William Hill, Ladbrokes Shares Hit Again Following UK Budget Woes, Downgrades

Leading UK bookmakers William Hill and Ladbrokes witnessed yet another share decline on Monday following a downgrade and unfavourable football results over the weekend.

Hill dropped 1.33% Monday, Ladbrokes dropped 0.53%.

Analysts at Barclays have cut their price targets on William Hill, down 7.7p to 331.4p and Ladbrokes, 2p lower at 129p.
Barclays said:

While we believe William Hill is well placed to gain market share and outperform on a 3- to 5-year view, we expect the regulatory risk surrounding machines to weigh on the shares in the near term. We cut our William Hill price target to 370p (from 393p) and reiterate our equal weight rating.

[On Ladbrokes], with just 15% of earnings before interest and tax coming from the online division in 2015, versus William Hill's more than 50%, the downside for Ladbrokes from any negative machine regulation has around twice the magnitude. We note that with estimated dividend cover in 2015 of just 1.1 times (versus 2 times in 2012), the dividend appears very much at risk. We cut our price target to 117p (from 128p) and reiterate our underweight rating

The FTSE 100 slipped on Wednesday, with insurer Legal & General and gambling company William Hill slumping as changes imposed by the UK budget threatened their profits.

British Chancellor George Osborne's budget scrapped a requirement that pensions savings be used to buy an annuity. It also imposed a tax on certain betting machines. The first hit Legal & General (L&G), the second William Hill. Both under-performed the broader market decline.

William Hill dropped by 7% after Wednesday's news of a new tax on critical fixed-odds betting terminals with Ladbrokes diving 13.3%.

- Aaron Goldstein, Gambling911.com