Being a bookmaker is quite tough these days. Not only is there lots of competition, but the government is looking to clamp down on the industry. To survive and thrive in this environment you have to be good at keeping your customers happy. William Hill (LSE: WMH) looks like it is doing lots of things right.
This week’s trading update revealed that the business is doing very nicely. Sports betting – boosted by the World Cup – has been very kind to William Hill.
The profits of the online business have more than doubled compared to last year, while high-street profits rose by nearly a third. Overseas ventures in Australia and Italy are also doing well. The company now expects profits for 2014 to be at the top end of City analysts’ expectations.
One of the things I like about William Hill is its ability to generate lots of cash. As a result, net debt fell by nearly a quarter last year and we may see a nice dividend increase. I tipped the shares as a ‘buy’ back in July at 335p.
At 363p they have performed quite well in a difficult stockmarket. They are not that expensive on 12 times forecast earnings, but I probably wouldn’t chase them now.
Verdict: a solid hold