William Hill has released a trading statement this morning covering the Q4 period for the company. William Hill continues to make excellent progress with regards to its online platform and the growth in revenue reflects this. Total online net revenue increased by 14% YoY on a LfL basis during the quarter (Sportsbook amount wagered +38%, Sportsbook net revenue +30%, gaming net revenue +2%). The retail division of the business also performed well, driven by increased growth rates for the machine offerings and total retail net revenue increased by 13% on a LfL basis versus 2012 (OTC amounts wagered -2%, OTC net revenue +4%, machines net revenue +24%, underlying machines revenue +3%). <p>

William benefitted from an increased gross win margin during the quarter with the online margin increasing to 8.1% (Q4 2012: 8.4%) versus the 6.3% rate seen in Q3. The retail grows win margin increased to 20.3% (+1.2% YoY). Gross win per machine increased to £920 (2012: £918). <p>

In terms of guidance, William Hill is forecasting for a group operating profit in 2013 to amount to c.£334 million on a pre-exceptional basis (£18.6 million of exceptional items previously disclosed) and for an outturn of £323 million taking in to account the exceptional charges. This is in line with the current market consensus of £323 million. Group net debt stands at c.£800 million (c.2.1x net debt/ EBITDA). <p>

William Hill has also quantified the losses incurred by the business in recent weeks as a result of adverse football results (high number of favourites winning) that will cost the business c.£13 million. While William Hill notes that there is no certainty that it can recoup this amount during 2014, it is still early in the year with the main sporting events still due to occur, including the World Cup. Despite the unfavourable football events, William Hill has seen continued strength in the online sports book with wagers increasing by 48% YoY in the first two weeks of 2014.<p>

Overall, this is a solid update from William Hill as management continue to demonstrate the increased shift towards online and mobile products with strong growth rates being achieved by both offerings. While the football results so far in 2014 have been unfavourable from William Hill’s perspective, it is likely to prove to be a statistical anomaly and it is part of normal business for the sector that sports results like these occur from time to time.
<p><h5>David Holohan</h5>


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