Monday, 30 July 2012

William Hill 2012 Interims: Top ranked Apps and online business.

William Hill @ 311.1p, +20.70p (+7.13p).

William Hill surged to new 52 week highs of 316p on Friday before settling back to close at 311.1p.

The catalyst on this occasion being the company's interim results announcement:

Key points:
- Group net revenue +11% and Operating profit1 +14% with innovation and investment driving market share gains by William Hill Online
- Good Retail performance drives +5% net revenue growth in both over-the-counter (OTC) betting and gaming machines, and Operating profit1 +6%
- Outstanding William Hill Online performance with Sportsbook turnover 33% ahead of H1 2011, overall net revenue +30% and Operating profit1 +23%
- Mobile Sportsbook turnover up +390%, 28% of total Sportsbook betting in June via mobile
- Basic adjusted earnings per share and dividend +17%
- Nevada licences awarded to William Hill and William Hill US formed through completion of three previously announced US land-based acquisitions
- International expansion continues with award of online licence in Spain, launch of Spanish regulated site ( and expansion of Italian regulated site (
- Continued strong cash flow from operations reduces net debt for covenant purposes by £61m to £355m against 27 December 2011.

Very positive increases to revenue (+11%), and profits (+14%) but of significance is the continued increase in online revenues which advanced 30%.
Coincidentally, online revenues now contribute about a third of overall revenues (Online £198.4m and retail £417.4m), with CEO - Ralph Topping commenting that "The William Hill Sportsbook app, which has been top-ranked since its launch in the Apple App Store in mid-February, has delivered more than 40,000 new customers".

With cash balances jumping to £197.3m in the six months since the company's Dec year end (2011 FY: £114.3m), and borrowings remaining steady (remember that there have been acquisitions), the resulting net borrowings figure is £274.2m giving a net gearing figure in the region of 28.44% (2011 FY: 39.01%).

Pleasingly this maintains a very strong debt reducing trend and highlights the strengths and profitability of the company's cash flows.
Putting this in perspective, the 2008 full year reported £1.154bn of borrowings and a net gearing of 464.99%.
So the borrowings figure represented almost 5 times the company's net assets in 2008 whereas today the company's net assets are almost 4 times the borrowings figure.

This growing financial strength has also enabled the company to announce an increase of 17% to the interim dividend which in the 2011 full year results was covered 2.52 times by earnings.
As with Rolls-Royce it is disappointing to see such a long timescale from the declaration date (27 July), to the ex dividend date (24 October), before finally becoming payable on the 7 December.

A strongly improving trend then which has seen the share price gallop up to 311.1p.
311.1p rates the company on a forecast pe of 11.5 times consensus earnings and a yield of 3.7%.

Looking ahead the company continues to invest in its burgeoning online operation as well as expand internationally through acquisitions in the US (Nevada), Spain, and Italy.
Of course there are risks, not least of which is the economic situation in Spain and Italy. But the Nevada move in particular could prove significant giving the company a foothold in the US ahead of any online de-regulation.

But, to date, William Hill has performed handsomely in my portfolio (June 2012: Portfolio Update.), with a 31 month share price gain of 81.94% and a further 13.39% in dividends. Total gain - 95.33%.

So a share on the gallop with some racing left in it... I hope!

Related article links:
- William Hill PLC - Interim Results
- William Hill PLC

Related posts:
June 2012: Portfolio Update.

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