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Financial Analysis and Decision Making

Interpretation of Published Accounts

M05EFA

Due Date: 28th March 2017

1
ABSTRACT

As an investment analysts team for World Wealth Management, the team investigates

the fiscal term for most recent three years of two gamble companies, Paddy

Power Betfair Plc and William Hill Plc namely business performance from 2013 to 2015

upon a request from Dave Jones who is a long-time client. The team

applies appropriate financial ratios and tools to the annual figures of both companies

and decide tendency in their business and assess their present and past performance.

Also, the team analyse the gambling industry to obtain further understanding of the

sector where the two companies take part. The outcomes from research and analysis

that the team has conducted will be used to summarise to present to Dave Jones, who

was interested in the expansion of his portfolio, which company will be the better choice

of his investment?

2
Table of Contents
1.0 Introduction.............................................................................................................5
2.0 Financial Analysis and Interpretation......................................................................6
2.1 Profitability..............................................................................................................6
2.1.1 Return on Capital Employed............................................................................6
2.1.2 Net Profit Margin..............................................................................................7
2.1.3 Gross Profit Margin..........................................................................................9
2.2 Efficiency...............................................................................................................10
2.2.1 Fixed assets turnover.....................................................................................10
2.2.2 Sale per employee.........................................................................................11
2.3 Liquidity.................................................................................................................12
2.4 Gearing.................................................................................................................14
2.4.1 Capital Gearing..............................................................................................14
2.4.2 Interest cover.................................................................................................15
2.5 Investment............................................................................................................17
2.5.1 Earnings per Share........................................................................................17
2.5.2 Dividend per Share........................................................................................19
2.5.3 Dividend Payout.............................................................................................20
3.0 Vertical and horizontal analysis............................................................................21
3.1 Industry Analysis...................................................................................................21
3.1.1 Future of Gambling industry in the UK..........................................................22
3.1.2 Customers......................................................................................................22
3.2 Paddy Power Betfair plc.......................................................................................23
3.2.1 Growth............................................................................................................23
3.2.2 Shareholders..................................................................................................24
3.2.3 Performance...................................................................................................24
3.2.4 Products.........................................................................................................25
3.2.5 Consumers.....................................................................................................25
3.2.6 Customer Support..........................................................................................26
3.3 William Hill Plc......................................................................................................26
3.3.1 Growth............................................................................................................26
3.3.2 Shareholders..................................................................................................27
3.3.3 Performance...................................................................................................28
3.3.4 Products.........................................................................................................28
3.3.5 Consumers.....................................................................................................29
3.3.6 Customer Support..........................................................................................29
3.3.7 Strategies.......................................................................................................29
3.3.8 Future.............................................................................................................30
3.3.9 Competitors....................................................................................................30

3
3.3.10 Average........................................................................................................31
4.0 Summary of Analysis & Research........................................................................32
5.0 Recommendation for Investment.........................................................................33
Reference...................................................................................................................... 34
Appendices................................................................................................................... 36
Vertical and Horizontal calculation.................................................................................36

Table of Figures

Figure 1: Return on Capital Employed6


Figure 2: Net Profit Margin8
Figure 3: Gross Profit Margin9
Figure 4: Fixed assets turnover10
Figure 5: Sale per employee11
Figure 6: Current and Liquid Ratios12
Figure 7: Current & Liquid Ratio13
Figure 8: Capital Gearing14
Figure 9: Interest cover15
Figure 10: Interest Coverage Ratio16
Figure 11: Investment17
Figure 12: Earnings per Share18
Figure 13: Dividends per Share19
Figure 14: Dividend Payout20
Figure 15: Paddy Power Shareholders (2015)24
Figure 16: William Hill Shareholders (2015)27

4
1.0 Introduction

The team acquired annual reports of both the companies, Paddy Power Betfair Plc and

William Hill Plc, and analysed the released financial statements of 2013, 2014 and 2015

by applying the appropriate financial ratios. For an understanding of the performance of

two, several ratios i.e. the profitability, investment, liquidity, efficiency, gearing ratios and

tools like vertical and horizontal analysis is computed according to the financial reports.

5
2.0 Financial Analysis and Interpretation

2.1 Profitability

Profitability is one of the critical indexes to check the performance of the company. First

of all, the team has examined the profits of both the companies to know if they are

adequate.

2.1.1 Return on Capital Employed

Return on Capital Employed (ROCE) is the index to measure returns i.e. profitability

from all sources of financing available to shareholders.

Operating Profit (PBIT)


ROCE = x 100
Total assets less Current liabilities

Figure 1: Return on Capital Employed

6
The ROCE of William Hill has slightly decreased from 14.53% in 2013 to 13.32% in

2015, Paddy Power has substantially increased their ROCE of approximately 20% from

41.89% in 2013 to 61.99% in 2015. This is because their Operating profit has

dramatically increased due to substantial investment in differentiated product and

marketing. Through the period, ROCE of Paddy Power is higher than the market

average from FAME. On the other hand, ROCE of William Hill is extremely low

compared with a market average in the period.

2.1.2 Net Profit Margin

Net Profit Margin is one of the indicators that are the most important to see the financial

health of the company. The higher Net Profit Margin shows the higher competitiveness

of the company in the market. The indicator shows how much profit of each pound the

company has gained.

Operating Profit (PBIT)


Net Profit Margin = x 100
Revenue

7
Figure 2: Net Profit Margin

Both companies have reduced their Net Profit Margin from 2013 to 2015 and what can

be considered as factors are growing cost of sales and expenses. As for William Hill, the

cost of sales increased about 20% in 2015 compared with one in 2014. This is because

MGD rate increased from 20% to 25% on 1st March 2015. Shrinking of Net Profit

Margin greatly reflects additional MGD cost.

As for Paddy Power, their revenue increased by approximately 24% in 2015 compared

with one in 2014. However, their expenses rise 17 % in 2015 from 2014 and especially

Technology and communications expenses is increased by 20% due to capex. This is

mostly related to technology invested in product development and the opening of new

shops.

8
2.1.3 Gross Profit Margin

Gross Profit Margin expresses the percentage of profit by measuring how much

revenue a company has earned. It is affected by many items such as changes in sales

and marketing strategy.

Gross Profit
Gross Profit Margin = x 100
Revenue

Figure 3: Gross Profit Margin

Gross profit margin of Paddy Power and William Hill shows similar trend i.e. it has

gradually declined during the period. The ratios are higher than the market average all

the time. The reason why the ratio of Paddy Power decreased is improving their direct

betting costs which include betting taxes, software supplier costs, and other direct

betting costs. For the case of William Hill, the major reasons of decrease are reducing

9
revenue and increase in the cost of sales, mainly Point of Consumption Tax affected.

The results of both the companies are affected by new taxation.

2.2 Efficiency

Efficiency ratio is used to show if the company uses its assets and liabilities usefully.

Efficiency ratio concludes turnover and receivables.

2.2.1 Fixed assets turnover

Fixed assets turnover = Revenue

____________________________

Non-current assets (NBV)

Figure 4: Fixed assets turnover

10
This ratio measures how efficiently the company is going to manage its own investment.

The higher ratio means, the more efficient the company is; this means the company

has an efficient way to use its assets to make sure the company has enough assets to

generate sales. While comparing the data, it easy to find the Paddy Power has a higher

fixed assets turnover it means it has a good performance in the sale.

2.2.2 Sale per employee

Sale per employee=_____ Sale____________________

Numbers of employees

Figure 5: Sale per employee

Sales per employee is a ratio which shows how much sales is made by every

employee. A high ratio explains how effective the employees are. Paddy power has a

11
higher ratio than William Hill. The sales per employee is a good measure of personal

productivity. From 2013-2014 William Hill has an increase of this ratio, while Paddy

power is decreasing but still has a higher ratio than the William Hill.

2.3 Liquidity

Current and Liquid Ratios

Figure 6: Current and Liquid Ratios

12
Short-term solvency is mainly used to determine the company's ability to pay short-term

debts, which is usually occurred due to the need of production and business and the period

is shorter than a year. On the basis of the current ratio, inventory items whose liquidity are

weaker, have to be excepted from the assets used for evaluating debt repayment ability in

the liquid ratio. In other words, it can help to determine whether there are adequate liquid

assets to meet the request short-term debt.

Figure 7: Current & Liquid Ratio

According to the above figure, we can see, the overall short-term solvency capacity of

William Hill has been below the level of Paddy Power for three years in a horizontal

view. Besides, at the vertical sense, Paddy Power's index has risen in 2014 at about

1.4, but the improvement has not been maintained, and it fell sharply to 0.8 in 2015.

William Hill's solvency has continued to decline in the past three years, from the level of

more than 0.8 in 2013, fall to only about 0.5 in 2015, from which we can see the

situation is worsening.

13
2.4 Gearing

Gearing ratio tells us about how solid a company is to tackle or to repay its debt.

Gearing ratio tells how solid the company is considering to long-term debt because the

short-term debt is considered by calculating the liquidity ratio.

2.4.1 Capital Gearing

Capital gearing ratio = ______Long term borrowing________

Shareholder funds + Long term borrowing

14
Figure 8: Capital Gearing

Gearing ratio should be above 10% and below 50% for it to be interpreted as

generously. William Hill in 2013, as many as 47% of the funding covered by long-term

debt which is not positive for the company. Paddy Power did not have any long-term

15
debt in 2013-2014, but in 2015 they made long-term loans which are 74% of the total

long-term financing. If we also look at the balance sheet of FAME Shareholders funds,

we will discover that it has been dramatically reduced from 2014 to 2015.

2.4.2 Interest cover

For long-term borrowing of a company, it is usually accompanied by the need to pay the

interest at a regular time every year. Ability to repay the interest in time is also one of

the important indicators to measure the solvency of the company.

Interest Coverage Ratio= PBIT (Profit before interest and tax)

Interest Paid

Figure 9: Interest cover

This indicator helps companies to identify the relationship between borrowing costs and

revenue that is to clarify whether the business achieves greater returns on the basis of

the borrowing capital. The computational results are shown in the following table:

16
2015 2014 2013

William Hill 5.47 5.76 6.43

Paddy Power 66.49 986.78 759.04

Figure 10: Interest Coverage Ratio

According to the chart above, the two companies showed a big difference at this

indicator, William Hill saw a slight decline in this interest coverage ratio for nearly three

years. However, Paddy Power has demonstrated a shocking coverage situation, which

although there was a significant decrease than the previous two years in 2015.

2.5 Investment

17
Paddy Power William Hill

Figure 11: Investment

2.5.1 Earnings per Share

Earnings per share (EPS) is the segment of an organisation's benefit that is distributed

to each remarkable share of normal stock, filling in as a marker of the organisation's

profitability. It is regularly thought to be a standout amongst the most critical factors in

deciding a stock's esteem, and it involves the "E" some portion of the P/E (value

income) valuation proportion. EPS is ascertained as:

EPS = Net wage/normal exceptional basic shares

18

Year
Figure 12: Earnings per Share

(*Value of Paddy power is in Cents and Value of William Hill is in Pence.)

Clearly, the Paddy Power's EPS expanded generously in 2013, and after that again in

2014 and in 2015, while the William Hill's EPS has decreased both in 2014 and 2015.

It is imperative to investigate the EPS after sometime to decide a development drift.

Shareholders would anticipate that EPS will increase more prominently.

Dividend 03 Sep 2015 25 Sep 2015 60.00 EUR 0.00

Dividend 03 Sep 2014 26 Sep 2014 50.00 EUR 0.00

Dividend 04 Sep 2013 27 Sep 2013 45.00 EUR 0.00

2.5.2 Dividend per Share

Similarly as with EPS, the Profit Per Share ought to be investigated after some time to

decide whether there is a development slant. Profit per share is the total of proclaimed

profits issued by the organisation for each standard share exceptional. It is the

19
aggregate profits paid out by the business, including interval profits, profit by the

quantity of remarkable conventional shares.

Dividends
DPS = X 100
No of Shares

Year

Figure 13: Dividends per Share

(*Value of Paddy power is in Cents and Value of William Hill is in Pence.)

In spite of the fact that the desires would be for profits to increment more noteworthy

than that of expansion, a long haul financial specialist may see open doors for the more

prominent long haul estimation of the shares, ought to the organization have the

capacity to utilize held income to adventure development openings that may bring about

more noteworthy returns for long-haul ventures.

20
2.5.3 Dividend Payout

This ratio measures the percentage of profits made that are paid to the shareholders in

dividends.

Dividend Payout = _DPS x 100

EPS

Dividend Payout

PaddyPower William Hill

Figure 14: Dividend Payout

The greater the payout percentage, the less the company has for reinvestment. It is

noted that both the companies had made a profit for three years in a row, and has paid

a dividend to the shareholders. This seems like they are attracting the shareholders to

invest in their companies.

3.0 Vertical and horizontal analysis

21
Gross profit for William Hill and Paddy Power are reduced from the year 2013-2015

which is negative for the companies. This is because of the cost of sales has increased

over the years.

William Hill has a reduction in operating profit from the year 2013-2015, primarily due to

exceptional items. Paddy Power has a higher operating profit in 2014-2015 than William

Hill which is positive for the company.

William Hill pays 10 to 15 times more interest than Paddy Power and has, therefore, a

much-reduced profit before tax from 2013 to 2015. Paddy Power pays interest only in

2015 since in 2013-2014 the company had no debt.

Paddy Power, however, has reduced its payout for dividends over the years and are

almost equally with William Hill in 2015.

Retained profit for both companies have been reduced over the years 2013-2015 which

is negative for the companies.

Overall Paddy Power comes best out of it with a retained profit of 6.6% over the past

year, but William Hill is only 4.4%.

3.1 Industry Analysis

The UK was the host to the first international summit on online gambling and also the

first nation to introduce legislation for controlling online gambling (Matthew 2006).

The online gambling industry has maintained constant growth in all years. The British

government has a major role in the British online gambling industry. They put the

legislation that affects online gaming and affecting the industry's development in the

country. British government is very controlling; they are much focused to get the agreed

22
measures to prevent children to be able to take advantage of online gambling sites,

prevent money laundering and prevent gambling addiction amongst consumers

(Matthew 2006)

3.1.1 Future of Gambling industry in the UK

The British government has considered cutting the tax rate for online gambling in the

UK (U.S. Newswire 2013). This is because of the major UK online gambling companies

have moved out of the UK in the recent years to be able to save tax costs. It looks like

the British government has realised that there is much profit in the online gambling

industry. It will attract all the major UK online gambling companies back to Britain, but

the government is still very strict in terms of regulation and regulatory requirements.

3.1.2 Customers

The online betting industry has a broad category of segments. There is some statutory

requirement that consumer should be over 18 years to be able to gamble. They have

consumers who are generally interested in making daily life more exciting by gambling.

3.2 Paddy Power Betfair plc

23
Paddy Power Betfair was formed in 2016 after the Paddy Power Plc and Betfair Group

Plc decided to merge to become one of the leading players in the sports betting and

gaming operators.

Founders of Paddy Power were Stewart Kenny, David Power and John Corcoran in

1988 and November 2011 where Paddy Power the most valuable gaming company in

the Europe (Sunday Business Post 2015).

Today driver Paddy Power with four sports betting and gaming brands:

Paddy Power

Betfair

Sportsbet

TVG

3.2.1 Growth

In September 2015, both Paddy Power plc and Betfair Group plc stated that they

agreed to terms of the merger of both companies and it completed on 2nd February

2016. Both companies recorded considerable growth in revenues and profits. The

revenues of Paddy Power increased by 24% in 2015, and the operating profit increased

10%. Meanwhile, Betfair improved their revenues by 17% and grew 9% of operating

profit.

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3.2.2 Shareholders

Figure 15: Paddy Power Shareholders (2015)

The investment management company BlackRock Inc. has the largest percentage of

shares. They were not on the list of the main shareholders in 2013 and 2014, but the

Capital Group Companies, Inc. was the largest stockholder in those years. The

percentage of the Capital Group Companies shares increased from 3.85% to 8.21% in

2015.

3.2.3 Performance

Taking after an extremely positive first half execution, Paddy Power controlled a detailed

solid basic development for the three months till mid of November. The online games

wagering stakes rise 23%, while online add up to net income grew 7%. Under it's retail

arm, sports stakes grew 12%. As of fifteenth November, Paddy Power control had a net

25
obligation of euro 96 million, which is comparable to its 2014 profit before intrigue,

assessment, deterioration and amortisation.

The Dublin-based firm has updated its working benefit estimates to 180 million euros,

which is an ascent of 16.2 million euros, though in 2013 Paddy Power control recorded

working benefit at 163.8 million euros

3.2.4 Products

There are several products which are in business right now such as,

Sports betting,

Online poker,

Online casino,

Online bingo,

3.2.5 Consumers

The web-based wagering industry has a general class of portions. There is some

statutory necessity that purchaser ought to be more than 18 years to have the capacity

to bet. They have buyers who are for the most part intrigued by making day by day life

all the more energising by betting.

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3.2.6 Customer Support

Paddy power tries to understand their customers better, so it provides their customers

with the information and tools. In this way, they can manage their money and time much

better. The company gives the detail at the ability to use the accessibility and how long

they are limited on the machine because every machine can reflect time out. There is

a feature which has found the limit that can help the customer to control their gambling.

3.3 William Hill Plc

The name William Hill originates from the founder of the company for about 83 years

ago with business as a Postal/telephone betting service.

In 2002 the Company was listed on the London Stock Exchange and also in

2013 was horse race betting was the major in sports betting in the UK. William Hill led

horse race gambling regarding income and search impression volume (Entertainment

Close Up 2013)

William Hill is the leading player in bookmaker online gaming and betting providers to

UK Customers. They have also made some major investments overseas. They are the

third largest provider of online sports betting in Australia and one of the largest in legal

bookmaker in the United States.

3.3.1 Growth

Due to a successful shift to mobile, the revenue of mobile Sportsbook increased by 24%

and 36% increase for mobile gaming in 2015 by leading strong online growth. The net

27
revenue of the group declined by 1% which was reflected by the lack of the main

international football games in that period; results drop in the retail trade for sports and

extensive work to centralise business in Australia to adapt fast growing the recreational

customer base. The growth of the Online net revenue becomes slow under the

influence of the effect by business in non-core markets.

3.3.2 Shareholders

Figure 16: William Hill Shareholders (2015)

The share of 13.03% hold by Parvus Asset Management (UK) LLP is outstandingly high

compared to other companies. Capital Research, BlackRock and Artemis Investment

reduce their share while Oppenheimer Funds, Inc. and Schroders plc are remaining the

same share.

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3.3.3 Performance

Bookmaker William Hill share cost dropped by more than 13% after it cautioned of 25-

million-pound fall in online benefits in 2016. William Hill's online business took a hit in

the period to twentieth of the walk as an advanced execution was affected by controls

and lower than anticipated gross win edges. Share costs dropping more than 50%

indicates a loss and 13.5 % which increased as soon after exchanging started.

Second, Net win edges in the online business were 1.9 % focuses beneath the desires

in the period at 6.2%, influencing European football comes about.

3.3.4 Products

Online Betting

Sports betting

Vegas

Macau

Casino

Scratch Card

Poker

Bingo

Virtual

29
3.3.5 Consumers

The electronic betting industry has a general class of bits. There is some statutory need

that buyer should be over 18 years to have the ability to wager. They have purchasers

who are generally charmed by making a step by step life all the all the more

empowering by wagering.

3.3.6 Customer Support

William Hill has refreshed the information as regulation change, and it included several

areas in markets position. William Hill helps the customer to get an innovative point. It is

not only one-way management. It has Omni-channel, betting and gaming fixed to attract

the customers. Omni-channel is a digital channel to make a mobile service. Betting

measures an expectable profit for the customer to consider. Gaming is a volatile profit to

let the customers use the products. William Hill has an international market, and it owes

to its technology.

3.3.7 Strategies

Each business will have a strategy for its own development. The strategy of William Hill

in the following years is mainly to increase its diversification through its digital and

international revenues. From Paddy Power's specific behaviour, we can see the

implementation of its strategy, such as the merger with another leading company in this

industry in 2016, and this merging strategy also makes the year to become the best

year ever for Paddy Power. By merging companies, it can capture the market quickly,

30
share channels with each other, and the combination of two leading companies helps to

reduce vicious competition, which improving the value of both the companies.

(2014&2015 annual report of both companies)

3.3.8 Future

The company's future development is always matched with its strategy. For William Hill,

it will begin to enter overseas markets, like building a challenger brand in Australia.

Besides, William Hill will start to strengthen the company's competitiveness, and

enhance the business from the internal organisation, such as the management and

policies; technology platform and IT team; switching investment strategy to choose

more profitable projects. On the one hand, consolidate existing customers, which

means addressing multi-channel and core retail customer demand. One the other

hands, using the combined resources to occupy a larger market, and to lock more

customers has also become one of the challenges of the future.

(2015 annual report of both companies)

3.3.9 Competitors

Market competition, the distribution of competitors, the probability of potential

competitors entering the market, will affect the development of the company, so the

external competitive environment also has a significant effect on our analysis of

companies. In general, these two companies are both in a dominant position compared

with their competitors in the contest. For William Hill, as per the abundant cash inflows

31
from its operations, this company can further increase its research and development on

the technology platform, which also makes the company different from its competitors

effectively. Most of the company's competitors are still using a third-party platform for

sales and operation of its products, but William Hill has its own technology through

research and development platform, which not only absorb more customers but also let

it stand out from the competitors. In terms of Paddy Power, its advantages in retailing

are prominent, only 565 shops can have an equal turnover of 1163 competitors, which

mainly because of its distribution- Paddy Powers retail shops are always located in the

place where crowds are gathered, and people can easily find a Paddy Power shop

within about five miles (2015 annual report of both companies).

3.3.10 Average

The industry data is calculated based on 14 companies including William Hill and Paddy

Power in this industry, whose main business are all gambling and betting activities. In

terms of solvency, the ratio of both companies is much higher than the industry average,

William Hill ranked No. 6, No. 5 and No. 3 respectively from 2013 to 2015, the industry

average is about 30, but William Hill has reached 50 to 60 levels. We can see that

William Hills long-term solvency is quite strong, which also reflect their good use of

financial leverage. However, indicators of Paddy Power ranked No.2, No.2 and No.10 in

the past three years, and the solvency showed an obvious downward trend in 2015, at

only 12.41, which was lower than the industry average of 33.29. Thus, Paddy Power

should be wary of the risk of expiry liabilities. William Hill has reduced from 0.82 in 2013

to 0.76 in 2014, while only 0.52 at the last year. Similarly, Paddy Power`s Liquidity Ratio

32
in the previous three years were 1.17, 1.34 and 0.82, which reflect the environment

change has affected the whole industry that the company showed a decline in their

liquidity abilities.

4.0 Summary of Analysis & Research

Paddy Power's Income has gone up by 24% to 1,094m in the year 2015, with twofold

digit development overall on the web and retail divisions. Working benefit has gone up

10% to 180m, or half before 66m in new duties and item charges. Weakened EPS up

12% to 332.8 Cents for each share; Entire year's profit up by 18% to 180 cents for every

share and extra 8 per share money return amid 2015.UK retail income has gone up by

15% (up 6% like-for-like).

Working benefit of 23m up by 12% preceding 5m of extra Machine Gaming

Obligation. This Domain now has 341 shops with a net 20 units opened in 2015. This

Irish Retail income has increased by 14% (up 11% like-for-like). The working benefit of

20m which is 44%. In the home market now it has 259 shops with 14 units opened in

2015.

Exchanging in William Hill stays in accordance with past entire year working benefit

direction of 260-280m subject to standardized gross win edges inside the online net

income decrease of 11%, gaming was 4% let moreover, Sportsbook was down 17%,

affected basically by misfortunes at Cheltenham, The Online business keeps on being

affected by time-outs and self-avoidances; we are checking this intently in any case, at

this stage, these patterns stay unaltered.

33
5.0 Recommendation for Investment

Based on the analysis above, it can be found that there are significant differences

between the two companies Paddy Power Betfair Plc and William Hill Plc in terms of

profitability, efficiency, gearing, investment as well as a series of internal resources such

as products and customers. It can be concluded that compared with William Hill, Paddy

Power has a higher return on capital employed and net profit margin, even though the

two companies present similar trend in the aspect of gross profits margin. Furthermore,

through analysing statistics about the two companies ability in capital gearing, earning

of investment and products as well as service portfolio, it is not difficult to come to the

conclusion that generally speaking, Paddy Power has more competitive advantages in

bringing more rewards for clients. Based on these findings, it is suggested that

investment should be made on Paddy Power Betfair Plc. According to the vertical and

Horizontal analysis, we can also see that Paddy Power has more retained profit as

compared to William Hill in the year 2015.

Prashant Jha

Waqas Mahmood

Bin Chen

Zhaozhao Wang

Kiyomi Kamata

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William Hill (2017) Regulatory news [online] available from
<https://www.williamhillplc.com/investors/regulatory-news/24389699-trading-
statement/> [25 march 2017]

Appendices

Vertical and Horizontal calculation

36
Paddy Power Betfair plc (2015) ' 000

Operating Profit (PBIT) =


Dividend per Share =
SC+Res. (Total Equity) =
Sales (Revenue) =
(Non Current) Fixed Assets (FA) =
Current Assets (CA) =
Current Liabilities (CL) =
Non Current Liabilities (NCL) =
Stock (Inventory) =
Cost of Goods Sold (COGS) =
Debtors (Receivables) =
Debentures (Long term Loans) =
Interest =
Profit after TAX =
Share Capital =
Earnings per share =
Dividends =

37
Capital Employed (CE) = FA + CA - CL
=

Working Capital (W/C) = CA-CL


=

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE =
Total assets less Current liabilities
125,044
ROCE =
410,033 - 208,313
= 61.99%

Net Profit Margin


Operating Profit (PBIT)
Net Profit Margin =
Revenue
125,044
Net Profit Margin =
803,687

= 15.56%

Gross Profit Margin

Gross Profit Margin Gross Profit

= Revenue

Gross Profit Margin 600,719

38
= 803,687
= 74.75%

(Check ratios)
ROCE = Net Profit Margin x ASSET T/O
= 15.56 x 3.98
= 61.93%

LIQUIDITY:

Current Ratio

Current Assets
Current Ratio =
Current Liabilities

170,922
=
208,313

= 0.82

Liquid Ratio

Liquid Ratio = Current Assets Stock

= 170,922 - 0

= 0.82

39
Current Liabilities = 208,313

EFFICIENCY:
Fixed assets turnover
Revenue
Fixed assets turnover =
Non-current assets (NBV)

803,687
=
37,391

= 21.49

Sale per employee

Sale
Sale per employee =
Numbers of employees

803,687
=
5,069

= 158.55
GEARING (Borrowing):

Capital Gearing Ratio

Long Term Borrowing


Gearing (Borrowing) Ratio =
Capital Employed + Long term borrowing

= 141,915

40
(50,503 + 141,915)

74

SHAREHOLDERS: Earnings per Share (EPS)

EPS = 3.3 Euro

No. of Shares

EPS = Profit after Tax x 100

No. of Shares

Number of shares = Profit after Tax x 100

EPS

= 147,293,000 x 100

3.3

= 48,123,143 shares

Dividends per Share DPS

DPS = Dividends x 100

41
No of Shares

= 76,323,000 x 100

51,104,700

DPS = 149 Cents

Dividend Payout

Dividend Payout = DPS x 100

EPS

= 56,072 x 100

108,211

= 51.82 %

42
Paddy Power Betfair plc (2014) ' 000

Operating Profit (PBIT) = 127,420


Dividend per Share = 1.52
SC+Res. (Total Equity) = 301,201
Sales (Revenue) = 685,802
(Non Current) Fixed Assets (FA) = 245,930
Current Assets (CA) = 246,891
Current Liabilities (CL) = -183,791
Non Current Liabilities (NCL) = -8,010
Stock (Inventory) = N/A
Cost of Goods Sold (COGS) = -130,485
Debtors (Receivables) = 25,211
Debentures (Long term Loans) = N/A
Interest = -129
Profit after TAX = 112,720
Share Capital = 3,975
Earnings per share = 2.61
Dividends = -53666

Capital Employed (CE) = FA + CA - CL


= 309,030

Working Capital (W/C) = CA-CL


= 63,100

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE =
Total assets less Current liabilities
127,420
ROCE =
492,821 - 183,791

43
= 41.23%

Net Profit Margin


Operating Profit (PBIT)
Net Profit Margin =
Revenue

127,420
Net Profit Margin =
685,802
= 18.58%

Gross Profit Margin

Gross Profit
Gross Profit Margin =
Revenue
555,317
Gross Profit Margin =
685,802
= 80.97%

(Check ratios)
ROCE = Net Profit Margin x ASSET T/O

= 18.58 x 2.22
= 41.25%

44
LIQUIDITY:

Current Ratio
Current Assets
Current Ratio =
Current Liabilities

246,891
=
183,791

= 1.34

Liquid Ratio
Liquid Ratio = Current Assets Stock

= 246,891 - 0

= 1.34

Current Liabilities = 183,791

EFFICIENCY:

Fixed assets turnover

45
Fixed assets turnover Revenue

= Non-current assets (NBV)

685,802
=
63,101

= 10.87

Sale per employee

Sale
Sale per employee =
Numbers of employees

685,802
=
4,856

= 141.23 GBP

GEARING (Borrowing):
Capital Gearing

Long Term Borrowing


Gearing (Borrowing) Ratio =
Capital Employed + Long term borrowing

0
=
(301,021+ 0)

46
SHAREHOLDERS RATIOS Earnings per Share (EPS)

EPS = 3 Euros

No. of Shares

EPS = Profit after Tax x 100

No. of Shares

Number of shares = Profit after Tax x 100

EPS

= 144,909,000 x 100

= 45,115,140 shares

Dividends per Share DPS

DPS = Dividends x 100

No of Shares

= 68991000 x 100

50977085

47
DPS = 135 Cents

Dividend Payout

Dividend Payout = DPS x 100

EPS

= 53666 x 100

112720

= 47.6 %

Paddy Power Betfair plc (2013)

Operating Profit (PBIT) =


Dividend per Share =
SC+Res. (Total Equity) =
Sales (Revenue) =
(Non Current) Fixed Assets (FA) =
Current Assets (CA) =
Current Liabilities (CL) =
Non Current Liabilities (NCL) =
Stock (Inventory) =
Cost of Goods Sold (COGS) =
Debtors (Receivables) =
Debentures (Long term Loans) =
Interest =
Profit after TAX =
Share Capital =
Earnings per share =
Dividends =

48
Capital Employed (CE) =
=

Working Capital (W/C) =


=

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE =
Total assets less Current liabilities
115,053
ROCE =
458,052 - 183,398
= 41.89%

Net Profit Margin


Operating Profit (PBIT)
Net Profit Margin =
Revenue
115,053
Net Profit Margin =
624,058
= 18.44%

Gross Profit Margin


Gross Profit
Gross Profit Margin =
Revenue
516,662
Gross Profit Margin =
624,058
= 82.79%

49
(Check ratios)
ROCE = Net Profit Margin x ASSET T/O
= 18.44 x 2.27
= 41.86%

LIQUIDITY:

Current Ratio

Current Ratio =
Current Assets
Current Liabilities
=
215,317
183,398
=
1.17

Liquid Ratio

Liquid Ratio = Current Assets Stock

= 215317 - 0

50
= 1.17

Current Liabilities =
183,398

EFFICIENCY:

Fixed assets turnover


Revenue
Fixed assets turnover =
Non-current assets (NBV)

624,058
=
31,919

= 19.55

Sale per employee


Sale
Sale per employee =
Numbers of employees

624,058
=
4,156

= 150.16

GEARING (Borrowing):

51
Capital Gearing
Long Term Borrow
Gearing (Borrowing) Ratio =
Capital Employed + Long ter

0
=
(260,446 + 0)

SHAREHOLDERS RATIOS Earnings per Share (EPS)

EPS = 2.6 Euro

No. of Shares

EPS = Profit after Tax x 100

No. of Shares

Number of shares = Profit after Tax x 100

EPS

123,184,00

= 0 x 100

2.6

= 47,990,704 share

52
s

Dividends per Share DPS

DPS = Dividends x 100

No of Shares

= 61,907,000 x 100

50,850,848

DPS = 122 Cents

Dividend Payout

Dividend Payout = DPS x 100

EPS

= 51,844 x 100

103,159

= 50.26 %

53
William Hill Plc (2015) ' 000

Operating Profit (PBIT) =


Dividend per Share =
SC+Res. (Total Equity) =
Sales (Revenue) =
(Non Current) Fixed Assets (FA) =
Current Assets (CA) =
Current Liabilities (CL) =
Non Current Liabilities (NCL) =
Stock (Inventory) =
Cost of Goods Sold (COGS) =
Debtors (Receivables) =
Debentures (Long term Loans) =
Interest =
Profit after TAX =
Share Capital =
Earnings per share =
Dividends =

Capital Employed (CE) = FA + CA - CL


=

Working Capital (W/C) = CA-CL


=

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE = x 100
Total assets less Current liabilities
224,300
ROCE = x 100
2,323,700 - 663,200
= 13.51%

54
Net Profit Margin
Net Profit Margin Operating Profit (PBIT)
x 100
= Revenue

224,300
Net Profit Margin
x 100
= 1,590,900

= 14.10%

Gross Profit Margin


Gross Profit Gross Profit x 100

Margin = Revenue

Gross Profit 1,213,000 x 100

Margin = 1,590,900

= 76.25%

(Check ratios)
ROCE = Net Profit Margin x ASSET T/O
= 14.10 x 0.96
= 13.54%

LIQUIDITY:

Current Ratio

55
Current Assets
Current Ratio =
Current Liabilities

170,922
=
208,313

= 0.82

Liquid Ratio
Liquid Ratio = Current Assets Stock

= 170,922 - 0

= 0.82

EFFICIENCY:
Fixed assets turnover
Revenue
Fixed assets turnover =
Non-current assets (NBV)

1,590,900
=
320,300

= 4.97

Sale per employee


Sale
Sale per employee =
Numbers of employees

1,590,900
=
15,747

= 101.03

56
GEARING (Borrowing):

Capital Gearing Ratio


Long Term Borrowing
Gearing (Borrowing) Ratio =
Capital Employed + Long term bo

369,500
=
(1,215,800 + 369,500)

23

SHAREHOLDERS RATIOS Earnings per Share (EPS)

EPS = 21.6 p

No. of Shares

EPS = Profit after Tax x 100

57
No. of Shares

Number of shares = Profit after Tax x 100

EPS

= 18,990,0000 x 100

21.6

= 880,900,000 shares

Dividends per Share DPS

DPS = Dividends x 100

No of Shares

= 108,400 x 100

880,900

DPS = 12.3 p

Dividend Payout

Dividend Payout = DPS x 100

58
EPS

= 81500 x 100

189900

= 42.92 %

William Hill Plc (2014) ' 000

Operating Profit (PBIT) = 281,800


Dividend per Share = 12.2
SC+Res. (Total Equity) = 1,169,300
Sales (Revenue) = 1,609,300
(Non Current) Fixed Assets (FA) = 2,070,900
Current Assets (CA) = 282,200
Current Liabilities (CL) = -369,800
Non Current Liabilities (NCL) = -823,000
Stock (Inventory) = 100
Cost of Goods Sold (COGS) = -304,200
Debtors (Receivables) = 55,300
Debentures (Long term Loans) = -716,100
Interest = -48,900
Profit after TAX = 206,300
Share Capital = 87,700
Earnings per share = 24
Dividends = -104,000

Capital Employed (CE) = FA + CA - CL

59
= 1,983,300

Working Capital (W/C) = CA-CL


= 282,200

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE =
Total assets less Current liabilities
281,800
ROCE =
2,353,100 - 369,800
= 14.21%

Net Profit Margin


Operating Profit (PBIT)
Net Profit Margin =
Revenue

281,800
Net Profit Margin =
1,609,300
= 17.51%

Gross Profit Margin


Gross Profit
Gross Profit Margin =
Revenue

60
1,305,100
Gross Profit Margin =
1,609,300
= 81.10%

(Check ratios)
ROCE = Net Profit Margin x ASSET T/O
= 17.51 x 0.81
= 14.18%

LIQUIDITY:

Current Ratio
Current Assets
Current Ratio =
Current Liabilities

282,200
=
369,800

= 0.76

Liquid Ratio
Liquid Ratio = Current Assets Stock

= 282,200 - 100

= 0.76

Current Liabilities = 369,800

61
EFFICIENCY:

Fixed assets turnover


Revenue
Fixed assets turnover =
Non-current assets (NBV)

1,609,300
=
87,600

= 18.37

Sale per employee

Sale
Sale per employee =
Numbers of employees

1,609,300
=
16,078

= 100.09

62
GEARING (Borrowing):

Capital Gearing Ratio


Long Term Borrowing
Gearing (Borrowing) Ratio =
Capital Employed + Long term borro

716,100
=
(1,160,300 + 716,100)

38

SHAREHOLDERS RATIOS

Earnings per Share (EPS)

EPS = 23.6 p

No. of Shares

EPS = Profit after Tax x 100

No. of Shares

Number of shares = Profit after Tax x 100

EPS

= 206,300,000 x 100

63
23.6

= 873,200,000 shares

Dividends per Share DPS

DPS = Dividends x 100

No of Shares

= 104000 x 100

874,152

DPS = 11.9 p

Dividend Payout

Dividend Payout = DPS x 100

EPS

= 102,300 x 100

206,300

= 49.59 %

64
William Hill Plc (2013)

Operating Profit (PBIT) =


Dividend per Share =
SC+Res. (Total Equity) =
Sales (Revenue) =
(Non Current) Fixed Assets (FA) =
Current Assets (CA) =
Current Liabilities (CL) =
Non Current Liabilities (NCL) =
Stock (Inventory) =
Cost of Goods Sold (COGS) =
Debtors (Receivables) =
Debentures (Long term Loans) =
Interest =
Profit after TAX =
Share Capital =
Earnings per share =
Dividends =

Capital Employed (CE) = FA + CA - CL


=

Working Capital (W/C) = CA-CL


=

PROFITABILITY: Return on Capital Employed (ROCE)


Operating Profit (PBIT)
ROCE =
Total assets less Current liabilities
303,000
ROCE =
2,413,900 - 328,600
= 14.53%

65
Net Profit Margin
Operating Profit (PBIT)
Net Profit Margin =
Revenue
303,000
Net Profit Margin =
1,486,500
= 20.38%

Gross Profit Margin


Gross Profit Margin Gross Profit

= Revenue

Gross Profit Margin 1,214,300

= 1,486,500

= 81.69%

(Check ratios)
ROCE = Net Profit Margin x ASSET T/O
= 20.38 x 0.71
= 14.47%

LIQUIDITY:

66
Current Ratio
Current Ratio =
Current Assets
Current Liabilities
=
272,700
328,600
=
0.83

Liquid Ratio
EFFICIENCY:
Liquid Ratio = Current Assets Stock Fixed assets turnover
Fixed assets turnover = Revenue
= 272,700 - 200 Non-current assets (NBV)

= 0.83 = 1,486,500
55,900
Current Liabilities = 328,600
= 26.59

Sale per employee


Sale
Sale per employee =
Numbers of employees

1,486,500
=
17,089

= 86.99

GEARING (Borrowing):

67
Capital Gearing Ratio
Long Term Borrowing
Gearing (Borrowing) Ratio =
Capital Employed + Long term borro

895,900
=
(1,023,300+895,900)

47

SHAREHOLDERS RATIOS Earnings per Share (EPS)

EPS = 28.1 p

No. of Shares

EPS = Profit after Tax x 100

No. of Shares

Number of shares = Profit after Tax x 100

EPS

= 21,120,0000 x 100

28.1

= 898,300,000 shares

68
Dividends per Share DPS

DPS = Dividends x 100

No of Shares

= 87,100 x 100

898,809

DPS = 10 p

Dividend Payout

Dividend Payout = DPS x 100

EPS

= 124,100 x 100

69
211,200

= 58.75 %

Peer Analysis from FAME

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