Gambling and gaming company William Hill (WMH) reported an upbeat third quarter trading update for the 13 weeks to 29 September citing the return of live sport and the reopening of its retail estate. The shares were unmoved, trading at 280p, close to the 277p recommended cash offer from Caesars.

EXPANDING US PRESENCE

Online operations were 4% higher driven by a 10% increase in the US where the company added another four states taking its US footprint to 14 territories. Agreements with US television networks CBS and ESPN helped to expand the group’s digital footprint.

Broker Numis noted, ‘the 4% growth is only a small improvement versus the minus 2% reported in 1H and significantly behind peers which have reported >20% during this period.’

William Hill has completed the acquisition of Cantor sports books and started the integration of Caesar’s In-person retail sports books. This will mean the company operates in more than 170 venues across 15 states, the majority of which will have a mobile William Hill presence.

In the retail estate footfall returned towards pre-Covid levels, with like-for-like sales 2% lower year-on-year, a similar result to the 10 weeks before the pandemic and a big improvement on the 49% drop over the first half.

The company indicated that in the event of further lockdowns the closure of 100 shops for four weeks would reduce EBITDA (earnings before interest, taxes, depreciation and amortisation) by around £2 million, excluding any benefits from job support schemes.

William Hill repaid the revolving credit facility during the quarter which means the group is on target to achieve a net debt to EBITDA ratio of one-to-two times by the year end.

SHAREHOLDER APPROVAL

Management has thrown its weight behind the Caesars cash offer for the company, leaving it to shareholders to approve the deal in due course.

Russ Mould, investment director at AJ Bell, said ‘lots of people have said Caesars isn’t offering enough for William Hill, but ultimately it will be down to shareholders to decide whether or not to accept the offer. So far the big institutional investors are keeping strangely quiet on their voting intentions which suggest the takeover is far from a done deal.

‘It’s easy to see why Caesars wants to do a deal. William Hill would turbocharge its ability to grab a larger share of the US gaming industry which some analysts believe could be worth as much as $35 billion in time.’

Numis commented, ‘of interest to the wider sector is how Caesars will exit William Hill’s non-US assets post acquisition; we think most interest will be for the company’s international online division (mainly Mr. Green) which it bought for £242 million in 2018 and is performing relatively well.’

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Issue Date: 21 Oct 2020