“In certain cases, such as Paddy Power Betfair or GVC, this shows that some bookies have developed a more robust operating model that relies less on High Street shops and more on online high rollers.
“In others, such as William Hill, the profit hit may be greater at first, even if the FTSE 250 firm finally seems to be getting its online act together.
| Quantified impact | 2018E forecasts | |
| of FOBT ruling | Revenues | Pre-tax profit |
GVC | £160 million in EBITDA* | £2.8 billion | £386 million |
PaddyPowerBetfair | £33 million to £46 million in revenues | £1.8 billion | £405 million |
William Hill | £70 million to £100 million in adjusted operating profit | £1.7 billion | £253 million |
Source: Company statements, Digital Look, analysts’ consensus forecasts. *Earnings before interest taxes depreciation and amortisation.
“However, Hills has resolved its difficulties in the Australian market, appointed a new chief digital officer and the prospect of the US opening up its sports wagering markets may have opened up a whole new profit avenue for the venerable firm, which dates back to the 1930s.
“Hills has a terrific foothold in the USA, helped by a trio of acquisitions it made in 2011. It already has a presence in Nevada and a relationship with the Monmouth park racetrack in New Jersey, which it intends to use as a base for sports betting services.
“Given the wave of consolidation which has swept the UK betting industry this could make Hills a potential takeover target, either for a trade buyer or private equity – the company has been owned by both in the past.
“Since the death of Mr William Hill in 1971 the firm has already had six different owners: Sears (1971), Grand Metropolitan, when it merged with the rival Mecca Bookmakers organisation (1988), Brent Walker (1989), Nomura (1997), a private equity consortium (1999) and then the public after its London stock market flotation (2002).
“A prior bid from Canada’s Stars Group and a joint approach from 888 and Rank may have both foundered in 2016 but Hills’ history, its US positioning and the highly-cash generative nature of bookmaking may mean a predator could still run the rule over Hills, whose shares trade nearly 40% below their five-year highs.
“The conclusion of the FOBTs review at least means that everyone knows where the UK market stands from a regulatory perspective, even if the result was the worst-case so far as the bookies are concerned.”
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| 2018 E |
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| Dividend |
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| Share price (p) | PE | EPS growth | Yield | Cover | Growth |
888 | 310.0 | 21.5 x | (7%) | 3.8% | 1.24 x | 50% |
GVC | 917.5 | 11.8 x | 38% | 4.7% | 1.82 x | 26% |
PaddyPowerBetfair | 8,285.0 | 20.1 x | 4% | 2.5% | 2.00 x | 3% |
William Hill | 311.0 | 12.3 x | (8%) | 4.3% | 1.89 x | 3% |
Source: Digital Look, consensus analysts' forecasts before conclusion of FOBTs review
APPENDIX: BRITISH BOOKMAKING: MAJOR EVENTS TIMELINE – LAST 20 YEARS
1998
Ladbrokes buys Coral from Bass but is forced to sell it by the Monopolies and Mergers Commission
1999
After a management buy-out, Coral merges with Eurobet
BetFred buys Demmy Racing
Victor Chandler moves its HQ to Gibraltar, having obtained a licence there in 1996
2000
Bet365 begins trading
Betfair begins trading
Betandwin floats on the Vienna stock exchange, three years after its launch
2001
SkyBet begins trading
2002
William Hill floats on the London Stock Exchange
888 Holdings is established
2003
Candover-Cinven private equity consortium buys Gala
2004
GVC lists on London’s AIM market
Done Bookmakers renames itself Betfred
2005
Gala buys Coral-Eurobet
William Hill buys Stanley Leisure
PartyGaming floats on the London Stock Exchange, eight years after its launch
2006
Betandwin changes its name to bwin
2007
Stan James acquires Betdirect from 32Red
2008
Stan James acquires Betterbet
2010
Betfair floats on the London Stock Exchange
2011
Betfred buys the Tote (and a seven-year exclusive licence for pool betting)
William Hill buys American Wagering and two other US businesses
Bwin Interactive mergers with PartyGaming
2012
Rank acquires Gala Coral’s casinos
William Hill and GVC jointly acquire and break up Sportingbet
2014
BetVictor is acquired by Michael Tabor
Sky sells a stake in SkyBet to CVC
2015
Unibet (Kindred) buys Stan James’ online business
William Hill makes an unsuccessful bid for 888
2016
Ladbrokes mergers with Gala-Coral to form Ladbrokes-Coral
Paddy Power merges with Betfair
GVC acquires bwin.party
888 and Rank make a failed bid for William Hill
Amaya makes a failed bid for William Hill
2017
Kindred acquired 32Red
2018
GVC acquires Ladbrokes-Coral
Stars Group acquires SkyBet