William Hill finishes 'pivotal' year in line with forecasts

William Hill reported that full-year adjusted operating profit for 2018 from continuing operations was expected to be around £234m - 15% down on 2017.

The FTSE 250 bookmaker had guided to 2018 operating profit to be between £225m and £245m for the 53-week period to 1 January.

Underlying operating profit increased about 4% year-on-year, excluding the impact of enhanced customer due diligence measures in online, and US expansion costs.

With the group now live in seven US states, William Hill said its online operations delivered a “good” underlying performance, with “excellent” growth in the existing US business, with the group investing in rapid expansion as US states regulated sports betting.

Overall, William Hill said US business broadly broke even in 2018 after allowing for significant expansion costs.

As it had anticipated, UK retail profits fell year-on-year, challenged by wider high street conditions.

“2018 was a pivotal year for both William Hill and the wider industry,” said chief executive officer Philip Bowcock.

“We now have greater clarity around the key challenges and opportunities for our business.”

For 2019, Bowcock said the company would remodel its retail offer, while building a digitally-led international business, underpinned by a sustainable approach as part of its ‘Nobody Harmed’ ambition.

“With rapid expansion underway in the US, building on profitable foundations, and the acquisition of Mr Green nearing completion, we look forward to making further progress this year.”

Back in November, Bowcock unveiled a five-year plan to at least double profits, focusing on driving digital growth in the UK and internationally, growing a business of scale in the US and remodelling UK retail, with digital revenues of around £1bn by 2023.

William Hill, which has had its offer for Sweden's Mr Green accepted to cover around 92% of the shares so far, said its 2018 final results would be announced on 1 March.

Shares in the company fell 3% to 170.39p by early afternoon on Monday.

With the reported EBIT figure ahead of its £227m forecast, broker Peel Hunt calculated that the difference was a consequence of the US approximately breaking even, while analysts had expected start-up losses in new states to exceed the profits in the core US business in Nevada.

"2019 is going to be tough, with regulatory and duty changes dragging on the UK retail and online businesses, and the US in an investment phase. Some faith is required to believe in a pick-up in 2020. In our view, the valuation is sufficiently attractive to encourage investors to take the plunge and look through 2019 to 2020, when we expect to see growth restored."

Analysts at Numis also saw it as a "finely balanced" investment case, with 2019 being a "trough year" for earnings due to implementation of the FOBT levy. "If the five-year strategic plan announced in November is achieved the shares are undervalued," however much of this growth is backend-weighted and reliant on US profitability which is seen representing nearly half of group earnings within five years.