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William Hill proves resilient

RESULTS: Bookmaker William Hill (WMH) is making progress with its efforts to offset ongoing regulatory challenges
March 4, 2014

The UK's largest bookmaker, William Hill (WHM), is making decent progress with efforts to minimise regulatory and tax pressures through the diversification of its revenue stream. In fact, operating profit from the online and Australian operations now generate 48 per cent the total. While, adjust for a long list of exceptionals (including acquisition and integration costs) and group operating profit rose 1 per cent to £335m.

IC TIP: Hold at 390p

Management says the acquisitions of Sportingbet and tomwaterhouse.com helped William Hill to establish a "second home" market in Australia, while international markets increased to 15 per cent of net revenue. The company also took back full control of its online offering after buying back a 29 per cent stake in William Hill Online from Playtech in April. Accordingly, adjusted online operating profit rose 4 per cent to £148m after net revenue from online operations grew 12 per cent to £446m.

Admittedly, the retail business suffered a 7 per cent operating profit fall to £196m after the impact of the new Machine Games Duty hit net revenue growth. The higher taxes cost the group approximately £10m, although cost savings of £15m-£20m are being targeted for 2015 in order to offset the introduction of the Point of Consumption Tax (due for December).

Broker Numis Securities expects pre-tax profit of £303m for 2104, giving EPS of 28.5p (£290m/28.8p).

WILLIAM HILL (WMH)

ORD PRICE:390pMARKET VALUE:£3.38bn
TOUCH:390-391p12-MONTH HIGH:495pLOW: 321p
DIVIDEND YIELD:3.0%PE RATIO:15
NET ASSET VALUE:118p**NET DEBT:78%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20090.991219.57.5
20101.0719318.68.3
20111.1418716.59.6
2012*1.2827825.010.4
20131.4925725.211.6
% change+16-7+1+12

Ex-div:30 Apr

Payment:06 Jun

*Figures restated for 53 weeks to 1 Jan 2013

**Includes intangible assets of £1.85bn or 214p per share