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William Hill still taking regulatory pain

The impact of the £2 stake limit for fixed-odds betting terminals continues to weigh on the group, and more regulation may well be coming
William Hill still taking regulatory pain

As the £2 stake limit for fixed-odds betting terminals (FOBTs) was introduced last April, William Hill (WMH) took on most of the cost of preparing for it in the year to January 2019. However, even after £922m in exceptional charges, the cost of tighter regulations persisted through 2019. The cost of shop closures and redundancies led to exceptional charges and adjustments of £134m, while adjusted operating profits from existing operations fell 37 per cent to £147m.

IC TIP: Hold at 168p

The online business, for its part, maintained UK market share while absorbing the £13m impact from increases in the remote gaming duty. The acquisition of gaming group Mr Green in January 2019 helped push the proportion of online revenues earned outside the UK to 35 per cent, from 24 per cent in 2018.

The online business is expected to return to growth in the coming year, “assuming a stable regulatory landscape”. Quite an assumption, given the Gambling Commission’s recent announcement it plans to make a decision over whether or not to limit online gambling stakes within the next six months.

The US, however, provides a bright spot. Net revenues grew 38 per cent as the group’s nationwide market share grew to 24 per cent. The division is expected to be broadly break-even through 2020.

Broker Peel Hunt is forecasting adjusted pre-tax profits of £113m and EPS of 11.3p in 2020, rising to £158m and 15.8p in 2021.

WILLIAM HILL (WMH)   
ORD PRICE:168pMARKET VALUE:£1.46bn
TOUCH:167.3-168p12-MONTH HIGH:207pLOW: 128p
DIVIDEND YIELD:4.8%PE RATIO:na
NET ASSET VALUE:36p*NET DEBT**:188%
Year to 31 Dec†Turnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20151.5918521.612.5
20161.6018118.912.5
20171.59147-9.713.2
20181.62-722-83.112.0
20191.58-38-3.18.0
% change-2---33
Ex-div:23 Apr   
Payment:4 Jun   
*Includes intangible assets of £1.1bn, or 125p a share **Includes lease liabilities of £163m †Previous period ended on January 1 2019