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William Hill - strong end of year, deal completion imminent

Nicholas Hyett, Equity Analyst | 13 January 2021 | A A A
William Hill - strong end of year, deal completion imminent

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No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

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Total net revenue rose 9% in the fourth quarter, driven by a very strong Sportsbook result. However, despite the positive end to the year, 2020 revenues as a whole are expected to fall 16% to £1.3bn - reflecting the disruption caused by lockdowns to sporting events earlier in the year.

The planned acquisition of the group by Caesars received the necessary support from shareholders back in November and is now expected to complete in the second quarter of 2021, but possibly as early as March 2021.

The shares were broadly unmoved in early trading.

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Our view

The 272p per share cash offer from Caesar's means William's Hill's results are a bit of a formality.

Having said that, the recovery in performance since live sports returned to TVs will help to reassure the acquirer. The US casino giants interest lies predominantly in William Hill's fledgling US business. The group already owns 20% of William Hill US, and growth has been impressive despite the MLB, NBA and NHL only resuming their seasons in late July. William Hill is also nailing down marketing deals and smaller acquisitions that will help drive growth nationwide.

Once the deal completes Caesar's will look for "suitable partners or owners" for the group's non-US segments, or 90% of last year's group revenues. That means we could yet see William Hill making a return to the stock market.

That's all in the future though, and with William Hill shares trading just a fraction beneath the Caesar's offer price it looks like the UK bookie is set to depart the public market in a matter of months.

William Hill key facts

  • Price/Earnings ratio: 33.2
  • 10 year average Price/Earnings ratio: 13.7

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

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Fourth Quarter Trading Update

Fourth quarter Sportsbook revenue rose 20% year-on-year. That follows a 16% increase in amounts wagered, thanks to product improvements and an increased geographical footprint, and sports results boosting net win margins.

Geographical expansion also drove a 12% increase in full year Online International net revenue following the integration of Mr Green. International gaming revenue rose 18% on an underlying basis.

In the UK online revenues rose 5%, as 20% growth in gaming revenue in the final quarter helped offset the lack of sports betting in early months.

US full year revenues rose 32% - despite casino closures and the rescheduling of sports events. Launches in five new states drove a 121% increase in revenue in the fourth quarter. William Hill's apps are now featured on both ESPN and CBS Sports.

The group's retail business saw net revenue fall 30% - reflecting disruption caused by the pandemic. When retail stores were allowed to be open they "traded well and profitably", but are on course to report a loss of £30m for the year as a whole.

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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

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