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Broker verdict: William Hill

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
10/12/2014

Brokers give William Hill a thumbs-up after encouraging results.

Martin Brown and Greg Johnson, Shore Capital

“As expected favourable sporting results, notably football, in the quarter was behind an 89 per cent increase in Q3 operating profit, admittedly against weak comparative figures. Retail gross win margin (the margin achieved on the amount won) was ahead by 2 per cent to 19.7 per cent, with online ahead 3.4 per cent to 9.4 per cent. Gross win was ahead by 9 per cent and 55 per cent respectively.

The group saw strong momentum in machines, with gross win ahead 8 per cent and online gaming, with net revenue ahead 23 per cent showing sustained momentum, having been ahead 18 per cent in H1. The strong momentum helped online operating profit move ahead by 126 per cent in the quarter and retail ahead by 31 per cent. The group also made good progress internationally with Australia and USA, with the former benefiting from further reductions in customer acquisition costs, while increasing its market share in Italy and Spain to 14 per cent and 20 per cent respectively.

“Following the strong Q3 update management now expect full year earnings (before interest and tax) to be towards the top end of market consensus which we believe is c£360m. We have upgraded our full year pre-tax profit estimate by £10m to c£305m to reflect these movements noting tougher comparatives in the fourth quarter, although noting forecasts remain conservative. On 11x earnings we retain our BUY.

Sheridan Admans, investment research manager at The Share Centre

“William Hill delivered a strong set of Q3 results this morning with net revenue up 23% and operation profits rising by 89%. These figures were driven mainly by positive sporting results and high growth in its online, mobile and international markets. The group’s cash generation was also strong. Due to this solid set of results, the group now anticipates operating profits to be at the top end of current consensus.

“This morning’s results support our long term expectation. While we recognise that the sector in the UK has been under recent regulatory pressure, we remain optimistic that the attention the group has paid to its corporate structure and strategy is starting to pay off. We recommend William Hill as a ‘buy’ due to growth prospects in its mobile and online operations and expanding its services to appeal to a wider demographic.”