I mentioned William Hill yesterday and the possibility that at the first sign of something bad their share price might take a hit after being a very good momentum play for some time. Well, today appears to be that day.
Shares in William Hill sank sharply on Friday morning as investors gave a cool reaction to the High Street bookie's first-half results.
Even Canaccord Genuity, which labelled the figures as "strong", kept its 'hold' recommendation and 438p target price for the shares, highlighting headwinds for the company in 2015.
The increase in profits in the first half was better than expected, the broker said, though earnings growth was "flattered by a particularly low tax charge".
Retail was boosted by a strong Grand National and a general good run of results, helping to offset a higher Machines tax. Meanwhile, Online delivered strong growth, but this was outweighed by a weaker contribution from Sportingbet.http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=14283&ac=,&username=,&action=news&story_id=21069911
Shares are down around 7% so far on this news. It would seem that the major hit came from the UK Government's new machine games tax, first mentioned as a possible drag on the sector here. It's interesting that the market largely overlooked the potential for a negative reaction from the imposition of new taxes, as long as momentum was with William Hill for most of this year, until now that is. The tax itself is not a surprise, but it would appear that William Hill while delivering a decent enough performance was not able to make up in other areas of its business to offset the negative tax in a way that would mean the market would overlook it.
Does this mean the end of the bull run for the company? Possibly, but a look at how the charts develop over the next few weeks will be needed to see whether the upward trend holds. For now, a little froth on the share price has been taken off.
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