Compare the historical performance of William Hill against Ladbrokes for their growth analysis over the last few years - Essay Example

RATIO ANALYSIS OF WILLIAM HILL PLC Growth of a firm is the fact that encapsulates the interests of shareholders, investors, analysts and all other stakeholders (Mouri, Sarkar & Frye, 2012). Importantly, this growth is geared and contributed by various factors, and understanding of the growth is only possible with an insight into the trend of these factors. Concurrently, the strength of this growth is also gauged in comparison with the performance of competitors. In a similar pattern, this report assesses the growth of different financial components of William Hill PLC, which is one the leading bookmaking service provider in the United Kingdom (Google Finance, 2014a).

The comparison is developed against competitor Ladbrokes PLC, which is another leading betting and gaming company in the UK (Google Finance, 2014b). Revenue and Profits Growth The growth trend of the revenue and profits of the two competitors shows the following: Revenue Growth 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004                       WMH PLC Rev 1,486,500 1,276,900 1,136,700 1,071,800 997,900 963,700 940,400 894,200 10,746,000 8,287,700 16.4% 12.3% 6.1% 7.4% 3.5% 2.5% 5.2% -91.7% 29.7%   LAD Rev 1,117,700 1,084,400 976,100 980,100 1,032,200 1,172,100 1,235,000 970,000 11,505,000 11,893,000 3% 11% 0% -5% -12% -5% 27% -92% -3%   Profits 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 William Hill PLC 257,000 277,700 187,400 193,300 120,900 293,300 209,200 235,400 176,000 205,300 -7% 48% -3% 60% -59% 40% -11% 34% -14%   Ladbrokes PLC 67,600 200,700 134,600 147,100 174,100 250,200 344,200 243,000 240,000 311,000 -66% 49% -8% -16% -30% -27% 42% 1% -23%   The revenue trend of both companies shows that they have consistent growth, though the growth of the competitor remained in the negative domain for most of the season.

However, there has been wide variation in the performance of the profits growth. LAD, in terms of revenue, remained in the negative domain while the company under discussion showed consistent fluctuations. The fluctuation in the profit did not show any notable reflection on total assets. Further, notable growth of the fixed assets was reported in 2004 and then in the most recent reported year, while in the remaining years the current assests absorbed the fluctuation. This is unlike LAD’s trend of total asset growth, which showed a decline in the initial years, with a drop in sales, and only managed to recover to some extent.

The trend is as follows: William Hill PLC 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004   Fixed Assets 2,141,200 1,685,200 1,643,700 1,670,600 1,674,400 1,727,300 1,595,200 1,563,500 1,369,000 858,100 Growth 27% 3% -2% 0% -3% 8% 2% 14% 60%   Current Assets 272,700 190,000 164,600 156,700 176,000 108,600 107,500 144,000 97,000 82,700 Growth 44% 15% 5% -11% 62% 1% -25% 48% 17%   Total Assets 2,413,900 1,875,200 1,808,300 1,827,300 1,850,400 1,835,900 1,702,700 1,707,500 1,466,000 940,800 Growth 29% 4% -1% -1% 1% 8% 0% 16% 56%    Ladbrokes PLC  2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Fixed Assets 1,041,700 933,200 893,600 909,900 893,200 1,013,400 840,100 715,900 656,000 4,234,000 Growth 12% 4% -2% 2% -12% 21% 17% 9% -85%   Current Assets 77,000 93,100 106,900 102,500 174,600 260,700 205,300 114,400 4,794,000 870,000 Growth -17% -13% 4% -41% -33% 27% 79% -98% 451%   Total Assets 1,118,700 1,026,300 1,000,500 1,012,400 1,067,800 1,274,100 1,045,400 830,300 5,450,000 5,104,000 Growth 9% 3% -1% -5% -16% 22% 26% -85% 7%   Liabilities and Equities Total assets are financed either by debt or equity.

In the initial years, WMH financed its total assets from the long term liabilities (in 2005 and 2006), and since then it has been retiring its debt and shifting its focus towards equity and short term financing. It raised its long term liabilities again in the current year for financing total assets. On the contrary, Ladbrokes Plc has recentlty increased its reliance on equity after consistent retirement of sizebale equity in the years around the finacial crisis.   2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 William Hill PLC Short Term Liabilities 328,600 273,300 257,800 224,900 552,700 212,600 148,500 181,400 186,000 203,600 Growth 20% 6% 15% -59% 160% 43% -18% -2% -9%   Long term 1,062,000 579,500 662,700 759,200 553,600 1,275,200 1,321,100 1,335,600 1,061,000 486,200 Growth 83% -13% -13% 37% -57% -3% -1% 26% 118%   Total Liabilities 1,390,600 852,800 920,500 984,099 1,106,302 1,487,800 1,469,600 1,517,000 1,247,000 689,800 Growth 63% -7% -6% -11% -26% 1% -3% 22% 81%   Equities 1,023,300 1,022,400 887,800 843,200 744,100 348,100 233,100 190,500 220,000 251,000 Growth 0.09% 15.16% 5.29% 13.32% 113.76% 49.34% 22.36% -13.41% -12.

35%   Ladbrokes PLC Short Term Liabilities 184,800 144,700 280,200 271,300 304,600 818,300 561,500 381,600 589,000 988,000 Growth 27.71% -48.36% 3.28% -10.93% -62.78% 45.73% 47.14% -35.21% -40.38%   Long term 506,900 460,600 414,300 484,500 823,600 783,800 934,700 1,075,600 2,268,000 1,565,000 Growth 10.05% 11.18% -14.49% -41.17% 5.08% -16.14% -13.10% -52.57% 44.92%   Total Liabilities 691,700 605,300 694,500 755,800 1,128,200 1,602,100 1,496,200 1,457,200 2,857,000 2,553,000 Growth 14.27% -12.84% -8.11% -33.01% -29.58% 7.08% 2.68% -49.00% 11.

91%   Equities LD 427,000 421,000 306,000 256,600 -60,400 -328,000 -450,800 -626,900 2,593,000 2,551,000   1.43% 37.58% 19.25% -524.83% -81.59% -27.24% -28.09% -124.18% 1.65%   Return on Equity Overall growth of a firm is measured by the return on equity of the firm. Accoridng to Palepu and Healy (2007), the measure for sustainable growth of the firm as follows: ROE x (1 – dividend payout ratio) However, since both firms do not offer dividends to their shareholders, the measure of ROE on the whole is taken as a measure of sustainable growth.

WMH showed huge growth in the intial years of assessment; however, it fell steeply after the financial crisis. Moreover, the ROE has attempted to regain the strength. On the other hand, competitor LAD showed a similar wide fluctuation of the ROE as well, where it indicated no trend from 2006 to 2009 and gained a position almost doubled in comparison to that of WMH, as shown from figures below: Growth 2013 2012 2011 2010 2009 2008 2007 2006 2005 ROE (WMH)% 25.11 27.16 21.11 22.92 16.25 84.26 89.75 123.57 80 ROE (LF))% 15.83 47.67 43.99 57.33 n.s. n.s. n.s. n.s. 9.

26 Hence, the overall growth performance of WMH was found to be considerably consistent as compared to LAD. References Google Finance. (2014a). William Hill Plc. Available from http://www.google.co.uk/finance?q=LON%3AWMH&ei=zedIVLCKIamgwwOu1YDACg [Accessed 23rd October, 2014] Google Finance. (2014b). Ladbrokes Plc. Available From http://www.google.co.uk/finance?q=LON%3ALAD&ei=evVIVMHJJoKmwAPJjoCIDQ [Accessed 23rd October, 2014] Mouri, N., Sarkar, M. B. & Frye, M. (2012). Alliance portfolios and shareholder value in post-IPO firms: The moderating roles of portfolio structure and firm-level uncertainty.

 Journal of Business Venturing, 27(3), pp. 355–371. Palepu, K. & Healy, P. (2007). Business analysis and valuation: Using financial statements. Cengage Learning.