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27 Oct 2009
London, 27 October 2009 -- Moody's Investors Service has today assigned a Ba1 corporate family
rating (CFR) and Ba1 probability of default rating (PDR) to William Hill
plc. The rating outlook is stable.
William Hill's Ba1 CFR reflects the company's leadership positions
as demonstrated by a 25% market share in the retail betting business,
its established presence in the European online betting and gaming market,
and the strength of the William Hill brand. Moody's also
recognises that the company benefits from high barriers to entry in the
UK retail sector due to the high cost of real estate and existing regulation.
Furthermore, while the UK gambling market has evolved over the past
few years, overall, the regulatory framework in William Hill's
domestic market is well-established.
The Ba1 CFR also recognises the stability of William Hill's retail
activities and the relative resilience that the betting business has enjoyed
in previous downturns and continues to maintain despite the current difficult
market conditions. Moody's also acknowledges that despite
the unfavourable sporting results in Q3 2009 that affected the company's
performance, William Hill has been able to deliver reasonable year-to-date
revenues on the back of good retail machine performance and a strengthened
online business after the Playtech JV. Moody's more cautiously
notes the mature nature of retail betting and cautions that organic growth
opportunities for the business are limited.
Moody's positively views William Hill's high margins and free
cash generation capacity. Moody's believes that the company's
debt protection metrics should significantly improve in FY2009 (ending
31 December 2009) as a result of the GBP350 million rights issue executed
at the beginning of the year. More specifically, Moody's
anticipates that retained cash flow to net debt should improve to the
high teens and debt to EBITDA should decrease to around 3.3x in
the current financial year (all ratios adjusted as per Moody's Global
Standard Adjustments). Moody's notes that management has
not set an explicit leverage target but the ratings agency expects William
Hill to maintain a robust balance sheet.
Moody's considers William Hill's liquidity situation to be
satisfactory and sufficient to cover the company's funding needs
over the next 18 months. Furthermore, William Hill was compliant
with its financial covenants as of June 2009. The agency also positively
views management's willingness to adjust financial policies in line
with evolving market conditions, as demonstrated by the execution
of the rights issue and the pre-financing of maturing facilities.
However, the group still generates a large proportion of its revenues,
earnings and cash flows in the UK, exposing the company to the macroeconomic
conditions in its domestic market, which constrains the rating.
The rating is also constrained by the company's dependence on the
retail side of the betting business, with 82% and 86%
of gross win and profits, respectively, generated in this
segment. In addition, Moody's believes the rating could
be further constrained by any potential changes in the regulatory or fiscal
Furthermore, although potential growth opportunities could arise
from the company's online business, particularly if more European
markets open from a regulatory point of view, Moody's cautions
that the online market is very competitive. Moreover, due
to the fragmented nature of the online betting market, some industry
consolidation is likely to take place going forward, exposing the
company to a degree of event risk.
Finally, while William Hill benefits from an extensive retail store
base with around 2,300 licensed betting offices in the UK and Ireland,
the majority of the real estate base is leasehold (90%) and does
not offer the company much flexibility or additional asset coverage.
The stable outlook on the Ba1 CFR reflects Moody's expectation that
William Hill's credit metrics will improve in FY2009, with
retained cash flow (RCF) to net debt in the high teens and debt to EBITDA
comfortably below 3.5x, on a sustainable basis.
William Hill's ratings were assigned by evaluating factors Moody's
believes are relevant to the credit profile of the issuer, such
as (i) scale and competitive position of the company, (ii) its diversification
and exposure to regulatory risk, (iii) profitability, (iv)
growth opportunities and management strategy, (v) financial policies,
and (vi) the projected performance of the company over the near to intermediate
Headquartered in the UK, William Hill plc is a leading UK betting
and gaming company, with approximately 2,300 licensed betting
shops (2,271 in the UK and 48 in the Republic of Ireland).
In 2008, the company employed over 15,000 people and posted
a gross win of around GBP1 billion. William Hill offers fixed-odds
betting, gaming machines (8,700 machines across the network)
and online gaming through three principal channels: retail,
online and telephone.
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Ba1 to William Hill; stable outlook
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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