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William Hill - disrupted year ahead of acquisition

Nicholas Hyett, Equity Analyst | 4 March 2021 | A A A
William Hill - disrupted year ahead of acquisition

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William Hill reported a 16% decline underlying net revenue to £1.3bn, with underlying profits before tax down 91% to £9.1m. That reflects the disruption to the sporting calendar and closure of retail shops as a result of the pandemic.

The acquisition by Caesars is expected to complete "early in the second quarter of 2021 and possibly as early as March".

The shares were unmoved following the announcement.

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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: 32.0
  • 10 year average Price/Earnings ratio: 14.0
  • Prospective dividend yield (next 12 months): 0%

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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Full Year Results

William Hill's Online business (61% of revenues) saw revenues rise 9%, as growth in gaming revenues and favourable sporting results offset lower sports betting. Underlying operating profits in the division rose 3% to £121.9m. The group has seen a strong start to 2021 in both UK and International Online.

Retail (26% of group revenue) saw revenues fall 51%, with the division falling from a profit of £83.2m a year ago to a £29.5m loss in 2020. That reflects the introduction of the £2 staking limit on in shop gaming machines, some permanent shop closures and the effect of lockdown on high streets.

William Hill US (13% of revenue) reported a 35% increase in net revenue, and underlying operating profits of £17.3m, compared to £1.6m a year ago. That reflects increases in the amount wagered, as the group increased the number of states it operates in and expanded its product offering.

The group reported free cash flow of £346.2m for the year, up from £172.3m a year ago - reflecting good cash flow management and a £238m tax refund. As a result, net debt ended the year at £113.1m, down from £535.7m a year ago.

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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.