William Hill targets online as first-half profits dip

Despite plans to close 119 shops the bookmaker has done better than expected during the Covid-19 outbreak.

Plenty of investors backed William Hill (LSE:WMH) shares today after the bookmaker’s better-than-expected results showcased its opportunities in US sports betting and online casino markets.

The resumption of the sports calendar has also boosted confidence in the FTSE 250 index stock, which rose 3% to 121p as wagers return to near levels seen before the pandemic.

Aided by its recent strong online performance, William Hill has repaid the £24.5 million of furlough cash it received from the UK government to protect 7,000 UK retail jobs during the Covid-19 lockdown.

It also said 119 out of its 1,414 shops will not re-open following the Covid-19 lockdown.

The company is still not willing to reinstate financial guidance, however, as the compressed sports calendar means it remains hard to be certain about trends. Net revenues fell 32% to £554.4 million in the 26 weeks to June 30, with operating profits of £11.8 million ahead of expectations due to swift actions to control costs and deliver new online gaming content.

Shares were one of the five best-performing in the FTSE All-Share between the start of the UK lockdown on March 23 and July 16. Despite this rise of 187%, they were still 36% lower for the year as a whole after an estimated £25 million a month hit from the closure of betting shops.

A share placing boosted the company's balance sheet by £224 million in June, although at 128p those new shares are still underwater after a subdued recent performance.

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Deutsche Bank gave the stock a boost yesterday by upgrading its recommendation to ‘buy’, while Morgan Stanley reiterated a price target of 195p following today's results. It noted that the US business was potentially worth as much as 135% of the company's market capitalisation as William Hill looks to solidify its position as the country's biggest sports book operator.

The group said today:

“We remain particularly excited by the opportunities ahead of us in the US sports betting and online casino markets. We believe US sports betting will become the largest regulated market in the world and we are ideally positioned to be a market leader.”

The expansion is built around a partnership struck in January 2019 with Eldorado, under which the US firm received a 20% stake in William Hill US and $50 million (£38 million) of William Hill stock.

After Eldorado's acquisition of Caesars Entertainment last month, William Hill’s exclusive sports betting rights were carried forward to the new assets. Caesars owns or operates 54 properties across 16 states, including an iconic portfolio of casinos on the Las Vegas strip.

William Hill will assume operation of Caesars’ 29 live sports books and, where possible, integrate them onto the William Hill platform. The addition of the sports books will increase the company's US market share to 29% and permit access to an additional six states.

Most of the company's £1.6 billion of annual revenues still come from the UK, where the firm is merging its online and retail divisions to boost efficiency and get a single view of the UK customer. 

Online net revenues in the UK were down 8% in the half year after staking levels were impacted by the absence of sports events for much of the period. However, this was offset by a 10% rise in gaming revenues as overall operating profit across online channels rose 3% to £55.7 million. The online division now accounts for two-thirds of all revenues, with 39% of this figure generated outside the UK.