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William Hill’s luck has turned for the worse, says Canaccord


William Hill’s (LON:WMH) luck has turned for the worse, says broker Canaccord Genuity, as it downgraded the betting shop’s stock.

While the bookie doesn’t have its next trading update until mid-January, Canaccord has taken a pre-emptive move and has lowered its forescasts for what the broker describes as a challenging period.

Analyst Simon Davies is expecting William Hill to have taken a hit on its horse racing book.

The group’s acquisition of Sportingbet Australia is set to exacerbate the impact of a poor Spring Racing Carnival in Sydney, which saw the Melbourne Cup won by the biggest favourite since 2005. Davies points out that rival bookie Paddy Power took a £5mln hit from the event.

Along with the impact of a weaker Aussie dollar, the analyst reckons the new business’s profits could be some £13mln shy of prior expectations.

At the same time Davies notes that since the summer the trading performance will have been more subdued.

William Hill’s luck has turned over the past six months. After 18 months when retail and Online sportsbook margins were on an unbroken upward trend (investment in trading platforms and higher Mobile mix, but also a more favourable run of sporting  results), some weak summer racing and fewer football draws, sparked a reversal in Q3.”

Davies does, however, point to football markets as a possible catalyst for William Hill, thanks to particularly unpredictable results in the English Premier League and this year’s World Cup in Brazil.

William Hill’s shares are up by 15% so far this year, but they are a whopping 25% off their August peak.

“Growth looks relatively anaemic on a two year view, given the impact of Point of Consumption tax, but there is scope for some World Cup excitement, if England can get beyond their qualifying group.”

Canaccord cut its target price to 408p, down from 425p, and it repeated its ‘hold’ rating for the share.

Quick facts: William Hill PLC

Price: 269.03 GBX

Market: LSE
Market Cap: £2.82 billion

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