William Hill facing a "perfect storm" in 2015, says Canaccord Genuity
In spite of a decent set of results from William Hill last week, Canaccord Genuity has kept a ‘hold’ stance on the high street bookie, saying that the company is facing tough 2015.
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The broker said William Hill will already have to deal with a “perfect storm of negative external factors” this year, and there could be more.
“William Hill delivered an impressively resilient performance in 2014, but the deck is stacked against it in 2015,” said Canaccord’s Simon Davies.
The analyst highlighted that the group has to contend with a full year of the point-of-consumption tax in 2015, nine months of increased machines gaming duty, VAT on German and Irish online revenues, increased marketing costs in Australia and high race fees.
“Then there is the less predictable impact of the ‘£50 journey’ - the [government] regulations covering £50 plus bets on B2 machines (70% of William Hill’s machine estate),” Davies said.
Reduced revenue expectations for machines and lower online margins have prompted Canaccord to cut its 2015 adjusted pre-tax profit forecast to £262.6m, down from £326.3m in 2014 and below its previous £272.8m estimate.
Davies said: “2015 will see a perfect storm of negative external factors, but there could be more - the Labour party has committed to further restrictions on machines if it gets into power in May, and could look at additional taxes, while the consultation on the Horserace Betting Levy could increase costs.
“With no growth and regulatory uncertainty, we retain our 373p target price and ‘hold’ recommendation.”
The stock was down 0.4% at 379.3p by 09:44 on Monday, rebounding slightly after a heavy fall the previous session.