William Hill trading update: What the analysts said

William Hill released a trading update for the 17 weeks to 24 October 2017 this morning, revealing a 6% rise in Online revenues after a solid performance from its digital gaming business.

Here are a selection of notes on the operator’s financial results from some of the leading leisure industry analysts:

Davy Research

This four-month trading update from William Hill is a bit of a mixed bag. Underlying demand in retail and online is running marginally ahead of expectations with good acceleration in online gaming growth a particular positive. The US business is performing fantastically well. However, the declines in staking in Australia are a real concern; the business’s reliance on credit customers is now really hurting performance, with stakes down 5%.

Rating: NEUTRAL

Deutsche Bank

Delivery of cost savings on track, with the company now looking for “in excess” of £40m as confidence around the programme builds; some proceeds were reinvested in Online marketing. Australia remains disappointing, with further regulatory headwinds flagged such as credit betting which means WMH’s net revenue is being dragged down by the loss of high volume, high margin business.

Rating: BUY

Numis

We remain supportive of the clear improvements made by the company over the last 12 months. However, we cannot ignore the challenges William Hill still faces from both UK and Australian regulatory headwinds (triennial review, potential increase in both UK and Australia PoC tax). In our sensitivity analysis, we think WMH share price is discounting a £15 maximum FOBT stake, whereas our perception of consensus is £20.

Rating: HOLD

Stifel

Overall performance remains in line with market expectations assuming normalised margins for the rest of the year. Ahead of the analysts call we see little reason to change our forecasts for the full year.

Rating: HOLD

Shore Capital

Overall, this is a solid statement and we expect to maintain our 2017F EBIT estimate of £269m (EPS: 23.3p), in the middle of consensus range of £260-280m. William Hill remains inexpensive on a 2017F PER of 12x and an EBITDA of 8.5x and the sustained momentum is encouraging.

We would be minded to be more positive on the stock than our current hold stance but see Ladbrokes Coral^ (LCL: Buy at 135p) offering similar dynamics and trading multiples, with a further £100m+ of synergy benefits to be delivered; adjusting for these benefits and Ladbrokes is on just 8x forward earnings.

Rating: HOLD

Investec

We see six further major catalysts over the next 12 months, as outlined in our note of 16 November (Q317 preview, Catalysts, DCMS, M&A and upgrade to BUY). These are as follows: (1) Comps are weak for the next 12 months; (2) WMH is due to roll out a one wallet system across its estate (Plus system), launch in-play horseracing, make further omni-channel enhancements, and roll out more SSBTs and better machines with larger screens in the last two months of FY17;

(3) The possible repeal of PASPA upside is not fully reflected in the share price (we expect an outcome by June 2018); (4) WMH has guided to cost efficiencies of £15m in H217 and £10m in FY18, which should bode well for FY17, FY18 and FY19;

(5) The triennial review – we think the unknown becoming known will be a catalyst to the shares. We also expect a more delayed impact compared to the street (P&L impact now in FY19), and following the DCMS consultation paper and the RGSB report, we are more positive on the outcome; and (6) The Football World Cup, which begins on 8 June 2018.

Rating: BUY