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It isn’t a good day for the UK-listed bookies. William Hill (WMH) is firmly gripping the wooden spoon after a weak Q1 trading update which is dragging on peers Ladbrokes (LAD) and UK 100 newcomer Paddy Power Betfair (PPB). Not something shareholders ever like to hear, LAD has cut revenue and profits guidance (a.k.a, issued a profits warning) following poor recent online performance. This stems from gross win margins well below expectations (1.9% vs 6.2% management expectations) on the back of an unfavourable run of European football results, a terrible day at the races which saw the company record its worst Cheltenham result in history (3/4 of favourites won) and punters self-imposing time and bet limits. While the retail division has posted a surprise loss after Cheltenham, note favourable UK football results (lots of draws and favourites losing) and a strong US Superbowl helping mitigate this to some extent.
WMH shares have dropped back to just shy of a 2yr 310-410 channel floor which could revive interest among punters eyeing a rebound. Note PDP not suffering quite as much, more likely down on news that its Chief Operating Officer will step down in April, following completion of the Betfair merger.
Mike van Dulken, Head of Research, 23 March
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