Jefferies downgrades William Hill after profit warning

Jefferies downgraded William Hill to ‘underperform’ from ‘hold’ and slashed the price target to 280p from 380p following the company’s profit warning last week.

It said the share price decline since the trading update does not fully reflect the impact of customer self-exclusions/timeouts, which it reckons could accelerate, and strategic issues identified in the online division.

Self-regulation is a facility that allows a gambler to close their account for a minimum of six months and maximum of five years, with no option to reactivate the account within this timeframe.

Timeouts are a shorter version of this, where customers can opt to block their account for a period of 1 to 30 days.

“Any benefits from Project Trafalgar are now overshadowed by more immediate concerns, and we continue to be cautious on the regulatory environment,” the bank said.

Jefferies downgraded its full year 2016 earnings before interest and tax estimate by 16% to £260m, which sits at the bottom end of company guidance and is £100m lower than forecast two years ago.

The bank said William Hill’s larger proportion of high-value customers versus peers leaves it more exposed to self-exclusion.

“This is reinforced by strong current trading at other firms. We believe this will be an industry-wide issue, with Ladbrokes also likely to be impacted.”

At 1000 GMT, William Hill shares were down 0.6% to 328.30p.