William Hill results: What the analysts said

 William Hill today reported a 5% rise in Online net revenues for H1 2017, driven by strong double-digit growth from its gaming business which helped offset a 1% fall in sports betting revenues. Adjusted operating profit was also up 32% year-on-year to £57.2m.

The markets seem to have reacted well to the results so far. At the time of writing, the company’s share price was up 11.13% to 277.34p on the London Stock Exchange.

Below are a selection of analyst notes on the operator’s financial results:

Numis

WMH reported a robust set of interim results despite the soft GW margin. In its challenged online business, amounts wagered and net gaming revenue rose double digit, and growth in retail OTC and machine gaming contrasted to declines reported by LCL. Negligible profit from Australia may cause concern, leaving a lot to make up in 2H. Nevertheless, strength elsewhere means management is confident meeting FY consensus. With the shares -15% over the last three months, we would expect some recovery, albeit considerable regulatory risks remain.

Stock rating: Hold

Regulus Partners

William Hill is no longer in an operational tailspin, and for this management deserves some credit. However, it is too early to identify any real strategic progress, in our view. Further operational progress notwithstanding, the key focus for the next 12 months is likely to be dealing with regulatory-fiscal issues that form very significant threats to the fabric of both UK retail and Australia markets; given that these markets represent 62% of group revenue (with less structural but increasing pressure on online also), the short/medium-term outlook is likely to offer more challenges than opportunities.

Cenkos

A key feature of the half was strong growth in wagering but weak gross win margins in every division except the US – we would expect these to normalise over the course of the year, although for the first time we can recall H1 retail gross win margin of 17.4% was below that of Ladbrokes’ shops of 17.5%. The group remains on track to deliver £40m annualised cost savings with £25m in the current year which are being reinvested in online marketing and product development. The stock trades on a 2017E EV/EBITDA of 7.9x and yields 5.0%. It isn’t expensive but regulatory clouds loom large in the UK and Australia and whilst the shares may bounce today we think sentiment will remain largely negative.

Stock rating: Sell

Stifel

Better than expected performance in H1 with pre-tax profit up 2% reflects outperformance in Online, with profits up 32% offsetting a decline of 14% in Retail and a poor result in Australia.

This is a better than expected update from William Hill. There is a wide range of full year estimates and we expect to increase our full year pre-tax forecast by c. £8-12m. While progress is being made on the turnaround of Online, the shares remain overshadowed by the machine review, where an update from Government is expected in October

Stock rating: Hold

Citi

We make minor changes to our top of the range forecasts and expect LSD upgrades to consensus as the bottom end of the range moves up to reflect the strengthening growth. Regulation continues to overhang the shares from the UK triennial review on machines (expected Q4) and the proposed credit betting ban and possible POC tax increases in Australia but we think management is doing a good job on fixing what they can control. The US Supreme Court’s review of Sports betting regulation could be a game changer.

Stock rating: Buy

Peel Hunt

Today’s results show improved momentum in the business with the implication of market share gains. In addition, the share price is at a low point from which we believe it can rally. As a result we have changed our recommendation to Add from Hold and our target price to 290p from 254p.

Stock rating: Add (from hold)