UK bookmaker William Hill buys stake in online lottery firm

(Adds analyst comments, details, share movement)

By Aastha Agnihotri

Aug 7 (Reuters) - Britain's largest bookmaker William Hill (Other OTC: WIMHF - news) Plc said it had acquired a 29.4 percent stake in Luxemburg-based NeoGames to enter the emerging online lottery market.

The London-based company, which posted a 12 percent fall in first-half operating profit on Friday, also cautioned that it expected the 50 pound limit on gaming machines to further hurt its UK retail business in the second half.

Shares (Berlin: DI6.BE - news) in the company, which provides betting opportunities for royal weddings, general elections and reality TV, fell as much as 5 percent in early trading on the London Stock Exchange (Other OTC: LDNXF - news) .

Analyst Simon Davies of Canaccord Genuity (Other OTC: CCORF - news) said the further impact from the 50 pound journey referred to by the company was clearly constraining activity amongst higher staking customers in their machines business in retail.

He added that he expected some reduction in the full-year consensus forecast.

William Hill said it paid $25 million in cash for its stake in NeoGames, the online lottery software and services provider which currently focuses on the United States, where the per capita spend on lotteries is the highest in the world.

"This agreement gives William Hill good optionality in a new market that is increasingly attractive to gambling customers," Chief Executive James Henderson said.

William Hill said it had an option to buy the remaining 70.6 percent of NeoGames, exercisable after three or five years. It said it also agreed to fund a $15 million working capital facility if required.

The company reported an operating profit of 155.7 million pounds for the 26-weeks to June 30, down from 176.9 million pounds a year earlier, weighed down by increased machine games duty and a new tax on bets made online by its UK-based customers.

The company, which had posted a record annual profit in February, said group revenue was almost flat at 808.1 million pounds ($1.25 billion), with online growth of 7 percent.

William Hill declared an interim dividend of 4.1 pence per share from 4 pence last year.

Shares in the company were down 4.2 percent at 393.9 pence at 0734 GMT.

($1 = 0.6447 pounds) (Additional reporting Neil Maidment in London; Editing by Anupama Dwivedi)