William Hill on track to meet FY view

Mon 19 Oct, 2009 10:59

By Matt Scuffham

LONDON (Reuters) - Bookmaker William Hill (WMH.L) said profit expectations at its retail business had been unaffected by a run of punter-friendly football results, reassuring investors and sending its shares up by 9 percent.

William Hill, which has 2,300 betting shops in Britain and Ireland, said on Monday retail betting volumes had been good since the football season started in mid-August, while its online sports betting service had seen strong turnover.

The group also said there had been "encouraging levels of recycling" where gamblers re-invest their winnings and end up losing it back to the bookmaker.

Those factors helped offset the impact of a dire run of football results.

Chelsea and Manchester United, two of the country's most heavily backed clubs, won six of seven games up to end-September. By then, there were only four Premier League draws, bad news for bookies as most punters gamble on a win.

Earlier in October, the nation's biggest bookmaker Ladbrokes (LAD.L) launched a surprise 286 million pounds rights issue and said it would not pay a final dividend as it looked to cut debt in the face of the weak economic environment.

Shares in William Hill, which have declined in value by 15 percent since the group issued a profit warning on August 4, were up 9 percent to 176 pence at 11:30 a.m. British time, valuing the business at 1.2 billion pounds.

"Poor sporting results have taken their toll as expected but it could have been worse. The group is coping better than Ladbrokes," said KBC Peel Hunt analyst Nick Batram, who kept a 'buy' stance and 216 pence target price.

Numis kept an 'add' recommendation and increased its price target to 198 pence from 188, saying it preferred William Hill to Ladbrokes.

"In the wake of the recent disappointing trading update and rights issue from Ladbrokes we find the William Hill Q3 update to be encouraging," said Numis analyst Wyn Ellis.

William Hill said football margins had returned to being in line with usual trends in the latter part of September and October. Horseracing results were unfavourable in July and August but some recovery was seen in September.

Group revenue declined by 3 percent in the third quarter but was up 3 percent in the year-to-date.

Over-the-counter gross win was down 21 percent in the third quarter as a result of the sporting results impact. However, over-the counter turnover improved, being down only 4 percent, compared with an 11 percent fall in the first six months.

Revenue from gaming machines rose by 4 percent.

William Hill has embarked on a programme of cost-cutting initiatives, including moving its online sports betting and gaming operations from Britain to Gibraltar which it expects will save around 4 million pounds in 2009 and 10 million pounds in 2010.

The consensus forecast for William Hill's full-year underlying pretax profit stands at 185 million pounds, according to a Thomson Reuters I/B/E/S poll of 20 analysts. (Editing by Julie Crust and Rupert Winchester)