Sunday Business, London, Company Profile Column.

Byline: Lawrence Peterman

Aug. 18--William Hill is one of the best-known names in the UK betting industry. The group has more than 1,500 betting shops across Britain, making it the second-largest operator after Ladbrokes. Its national presence gives William Hill a competitive advantage in terms of both brand recognition and customer reach. The group earns 65 percent of profits from its retail operation, 13 percent from slot machines, 13 percent from internet betting and 9 percent from telephone betting.

The shares listed on the LSE on 17 June at 225 pence and has traded at a premium ever since. This is an excellent performance, given the state of the markets. The group raised UKpound 700 million from the float and funds will be used to reduce debt and purchase more outlets.

William Hill is the UK's leader in telephone betting, with an estimated market share of 40 percent.

It continues to lead innovations in this arena, having introduced free-phone and debit card betting. In addition, it believes it had the most profitable online betting operation of all major bookmakers last year. It first accepted bets over the internet in 1998. Since then, its sportsbook website and online casino have experienced significant growth both in the UK and overseas.

For the year ended 1 January 2002, it reported a 20 percent increase in turnover to UKpound 2.45 billion. Earnings before interest and tax rose 32 percent to UKpound 112 million.

At the time of the float, the management was upbeat about prospects and stated that the current year had got off to an excellent start and results would meet expectations for the full year. The group's interim results are to be released on 9 September and they should confirm the strong growth predicted.

The shares came to market (at a modest valuation) when sales and earnings were stronger than ever before and they have received a further boost from the new tax regime and sporting events such as the World Cup.

It is a well-managed business, with solid cashflow and a strong balance sheet. Earnings per share is forecast to grow by over 10 percent a year in the medium term.

At 260 pence, the shares are on 13 times December 2003 earnings and yield 3.4 percent, an inexpensive rating considering the fundamental strength of the business. I expect them to continue to outperform and have a 300 pence 12-month target.

Lawrence Peterman is director of research at Eden Group

To see more of Sunday Business, or to subscribe to the newspaper, go to http://www.sundaybusiness.co.uk

UKpound preceding a numeral refers to the United Kingdom's pound sterling.

(c) 2002, Sunday Business, London. Distributed by Knight Ridder/Tribune Business News.

TICKER SYMBOL(S): WMH