Next and William Hill

“The markets are racing ahead following a very good session last night in the US where the S&P, Nasdaq and Dow Jones all posted gains in excess of 1.5%.

“It’s now the turn of European and Asian stocks to join the rally with the FTSE 100 shooting up 1.5% in early trading on Wednesday and Japan’s Nikkei 225 index jumping 2.2%.

“The latest rally means the S&P, NASDAQ and Dow Jones are all back in positive territory for the year. The only other major index to share this status is Brazil’s Bovespa index, up 9.7% so far this year.

“The upturn in the market is positive for investors, although the main UK indices still have some way to go before they get back into the black. The FTSE 100 is currently down 7.3% year-to-date, and the FTSE 250 down 8.7%,” says Russ Mould, investment director at AJ Bell.

Major Indices Performance Year to Date

Bovespa Stock Index (Brazil) +9.7%
NASDAQ 100 +6.5% (US)
Dow Jones Industrial Average (US) +0.6%
S&P 500 +0.3% (US)
Nikkei 225 (Japan) -3.7%
CAC 40 (Paris) -4.5%
FTSE 100 (UK) -7.3%
DAX Xetra (Germany) -11.4%
Hang Seng (Hong Kong) -16.5%
SSE Composite (China) -22.3%

NEXT

“The typical pattern for high street stalwart Next of late has been for the performance of its online division to make up for a weak showing from its bricks and mortar retail arm.

“Today’s third quarter statement represents a continuation of that trend, the difference being that online sales growth has slowed markedly from the first half and investors have punished the company accordingly.

“Guidance for the full year to January 2019 is maintained. Although it had been upgraded slightly at the half year stage, at that point it still looked fairly conservative; less so after this update.

“Chief executive Simon Wolfson’s skill at managing expectations looks set to be tested as Next now heads into the most important trading period of the year against an extremely uncertain consumer backdrop.

“The company will likely set the tone for the retail sector when it is one of the first to update on its festive sales performance on 3 January.

“A weak outturn might increase pressure on management to consider more radical solutions to the structural challenges facing its physical shops.”

William Hill

“Diversification is the name of the game when you operate in an industry with constant moving parts from a regulatory and tax perspective.

“William Hill’s decision to buy Stockholm-listed Mr Green will make it a more international business and provide a boost to earnings to help offset the forthcoming UK remote gaming duty tax hike announced in the Budget (moving from 15% to 21%).

“Mr Green’s shares have been drifting this year, creating an opportunity for William Hill to swoop on a business with decent brands and attractive earnings growth. The consensus among analysts is for Mr Green to report 10% pre-tax profit growth in 2018 at SEK127.5m (£10.9m), rising by a further 40% in 2019 to SEK178.25m (£15.3m).

“The target has remote gambling licences in Denmark, Italy, Latvia, Malta, Great Britain and Ireland, and hopes to get one for Sweden by the year-end.

“This coverage will help William Hill to expand its reach at a time when its domestic UK offering is going through major changes from a tax perspective.

“However, some investors may be surprised it is focusing its attention on these parts of the world when the potential biggest prize is the US where the opening up of the sports betting market creates a massive opportunity to boost earnings.

“William Hill currently has a partnership with casino group Eldorado for digital and land-based sports betting and online gaming in the US. It now has a position in 13 states where sports betting is either legal or sports betting bills are tabled.”

These articles are for information purposes only and are not a personal recommendation or advice.