year.