TIDMWMH
RNS Number : 5203R
William Hill PLC
01 March 2019
William Hill PLC
1 March 2019
Good underlying performance during period of substantial
change
William Hill PLC (LSE: WMH) (William Hill or the Group)
announces its final results for the 53 weeks ended 1 January 2019
(the period or 2018). Comparatives relate to the 52 weeks ended 26
December 2017.
Statutory results Adjusted results
--------------------------- ---------------------------
53 wks 52 wks Change 53 wks 52 wks Change
to to 26 % to to 26 %
1 Jan Dec 17 1 Jan Dec 17
19 GBPm 19 GBPm
GBPm GBPm
-------- -------- -------- -------- -------
Net revenue 1,621.3 1,592.8 +2% 1,621.3 1,592.8 +2%
Existing operations adjusted
operating profit(1) - - - 266.8 273.8 -3%
US Expansion operations(2) - - - (33.2) - -
Adjusted operating profit(3) - - - 233.6 273.8 -15%
(Loss)/profit before interest
and tax (687.9) 177.4 - - - -
(Loss)/profit before tax (721.9) 146.5 - 200.2 237.4 -16%
-------- -------- ------- -------- -------- -------
Discontinued operations -
Australia(4) 3.8 (225.6) - 4.5 13.0 -65%
-------- -------- ------- -------- -------- -------
(Loss)/earnings per share
(EPS) (p)(5) (83.6) 16.6 - 20.6 26.1 -21%
Dividend per share (p) 12.0 13.2 -9%
------------------------------- -------- -------- ------- -------- -------- -------
Financial results
-- Group net revenue up 2% to GBP1,621.3m
-- Adjusted operating profit from existing operations(1) down 3%
to GBP266.8m, in line with expectations
-- Exceptional charge and adjustments of GBP922.1m including, as
previously reported, GBP882.8m non-cash impairment to Retail
following Triennial Review decision leading to statutory loss
before tax of GBP721.9m
-- Operating cash flow before movements in working capital up 9% to GBP275.0m
-- Balance sheet remains strong with net debt for covenant
purposes(6) of GBP308.1m, 1.0x EBITDA at period-end
-- Full-year dividend of 12.0p per share, in line with policy to
pay out approximately 50% of underlying earnings, based on adjusted
EPS before US Expansion costs in 2018
Good progress against strategic priorities
-- Driving digital growth in the UK and internationally
o Good underlying Online performance: actives +25%, underlying
net revenue +6% and operating profit up 11% before cGBP17m impact
of enhanced customer due diligence measures
o Acquisition of Mr Green for cGBP242m completed in January
2019, building international base and capabilities
-- Growing a business of scale in the US
o US Existing business delivering continued strong momentum with
42% net revenue and 91% adjusted operating profit growth (in local
currency)
o US Expansion business now live in six states, access secured
to 17 states in total
o 34% market share by revenue across all seven regulated states
in these early stages
-- Remodelling Retail
o Resilient performance with net revenue down 2% with
challenging trading backdrop on the UK high street
o Ready for implementation of new GBP2 stake limit on B2 gaming
products in April 2019 and reshaping of Retail estate
-- Nobody harmed by gambling
o Voluntary whistle-to-whistle TV advertising ban agreed during
pre-watershed UK live sport
Philip Bowcock, Chief Executive Officer of William Hill,
commented:
"2018 was a busy and decisive year for us. Key regulatory
decisions in the UK and US gave us much needed clarity to set a new
five-year strategy and a goal to double profits by 2023. We have
three businesses at different stages, with Online growing in the UK
and diversifying internationally, Retail being remodelled in
response to the new GBP2 stake limit, and rapid expansion in the US
sports betting market. Underpinning this, we have taken a clear
leadership stance around safer gambling with our Nobody Harmed
ambition.
"Against this backdrop, we delivered a good underlying
performance in Online, strong growth in the US Existing business
and a resilient Retail outturn in the face of difficult high street
conditions.
"We have started delivering on our strategy with the expansion
of our US business, being first out of the blocks in all states
that have regulated sports betting, and with the acquisition of Mr
Green, which will support the build-out of our international
digital business. We have also put our weight behind reducing the
amount of TV gambling advertising seen by under 18s through a
voluntary whistle-to-whistle advertising ban before the
watershed.
"We know the next few years will require careful navigating and
investment, but with a clear strategy and diverse, experienced
leadership teams in place we are ready to capitalise on the
opportunities available to us."
Notes:
1. Existing operations adjusted operating profit is defined as
profit before interest and tax, excluding exceptional items and
other defined adjustments, and excluding US Expansion operations in
states we have entered since the US Supreme Court overturned the
Professional and Amateur Sports Protection Act 1992 (PASPA).
Further detail on the US Expansion operations and adjusted measures
is provided in notes 2 and 3 to the financial statements within our
2018 Annual Report.
2. Adjusted operating profit from US Expansion operations
includes new states we have entered and the expansion in Delaware
following state legislative changes since the Supreme Court
overturned PASPA.
3. Adjusted operating profit is defined as profit from
continuing operations before interest and tax, excluding
exceptional items and other defined adjustments. Further detail on
adjusted measures is provided in note 3 to the financial statements
within our 2018 Annual Report.
4. Results for the period up to 23 April 2018 when the disposal
of the Australian business completed.
5. Basic EPS is based on an average of 857.0 million shares for
2018 and an average of 856.9 million shares for 2017. Adjusted EPS
is based upon adjusted profits after tax.
6. Net debt for covenant purposes and EBITDA for covenant
purposes are non-statutory measures. The basis of calculation is as
described in note 24 to the financial statements within our 2018
Annual Report.
7. Definitions are provided in the glossary at the back of the document.
8. Numbers are presented on an adjusted basis unless otherwise stated.
OAM: Inside Information
William Hill LEI: 213800 MDW41W5UZQ1X82
Enquiries
=============================================================
William Hill Lyndsay Wright, Director of Strategy Tel: +44 (0) 20 7612
and Sustainability 3000
Tom Randell, Head of Investor Relations
Ciaran O'Brien, Director of Communications
Brunswick Andrew Porter / Chris Buscombe Tel: +44 (0) 20 7404
5959
Analyst and investor presentation
=======================================================================
Meeting Friday, 1 March 2019 at 9.30 am GMT
Lincoln Centre, 18 Lincoln's Inn Fields, London,
WC2A 3ED
Live conference Tel: +44 (0) 20 3936 2999. Access code 868075
call
Archive conference [Tel: +44 (0) 20 3936 3001. Access code: 189619#.
call Available until 8 March 2019
Video webcast www.williamhillplc.com
Debt investor conference call
=======================================================================
Live conference 11.30 am GMT. Tel: +44 (0) 20 3936 2999. Pass
call code: 868075
Archive conference Tel: +44 (0) 20 3936 3001. Passcode 989173#.
call Available until 8 March 2019
Notes to editors
=========================================================================
William Hill PLC is one of the world's leading betting and
gaming companies, employing c15,500 people. Its origins are in the
UK where it was founded in 1934, and where it is listed on the
London Stock Exchange. The majority of its GBP1.6 billion annual
revenues are still derived from the UK, where it has a national
presence of licensed betting offices and one of the leading online
betting and gaming services. In 2012, it established William Hill
US with a focus on retail and mobile operations in Nevada and
established the largest sports betting business in the US.
Following the ruling in May 2018 by the Supreme Court that the
federal ban on state sponsored sports betting was unconstitutional,
William Hill US has expanded and continues to expand as new states
regulate sports betting. It is now operating in seven states:
Nevada, New Jersey, Delaware, Rhode Island, Mississippi,
Pennsylvania and West Virginia. William Hill's Online business has
operations in Italy and Spain, and to support its international
expansion strategy acquired Mr Green & Co AB in January
2019.
Cautionary note regarding forward-looking statements
=====================================================
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION
These results include statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "anticipates",
"expects", "intends", "plans", "goal", "target", "aim", "may",
"will", "would", "could" or "should" or, in each case, their
negative or other variations or comparable terminology. These
forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout
these results and the information incorporated by reference into
these results and include statements regarding the intentions,
beliefs or current expectations of the directors, William Hill or
the Group concerning, amongst other things, the results of
operations, financial condition, liquidity, prospects, growth,
strategies and dividend policy of William Hill and the industry in
which it operates. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future and
may be beyond William Hill's ability to control or predict.
Forward-looking statements are not guarantees of future
performance. The Group's actual results of operations, financial
condition, liquidity, dividend policy and the development of the
industry in which it operates may differ materially from the
impression created by the forward-looking statements contained in
these results and/or the information incorporated by reference into
these results. In addition, even if the results of operations,
financial condition, liquidity and dividend policy of the Group and
the development of the industry in which it operates, are
consistent with the forward-looking statements contained in these
results and/or the information incorporated by reference into these
results, those results or developments may not be indicative of
results or developments in subsequent periods. Other than in
accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation (596/2014), the Listing Rules,
the Disclosure Guidance and Transparency Rules and the Prospectus
Rules), William Hill does not undertake any obligation to update or
revise publicly any forward-looking statement, whether as a result
of new information, future events or otherwise.
OVERVIEW
=========
2018 was a pivotal year for both William Hill and the wider
gambling industry. We now have greater clarity around the key
challenges and opportunities for our business following the
Triennial Review decision for UK gaming machines and the opening up
of regulated sports betting in the US. With these changes
clarified, we moved quickly to deliver a new strategy which we
communicated in November 2018 and set out our ambition to build
William Hill into a digitally led, internationally diverse gambling
business and thereby to double operating profit by 2023.
Performance summary
Group net revenue in 2018 was up 2% to GBP1,621.3m, including US
Expansion net revenue of GBP11.8m. Online, before the impact of
enhanced customer due diligence measures, and the US Existing
business delivered good growth, while Retail was challenged by
wider high street conditions with revenue down 2%. The US Supreme
Court's decision in May to overturn the federal ban on sports
betting presented us with an exciting new growth opportunity and we
moved quickly to capitalise on this by investing in a digital
launch in New Jersey and land-based expansion in six states. During
the year, we also followed through on our commitments under the
regulatory settlement with the UK Gambling Commission and our
long-term ambition that nobody is harmed by gambling by taking an
important decision to conduct enhanced due diligence checks on a
greater proportion of our Online customers. This led to account
closures that impacted 2018 performance by cGBP17m and will also
affect 2019 year-on-year growth.
Our US Expansion investment, Online measures and challenges in
Retail resulted in the Group's adjusted operating profit declining
15% to GBP233.6m. Excluding the US Expansion investment and Online
measures, underlying profit would have increased 4%. On a statutory
basis, we recorded a loss before tax of GBP721.9m as we incurred
exceptional charges of GBP922.1m, principally an GBP882.2m non-cash
impairment of Retail following the UK Government's decision to
reduce staking on B2 gaming products to GBP2, and GBP31.2m for the
transformation programme.
This resulted in a statutory loss of 83.6p per share. The basic
adjusted earnings per share (EPS) was 20.6p, reflecting underlying
growth in Online and the US being offset by US investment, Online
customer checks and weaker Retail performance.
Group cash capital expenditure was up 39% to GBP117.3m,
supported by strong operating cash flows (before movements in
working capital) of GBP275.0m. The balance sheet remains strong,
with net debt to EBITDA for covenant purposes of 1.0 times at the
year-end (26 December 2017: 1.5 times), with proceeds received from
the sale of Australia and our investments in NYX. This gives us the
flexibility to invest in digital and international growth,
including the acquisition of Mr Green which was completed in
January 2019, while managing the impact of regulatory changes in
Retail in the coming year.
The Board has approved a final dividend of 7.74p per share to
give a full-year dividend of 12.0p per share (2017: 13.2p). As per
the Board's previous commitment, the calculation for 2018 is based
on the 50% payout policy being applied to 2018 earnings excluding
the US Expansion investment. From 2019 onwards, US Expansion will
be included in the calculation. However, as previously announced,
the Board has committed to underpin the dividend so that it does
not fall below 8p per share until such time as earnings come back
in line with the payout policy.
Responding to a pivotal year with a new strategy
In November 2018, we set out our new Group strategy at our
Capital Markets Day. Our ambition is to build a digitally led and
internationally diverse gambling business. We have set ambitious
growth targets that take account of both the near-term challenges
and longer-term opportunities for each of our three divisions, with
the ambition of doubling profits between 2018 and 2023. We will
meaningfully reshape William Hill over the coming years, moving
from a business that has been predominantly UK-centric and
land-based to being a leading gambling business that is digitally
led, internationally diverse and sustainable.
Our strategy is focused around three priorities:
-- Driving digital growth in the UK and internationally;
-- Growing a business of scale in the US; and
-- Remodelling UK Retail.
This is underpinned by the Group's approach to sustainability
and our long-term ambition that nobody is harmed by gambling.
The summary of the strategy and the Capital Markets Day
presentation are available on our corporate website at
www.williamhillplc.com/investors.
(a) Driving digital growth in the UK and internationally
Our ambition for Online is to build the world's most trusted
digital gambling brand and business with greater scale, more
geographic diversity and higher operating profit margins.
In 2018, Online's improved product and increased marketing
efficiency drove underlying, before the impact of enhanced customer
due diligence measures, net revenue growth of c6% and adjusted
operating profit growth of c11%. However, we closed a significant
number of customer accounts as a result of the enhanced due
diligence checks and this reduced net revenue growth to 3% which,
together with increased costs from Remote Gaming Duty caused
adjusted operating profit to decline 2%. We are successfully
broadening our customer base by focusing more on mass market
customers. Structurally, this is reducing the average revenue per
user, down 17%, as we focus on lower-staking recreational players
and increasing new accounts, which were up 10%. Combined with
better retention, this resulted in the number of active customers
increasing 25% to 3.0 million. Key performance indicators were
similar across both the UK and international markets.
International markets accounted for 24% of Online's net revenue
in 2018. We are focused on expanding this to diversify the sources
of Online's revenue streams. In January 2019, we completed the
acquisition for cGBP242m of Mr Green, a high-growth European online
gaming company with operations in 12 markets and licences in seven
countries. Had the acquisition completed at the beginning of the
period then this would have increased international to c35% of
Online's 2018 revenue. Mr Green saw revenue grow 40% in 2018,
principally from European markets. This acquisition also brings us
an international hub of operations in Malta, inside the European
Union and therefore not subject to any direct impact from Brexit,
from which we will manage our non-UK expansion. The acquisition is
expected to be accretive to earnings in the first full year, with
synergies of at least GBP6m per year identified and returns
expected to be in excess of our cost of capital.
Over the last year we have significantly strengthened our
digital capabilities. Ulrik Bengtsson joined as Chief Digital
Officer in April from Scandinavian gambling company Betsson and
Phil Walker joined in January 2019 as UK Online Managing Director,
previously Managing Director of Coral and Ladbrokes Online and
Chief Marketing Officer for the Ladbrokes Coral Group. Patrick
Jonker joins in mid-March 2019 as International Online Managing
Director. We have also added key roles in brand, digital marketing,
product, data and technology.
(b) Growing a business of scale in the US
Market estimates suggest that the US could generate between $5bn
and $19bn of sports betting revenues by 2023, depending on the
speed and nature of state-by-state regulation. This is a major new
market opportunity that William Hill is very well placed to pursue
as we are the US's leading sports betting company. We aim to
maintain our market leadership and intend to enter every state that
regulates sports betting, and have an ambition to grow William Hill
US's EBITDA from $46.2m from the US Existing business in 2018 to
c$300m from the combined US Existing and US Expansion business in
2023.
Our US Existing business delivered its sixth consecutive year of
strong growth with net revenue up 38% (+42% in local currency) and
adjusted operating profit up 84% in 2018 (+91% in local currency).
Our market share by revenues in Nevada reached 32% in 2018, up from
29% a year before and 12% when we launched in 2012.
Our US Expansion business is now live in six states, making
William Hill the only company to have launched in all seven states
that have regulated sports betting - Nevada, New Jersey, Delaware,
Rhode Island, Mississippi, Pennsylvania and West Virginia. Our
medium-term target is to achieve 15% market share on average across
the regulated US sports betting market and in these early stages we
are averaging 34% by revenue, ranging from 8% in New Jersey digital
to 100% in states where we are the exclusive service provider
through the state sports lottery, including Delaware and Rhode
Island. Our initial investment in US Expansion resulted in a loss
of GBP33.2m in 2018, bringing the William Hill US division overall
to a loss of GBP0.6m, in line with our plans.
In January 2019, we completed our strategic partnership with
Eldorado Resorts Inc., under which they became a 20% shareholder in
William Hill US, following receipt of regulatory approvals.
Alongside deals with Golden Entertainment, IGT and Prairie Meadows,
this gives us access to 17 states.
In New Jersey, our brand awareness has increased from 5% in
September 2018 to 22% in February 2019. Our share of the mobile
market has grown each month since launch to 12% in January 2019,
ahead of improvements to the product and customer experience that
will come when we launch our new technology platform, which is on
track for later in 2019.
We have made key hires to enhance our marketing and technology
capabilities, including appointing Sharon Otterman from Madison
Square Garden as Chief Marketing Officer, and Ken Fuchs, whose
background includes STATS and Yahoo, as President of Digital.
(c) Remodelling Retail
Our Retail business is focused on addressing the challenges laid
down by the Triennial Review decision, which will drive substantial
structural change across the licensed betting office sector over
the coming years.
We are ready for implementation in April 2019 across the UK,
including voluntary implementation in Northern Ireland. Our
preparations include product innovation as alternatives to B2
gaming, as well as remodelling the estate and the business. We have
been carefully reviewing the estate since the decision was
announced in May 2018, reducing the average lease length of our
shops and assessing the potential to amend lease terms. As
previously indicated, we expect this change to reduce Retail's
profitability by GBP70-100m following mitigation measures. While it
is not possible to predict with certainty the full impact of this
change as it is contingent on customer behaviour changes and on the
response of other operators, we continue to believe that our status
as the largest operator by brand places us in a strong position to
capture market share.
Following implementation of the GBP2 stake limit on B2 gaming
products, we will experience the full impact of changes to customer
behaviour from Q2 2019 without the offsetting benefit of mitigation
measures and cost savings until later in the year. We have
estimated that up to 900 shops could become at risk of closure. The
impact and thus the extent of mitigation and cost savings will in
part depend on assessing the impact on consumer behaviour seen
during this initial period following implementation of the new
limit.
During 2018, Retail's net revenue declined 2% due to racing
cancellations and a strong comparable period. Costs were well
controlled and held flat year-on-year, but operating leverage
resulted in adjusted operating profit declining 7%.
(d) Sustainability
In July 2018, we launched our ambition that nobody is harmed by
gambling and have made good progress across the nine initial
commitments that we set. One of the most important was to address
widespread concerns about gambling advertising and, to have an
impact on this, we needed the entire industry to work together.
Along with other operators across the industry, we have given our
support to a whistle-to-whistle ban on TV betting adverts during
pre-watershed live sport. It also includes an end to betting
adverts around highlight shows and re-runs, and an end to bookmaker
sponsorship of pre-watershed sports programmes. This move is
important. It is an industry-wide initiative that has been agreed
ahead of any regulation. We know the public is concerned about
advertising and that it is during live sport that young people are
most likely to see gambling adverts, so this is a significant step
towards our ambition.
Guidance and outlook
Outlook for 2019 is in line with market expectations, which
reflects the Capital Markets Day guidance as adjusted for the
previously announced UK Government's change to the implementation
date for the GBP2 stake limit and the increase in Remote Gaming
Duty.
The Group's Effective Tax Rate for 2019 is now expected to be
c12%, reflecting the changing shape of the business.
The Group's investment behind its strategy is supported by a
strong balance sheet, which was 1.0 times net debt to EBITDA at the
period end. We expect that during 2019 this ratio will temporarily
exceed two times as a result of increased investment in the
business combined with lower operating profit, but will naturally
de-lever in 2020.
With rapid expansion underway in the US and the acquisition of
Mr Green now complete, we are excited and focused on the
opportunity to make further operational and strategic progress this
year. In 2019 we are remodelling our Retail offer while building a
digitally-led and internationally diverse business, underpinned by
a sustainable approach as part of our Nobody Harmed ambition.
OPERATING REVIEW
=================
The commentary below on divisional performance reflects adjusted
results, since that is the basis on which they are reported
internally and in our segmental analysis. An explanation of our
adjusted results, including a reconciliation to the statutory
results, is provided in note 3 to the financial statements within
our 2018 Annual Report.
The following narrative relates to the 53-week period to 1
January 2019, with comparatives relating to the 52 weeks ended 26
December 2017.
Online (39% of Group revenue)
=============================
FY 2018 FY 2017 Change
GBPm GBPm
-------- --------------- ---------
Sportsbook amounts wagered 4,702.8 4,735.6 -1%
Gross win margin 8.0% 7.6% +0.4 ppts
UK net revenue 484.0 475.0 +2%
International net revenue 150.4 141.9 +6%
---------------------------- -------- --------------- ---------
Sportsbook net revenue 318.7 308.3 +3%
Gaming net revenue 315.7 308.6 +2%
---------------------------- -------- --------------- ---------
Online net revenue 634.4 616.9 +3%
Cost of sales (154.1) (144.6) +7%
Operating costs (350.1) (339.8) +3%
-------- --------------- ---------
Adjusted operating profit 130.2 132.5 -2%
----------------------------- -------- --------------- ---------
In 2018, we focused on building our digital structure and
capabilities. Following the appointment of our Chief Digital
Officer, we appointed a Global Brand and Marketing Director to lead
our brand strategy, a Data Director - rolling out our first
high-impact use-case to enable personalisation and real-time data
capabilities towards the end of 2018 - and a Product Director to
create and operationalise a new way of managing product
prioritisation and development. We also meaningfully reshaped our
compliance approach to address concerns raised by the Gambling
Commission in a GBP6.2m regulatory settlement we agreed in February
2018.
Sportsbook amounts wagered was down 1% year-on-year as a result
of a stronger margin, but would have grown 2% excluding the impact
of customer account closures following enhanced customer due
diligence checks.
Gross win margins were up 0.4 percentage points, with strong
football results but weaker horseracing margins, particularly
during the summer. Free bets over the year accounted for 1.2% of
amounts wagered (2017: 1.1%), including our popular 'Scratch of the
Day' offer during the World Cup and activities in H2 to attract and
retain a more recreational customer base. As a result, Sportsbook
net revenue rose 3% to GBP318.7m (2017: GBP308.3m).
Gaming net revenue was up 2% to GBP315.7m. Investment in
cross-sell product features and enhanced offers improved cross-sell
rates by three percentage points year-on-year.
Active users grew strongly, up 25% to 3.0 million unique active
accounts, as we invested in offers and incentives to attract a more
mass market customer base. New accounts grew 10%. Average revenue
per user reduced by 17%, reflecting the changing mix of the
customer base, while average cost per acquisition reduced 3%.
Our improvements to the mobile user experience resulted in
revenues from mobile devices increasing to 83% of Sportsbook net
revenue (2017: 74%) and 80% of gaming net revenue (2017: 69%).
Cost of sales increased faster than net revenue with the
annualised impact of Remote Gaming Duty being applied to gaming
free bets and the horseracing levy. The combined year-on-year
impact of these was cGBP7m.
Operating costs were 3% higher, with a 6% increase in marketing
investment. Staff costs reduced 12%, benefiting from operating
efficiencies delivered under the transformation programme.
Adjusted operating profit decreased 2% to GBP130.2m. Adjusting
for the GBP17m impact from customer due diligence changes, adjusted
operating profit grew 11%.
William Hill US (6% of Group revenue)
=====================================
Existing On a statutory reporting On a local currency
basis basis
----------------------------- -----------------------------
FY 2018 FY 2017 Change FY 2018 FY 2017 Change
GBPm GBPm $m $m
--------- ------- --------- --------- ------- ---------
Amounts wagered 1,084.5 893.9 +21% 1,442.8 1,152.7 +25%
Gross win margin 7.2% 6.3% +0.9 ppts 7.2% 6.3% +0.9 ppts
--------- ------- --------- --------- ------- ---------
Net revenue 79.7 57.9 +38% 106.0 74.7 +42%
Cost of sales (7.4) (4.9) +51% (9.8) (6.4) +53%
Operating costs (39.7) (35.3) +12% (52.6) (45.5) +16%
--------- ------- --------- --------- ------- ---------
Adjusted operating
profit 32.6 17.7 +84% 43.6 22.8 +91%
------------------- --------- ------- --------- --------- ------- ---------
Expansion FY 2018 FY 2018
GBPm $m
------- -------
Amounts wagered 164.4 212.5
Gross win margin 6.7% 6.7%
------- -------
Net revenue 11.8 15.2
Cost of sales (1.6) (2.0)
Operating costs (43.4) (56.9)
------- -------
Adjusted operating
loss (33.2) (43.7)
------------------- ------- -------
Numbers referenced in the following narrative are presented on a
local currency basis.
(a) US Existing
Amounts wagered in our US Existing business was up 25%, driven
by significant growth in mobile, up 42%, while retail remained
broadly flat. Mobile wagering was driven by a combination of an
increase in customer numbers - with new customers up 20% and unique
actives up 29% - and an increase in the average bet size, up 46%.
This strong wagering performance was complemented by a good margin,
up 0.9 percentage points, primarily due to favourable American
football and basketball results. This resulted in net revenue
growth of 42%, with mobile up 48% and retail up 38%. This was the
sixth consecutive year of net revenue growth. Operating costs
increased 16% as we invested in people and growing our capacity in
anticipation of and in response to the Supreme Court's decision to
overturn the Professional and Amateur Sports Protection Act (PASPA)
in May 2018. Adjusted operating profit was $43.6m, an increase of
91% year-on-year.
(b) US Expansion
Revenue is derived from both direct revenue and service provider
revenue, dependent on the nature of the different operating models
and partnerships and the regulation in each state. We have
delivered US Expansion net revenue of $13.4m from operations in New
Jersey and some operations in West Virginia and income of $1.8m
from providing services in Delaware, Mississippi, Rhode Island,
Pennsylvania and West Virginia.
Since the PASPA decision in May 2018, we have launched or
expanded operations in six states: New Jersey, Delaware, Rhode
Island, Mississippi, Pennsylvania and West Virginia. We have
generated total wagering across these six states of c$430m, made up
of c$212m wagered directly with us and c$218m wagered with our
partners where we receive income as a service provider. The average
gross win margin was 10.4%, with margins varying across the US
Expansion states but, on average, broadly in line with those we
have seen historically in Nevada; however, it is too early to
predict long-term trends.
Operating costs were $56.9m, including investments in New Jersey
to support the mobile launch and brand awareness. This resulted in
an adjusted operating loss of $43.7m in this first period of
operations.
Retail (55% of Group revenue)
=============================
FY 2018 FY 2017 Change
GBPm GBPm
-------- ------- ---------
Sportsbook amounts wagered 2,195.9 2,310.4 -5%
Gross win margin 18.2% 18.0% +0.2 ppts
Sportsbook net revenue 398.9 415.4 -4%
Gaming net revenue 496.3 497.7 -0%
--------------------------- -------- ------- ---------
Retail net revenue 895.2 913.1 -2%
Cost of sales (226.6) (233.6) -3%
Operating costs (518.3) (518.6) -0%
-------- ------- ---------
Adjusted operating profit 150.3 160.9 -7%
---------------------------- -------- ------- ---------
Sportsbook wagering was down 5% with the benefit of the World
Cup offset by racing fixture cancellations in Q1 2018 and rolling
over a period when we had the advantage of media content not
matched by our competitors in H1 2017.
Our proprietary SSBTs contributed 15% of total staking, with
machine weekly average wagering growing 60% year-on-year. A further
611 of the terminals were rolled out across the year, bringing the
per shop average to 1.6. Over 50% of football stakes are now
transacted through the SSBTs. During the period, we added seven
further sports to the SSBTs, customer enhancements such as 'Betting
Buddy' and multi-match coupons.
Total Sportsbook gross win margin was up 0.2 percentage points
to 18.2%, benefiting from a strong end to the year across
horseracing and football.
In gaming, our regular programme of product launches saw B3
content increase to 38% of revenues (2017: 36.5%). We have also
seen strong growth from games that we have developed in-house,
which not only expand our content portfolio but also do not attract
a revenue share.
Retail net revenue declined 2%, with Sportsbook down 4% and
gaming flat.
Operating costs were flat as we continued to focus on
controllable costs in light of tough high street conditions and
pressure on the top line. As a result, adjusted operating profit
fell by 7%.
The average number of shops fell 1% to 2,333 (2017: 2,362), with
23 shops closed in the period. The number of shops at the year-end
was 2,319.
Horseracing is part of William Hill's heritage and we are proud
to be the on-course operator at 36 of the UK's 60 racecourses.
Corporate costs
===============
Net corporate costs increased 26% to GBP46.6m (2017: GBP37.1m),
mainly driven by increased central compliance costs, support for
development of the US business and implementation of new General
Data Protection Regulations.
FINANCIAL REVIEW
=================
Note the analysis below considers only continuing operations
unless specifically stated otherwise. The Group disposed of William
Hill Australia, the Group's Australia segment, in April 2018. This
has been classified as a discontinued operation and therefore not
included within the below analysis. The difference between
statutory results and adjusted results is due to exceptional items
and other defined adjustments, principally relating to an
impairment charge of GBP882.8m recognised in the Retail segment
following the results of the Triennial Review. Further detail on
adjusted results is provided in note 3 to the financial
statements.
The Group grew revenue by 2% to GBP1,621.3m, although this is
from a 53-week trading period in 2018. With costs of sales
decreasing by 4%, this led to gross profit of GBP1,235.7m, an
increase of 4% or GBP43.5m. Net operating expenses grew by
GBP908.8m (90%) on a statutory basis, mainly reflecting the
impairment of the Retail segment of GBP882.8m. On an adjusted
basis, net operating expenses grew by GBP62.5m (7%) to GBP998.0m.
This includes the cost of investment in expanding the US business
since PASPA was overturned in May 2018 (referred to as the US
Expansion segment) with net operating expenses of GBP43.4m and a
net adjusted operating loss of GBP33.2m.This led to a decrease in
the Group adjusted operating profit of 15% to GBP233.6m. Excluding
the impact of the US Expansion segment, adjusted operating profit
has decreased by GBP7.0m (3%).
On a statutory basis, net finance costs have increased by 10% or
GBP3.1m, primarily due to the disposal of the NYX redeemable
convertible preference shares in January 2018, which had earned
interest income in 2017 of GBP5.5m. We recognised a tax credit of
GBP5.8m in 2018, reflecting the release of deferred tax liabilities
following the impairment of the Retail segment, compared to a
charge of GBP4.1m in 2017. Loss after tax for the period was
GBP716.1m compared to a profit of GBP142.4m in 2017, with a loss
per share of 83.6p compared to earnings per share of 16.6p. On an
adjusted basis, profit after tax decreased by 21%, or GBP47.8m, to
GBP176.1m with a corresponding 21%, or 5.5p, decrease in earnings
per share to 20.6p.
We remained strongly cash generative in the period with net
operating cash flows of GBP197.1m, although this was a decrease of
GBP75.5m or 28% compared to 2017. This decrease was driven by the
15% decrease in adjusted operating profit and an increase in
working capital. The operational cash flow coupled with net cash
receipts of GBP141.6m from the disposal of the Australia business
and GBP100.7m from the sale of NYX investments led to a reduction
in net debt for covenant purposes to GBP308.1m from GBP515.2m.
Consequently, the ratio of net debt to EBITDA for covenant purposes
reduced to 1.0 times (2017: 1.5 times), within the target ratio of
1-2 times.
Income Statement by division
The commentary below on divisional performance reflects adjusted
results, since that is the basis on which they are reported
internally and in our segmental analysis. An explanation of our
adjusted results, including a reconciliation to the statutory
results, is provided in note 3 to the financial statements. The
current period was a 53-week period compared to a 52-week
comparative. This has not been adjusted for in the analysis
below.
Revenue was GBP1,621.3m, an increase of 2% on 2017. Online
revenues increased by GBP17.5m or 3%. Online Sportsbook net revenue
increased by 3% although staking decreased by 1% with a stronger
margin offsetting the impact of customer account closures following
enhanced customer due diligence checks. Gaming net revenue
increased by 2%. Retail revenue fell GBP17.9m or 2%. Within this,
Retail Sportsbook saw a GBP16.5m (4%) decrease, driven by a 5%
decrease in wagering, while revenue from gaming machines decreased
by GBP1.4m (0%) with declines in footfall on the retail high street
offsetting increasing product launches of B3 content. In the
William Hill US division, which comprises the US Existing segment
(with all operations existing before PASPA was overturned in May
2018) and the US Expansion segment (with all operations in new
jurisdictions since PASPA was overturned) revenue grew 58% to
GBP91.5m. Revenue includes service provide revenue, where William
Hill US provides sports books services to the operator. The Group
previously recognised this through other operating income. Further
detail is provided in note 1 to the financial statements. The US
Existing segment revenue grew GBP21.8m, or 38%, to GBP79.7m driven
by significant growth in mobile. In US dollars the increase in
revenue for US Existing was 42%.
Cost of sales grew 2% or GBP6.2m, in line with the movements in
revenue across each segment.
Adjusted expenses (net of other operating income) increased 7%
or GBP62.5m to GBP998.0m. Retail expenses stayed flat at GBP518.3m
(2017: GBP518.6m) through tight cost control in the period. Costs
in Online grew GBP10.3m or 3% to GBP350.1m, due to an increase in
marketing investment offset by a reduction in staff costs from
operating efficiencies delivered under the transformation
programme. US Existing segment expenses grew 12% to GBP39.7m, due
mainly to increased staff costs. US Expansion costs of GBP43.4m
were also incurred in the period. Elsewhere, the Group's corporate
and other costs grew by GBP6.6m from increasing central compliance
costs and from support for the development of the US business. This
is partly offset by an increase in the share of profit from
associates in the period.
Exceptional items and adjustments
Exceptional items and adjustments amounted to GBP892.2m after
tax, an increase of GBP810.7m from the prior period.
This predominantly related to an impairment of the Retail
division of GBP882.8m following the results of the Triennial Review
with the maximum stake on B2 gaming products being reduced from
GBP100 to GBP2. A regulatory change of this nature is unprecedented
and its impact on customer and competitor behaviour will not be
known until some years after implementation but we currently
estimate this could reduce the Retail division's annualised
adjusted operating profit following mitigation measures by
cGBP70-GBP100m, see note 12 to the financial statements.
There were two restructuring programmes in the period. First,
there was a continuation of the transformation programme with costs
of GBP31.2m incurred in the period. This programme began in 2016
and is still expected to finish in 2019, with the benefits
continuing to underpin the future growth of the business. This
programme has incurred costs of GBP95.8m up to the period end of
2018 and expects to incur cGBP10m of costs in 2019. The costs
incurred relate to revenue generating and cost saving initiatives,
which have an estimated allocation of cost of GBP43.3m and GBP41.6m
respectively as well as a specific Retail restructuring programme
(GBP10.9m).
Secondly, there is a new restructuring programme surrounding the
Group-wide mitigation of the results of the Triennial Review. This
restructuring programme is distinct from the transformation
programme as it is a specific result of the external regulatory
change as opposed to an internally led programme. The programme is
expected to last until 2020 with estimated cash costs of cGBP75m.
This relates to GBP40m-GBP60m in the Retail segment predominantly
due to shop closures and cGBP15m of cost from a Group-wide cost
saving programme initiated as a specific result of the Triennial
Review decision.
The remaining exceptional items within operating expenses
included the loss on disposal of our Australian business of
GBP0.6m; corporate transaction costs mainly related to the
acquisition of Mr Green and the partnership with Eldorado, which
both completed in 2019; and the recognition of a provision for
guaranteed minimum pension equalisation. There is also the
continuation of certain exceptional items from the previous period
for specific US legal fees (GBP0.6m); the loss on disposal on
completion of the sale of the NYX shareholding (GBP0.4m) and
adjustments to the provision for shop closures (GBP0.3m
credit).
There was a credit to exceptional items in costs of sales,
reflecting indirect tax settlements reached in certain
jurisdictions leading to a release of previously accrued balances
(GBP4.1m) and there was an exceptional item in financing costs with
the write off of the finance fees on the previous RCF that was
replaced in the period of GBP0.6m.
An exceptional tax provision of GBP8.0m (2017: GBPnil) has been
recognised in respect to potential additional tax payable relating
to a change, with retrospective effect, in specific non-UK tax
legislation.
In addition to exceptional items, there were adjustments
totalling GBP2.2m after tax, compared to a credit of GBP9.0m in
2017. In the current period, this relates to amortisation charges
on intangibles recognised in acquisitions. In the prior period, the
credit is explained by movements in the redeemable convertible
preference shares held in NYX, which were disposed in January
2018.
Taxation
On a statutory basis, the Group recognised a tax credit of
GBP5.8m on losses before tax of GBP721.9m, giving an effective tax
rate of 0.8% (2017: 2.8%). The rate is adversely impacted due to
the non-deductibility of certain exceptional costs (principally the
impairment of the Retail segment). On an adjusted basis, the Group
recognised a tax charge of GBP24.1m on adjusted profits before tax
of GBP200.2m, giving an adjusted effective tax rate of 12.0% (2017:
5.7%). This rate is lower than the UK statutory rate mainly due to
lower tax rates on profits earned in Gibraltar, offset by the
inclusion of a provision in respect of uncertain tax provisions of
GBP8.0m (2017: GBPnil) in respect to the unwinding of the
intragroup lending on the disposal of the Australian
operations.
The Group's effective tax rate for 2019 is now expected to be
c12%, reflecting the changing shape of the business.
Earnings per share
Basic EPS declined to a loss per share of 83.6p from an earnings
per share of 16.6p in the prior period, reflecting the loss after
tax made of GBP716.1m, due predominantly to the GBP882.8m
impairment of the Retail segment, compared to a profit after tax in
2017 of GBP142.4m. Adjusted EPS decreased by 21% to 20.6p, due to
the 21% decrease in adjusted profits after tax to GBP176.1m.
Including results from discontinued operations, namely the
results of the Australia business disposed of, profit for the
period on an adjusted basis was GBP180.6m, a decrease of GBP56.3m
or 24%, with an adjusted basic EPS including discontinued
operations falling 24% to 21.1p.
Statement of Financial Position
The impairment of the Retail division of GBP882.8m was allocated
firstly against goodwill (GBP680.7m) and the remaining impairment
charge, once goodwill had been decreased to nil was taken against
licences within intangible assets (GBP151.5m) and property, plant
and equipment (GBP50.6m). The impairment charge, coupled with the
disposal of the Australian business and investments in NYX has led
to a decrease in non-current assets of GBP1,030.8m from GBP1,968.6m
at 26 December 2017 to GBP937.8m. These disposals of investments
have led to an increase in cash and cash equivalents of GBP193.5m,
which explains the GBP180.5m increase in current assets to
GBP573.9m.
A buy-in bulk annuity policy was signed by the Trustees of the
pension scheme to insure a proportion of the defined benefit
obligation against the risk of rising costs in the future.
Current liabilities have decreased by GBP48.6m, mainly due to a
GBP57.1m decrease in trade and other payables. There were decreases
in trade payables of GBP12.3m reflecting the disposal of the
Australia business and taxation and social security liabilities of
GBP25.8m reflecting the settlement of previously accrued indirect
taxes following clarifications on tax interpretations in certain
jurisdictions. Furthermore, there was a decrease in accruals of
GBP19.8m due to a reduction in accruals relating to the
transformation restructuring programme as the programme begins to
wind down and a reduction in staff incentive accruals.
Non-current liabilities decreased by GBP37.9m, predominantly due
to the release of part of the deferred tax liabilities held on
licences and other intangibles due to the impairment of these
balances as part of the Retail division impairment. In total,
liabilities decreased by GBP86.5m to GBP1,212.8m.
We entered into a new GBP390m revolving credit facility in
September 2018, replacing the previous facility, which was due to
expire in May 2019. This revolving credit facility has not been
utilised in 2018.
Net assets of GBP298.9m is a decrease of GBP763.8m compared to
26 December 2017.
Cash flows and net debt
Operating cash flows of GBP197.1m were GBP75.5m (28%) lower than
in 2017. This decrease was driven by the 15% decrease in adjusted
operating profit and a decrease in working capital of GBP31.0m, due
to settlements of indirect tax accruals and a reduction in staff
incentive accruals.
We invested GBP117.3m in net capital expenditure, an increase of
GBP33.2m compared to 2017 reflecting the increase investment in the
US Expansion business with capital additions of GBP20.4m. GBP19.2m
of the GBP20.5m investments balance relates to the Group increasing
its shareholding of Mr Green & Co AB, up to 8.11% at 1 January
2019, prior to the acquisition completing in January 2019.
The Group returned GBP113.5m to shareholders through dividends,
an increase of 5% compared to GBP108.1m in 2017.
We disposed of our Australia business for GBP141.6m (net of cash
disposed of and disposal costs) in April 2018 and our NYX
investments for GBP100.7m in January 2018.
This drove a reduction in net debt of GBP207.1m to GBP308.1m and
our net debt to EBITDA for covenant purposes to a multiple of 1.0x
(2017: 1.5x).
The Board committed to pay the 2018 full-year dividend from
underlying earnings excluding US Expansion. Moving forward, now
that the Group's US ambitions are clearer, the Board believes it is
appropriate that dividends are paid out of true underlying
earnings, i.e., including US Expansion costs, from 2019 onwards.
However, reflective of the Board's confidence in the Group's
strategy, strong capital position and future cash generation
prospects, the Board has committed to underpin the annual dividend
to be not less than 8p per share until such time as the earnings
come back in line with the payout policy.
BOARD CHANGES AND GOVERNANCE UPDATE
====================================
Gordon Wilson joined the Board as a Non-executive Director on 2
January 2019. Gordon is President and CEO of Travelport Worldwide
Limited, a leading travel distribution platform, and brings
extensive experience of the development and use of proprietary
technology and data at scale on a global basis.
David Lowden will step down from the Board from 4 March 2019 to
allow him to focus on other commitments following his appointment
as Independent Non-executive Director of Huntsworth plc on 1
January 2019 and Chairman with effect from 6 March 2019. David has
been with the Board since 2011 and was Chair of the Audit and Risk
Management Committee. The Board would like to thank David and
acknowledge his contribution and service over the last seven years.
Robin Terrell will succeed David as Chair of the Audit and Risk
Management Committee with effect from 4 March 2019.
PRINCIPAL RISKS AND UNCERTAINTIES
==================================
We have reviewed our risk profile as set out in the 2018 Annual
Report and considered the risks facing the Group in the 2019
financial year. The key risks are identified as:
-- Regulatory and political risk;
-- Cyber crime and information security;
-- Competitive landscape;
-- Delivery of IT strategy;
-- Talent engagement and retention; and
-- Programme optimisation.
Further information is available on pages 57 to 61 of the 2018
Annual Report, which will shortly be available on our corporate
website at www.williamhillplc.com.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
FINAL RESULTS ANNOUNCEMENT
============================================================
The directors confirm that, to the best of their knowledge:
-- the 2018 Annual Report and financial statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy;
-- the Group financial statements, which have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union and Article 4 of the IAS Regulation
(in the case of the consolidated financial statements) and United
Kingdom Generally Accepted Accounting Practice, including Financial
Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101) (in
the case of the parent company financial statements), give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Group and the undertakings included in the
consolidation taken as a whole; and
-- the Strategic Report and risk sections of the 2018 Annual
Report, which represent the management report, include a fair
review of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties that it faces.
This responsibility statement is approved by the Board of
directors and is signed on its behalf by:
P. Bowcock R. Prior
Chief Executive Officer Chief Financial Officer
1 March 2019 1 March 2019
William Hill PLC
Consolidated Income Statement
for the 53 weeks ended 1 January 2019
53 weeks ended 1 January 52 weeks ended 26
2019 December 2017
================================ ===== ====================================== =====================================
Exceptional Exceptional
items items
and adjustments and adjustments
(note Statutory (note Statutory
Adjusted 3) total Adjusted 3) total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================================ ===== ========= ================ ========= ======== ================ =========
Continuing operations
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Revenue(1) 2 1,621.3 - 1,621.3 1,592.8 - 1,592.8
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
2,
Cost of sales 3 (389.7) 4.1 (385.6) (383.5) (17.1) (400.6)
================================ ===== ========= ================ ========= ======== ================ =========
Gross profit 2 1,231.6 4.1 1,235.7 1,209.3 (17.1) 1,192.2
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Other operating income 5.7 - 5.7 6.7 - 6.7
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Other operating expenses 3 (1,006.6) (925.6) (1,932.2) (943.2) (79.3) (1,022.5)
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Share of results of associates 2.9 - 2.9 1.0 - 1.0
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/profit before interest
and tax 2 233.6 (921.5) (687.9) 273.8 (96.4) 177.4
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Investment income 4.7 - 4.7 1.4 5.5 6.9
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
3,
Finance costs 4 (38.1) (0.6) (38.7) (37.8) - (37.8)
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/profit before tax 2 200.2 (922.1) (721.9) 237.4 (90.9) 146.5
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Tax 3,5 (24.1) 29.9 5.8 (13.5) 9.4 (4.1)
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/profit for the
period from continuing
operations 176.1 (892.2) (716.1) 223.9 (81.5) 142.4
================================ ===== ========= ================ ========= ======== ================ =========
Profit/(loss) for the
period from discontinuing
operations 13 4.5 (0.7) 3.8 13.0 (238.6) (225.6)
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/profit for the
period (attributable to
equity holders of the
parent) 180.6 (892.9) (712.3) 236.9 (320.1) (83.2)
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/earnings per share
from continuing and discontinued
operations (pence)
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Basic 7 21.1 (83.1) 27.6 (9.7)
-------------------------------- ----- --------- ---------------- --------- -------- ---------------- ---------
Diluted 7 20.9 (83.1) 27.5 (9.7)
================================ ===== ========= ================ ========= ======== ================ =========
(Loss)/earnings per share
from continuing operations
(pence)
---------------------------- ---- ------ ---- ----
Basic 720.6 (83.6) 26.1 16.6
---------------------------- ---- ------ ---- ----
Diluted 720.4 (83.6) 26.0 16.5
============================ ==== ====== ==== ====
1 The Group previously recognised service provider revenue,
previously referred to as bookmaking services income, through other
operating income. It is the Group's view that in order not to
distort the other operating income figure, service provider revenue
of GBP2.9m (52 weeks ended 26 December 2017: GBP1.4m) shall be
recognised as revenue. Prior period comparatives have been
reclassified.
William Hill PLC
Consolidated Statement of Comprehensive Income
for the 53 weeks ended 1 January 2019
53 weeks 52 weeks
ended ended
1 January 26 December
2019 2017
GBPm GBPm
====================================================== ========== ============
Loss for the period (712.3) (83.2)
======================================================= ========== ============
Items that will not be reclassified subsequently
to profit or loss:
------------------------------------------------------ ---------- ------------
Actuarial remeasurements in defined benefit
pension scheme (27.3) 33.0
------------------------------------------------------- ---------- ------------
Tax on remeasurements in defined benefit pension
scheme 4.7 (5.6)
------------------------------------------------------- ---------- ------------
Items that may be reclassified subsequently
to profit or loss:
------------------------------------------------------ ---------- ------------
Exchange differences
------------------------------------------------------ ---------- ------------
Translation of foreign operations (5.2) (8.9)
------------------------------------------------------- ---------- ------------
Reclassified to profit and loss on disposal
of Australia operations 84.3 -
------------------------------------------------------- ---------- ------------
Gains on available-for-sale financial assets
------------------------------------------------------ ---------- ------------
Changes in fair value of available-for-sale
financial assets - 4.0
------------------------------------------------------- ---------- ------------
Changes in fair value reclassified to profit
and loss on disposal of investments in NYX 0.4 -
------------------------------------------------------- ---------- ------------
Other comprehensive income for the period 56.9 22.5
======================================================= ========== ============
Total comprehensive loss for the period (attributable
to equity holders of the parent) (655.4) (60.7)
======================================================= ========== ============
William Hill PLC
Consolidated Statement of Changes in Equity
for the 53 weeks ended 1 January 2019
Attributable to equity holders of the parent
---------------------------------------------------------------------------------------
Hedging
Called-up Share Capital Own and
share premium redemption Merger shares translation Retained
capital account reserve reserve held reserve earnings Total equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ========= ======== ========== ======== ======= =========== ======== ============
At 26 December
2017 88.7 689.4 6.8 (26.1) (97.0) (72.5) 473.4 1,062.7
================= ========= ======== ========== ======== ======= =========== ======== ============
Loss for the
financial period - - - - - - (712.3) (712.3)
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Actuarial
remeasurements
in defined
benefit pension
scheme - - - - - - (27.3) (27.3)
================= ========= ======== ========== ======== ======= =========== ======== ============
Tax on
remeasurments in
defined benefit
pension scheme - - - - - - 4.7 4.7
================= ========= ======== ========== ======== ======= =========== ======== ============
Exchange
difference on
translation of
foreign
operations - - - - - (5.2) - (5.2)
================= ========= ======== ========== ======== ======= =========== ======== ============
Exchange
differences
reclassified to
profit and loss
on disposal of
Australia
operations - - - - - 84.3 - 84.3
================= ========= ======== ========== ======== ======= =========== ======== ============
Changes in fair
value
reclassified to
profit and loss
on disposal of
investments in
NYX - - - - - - 0.4 0.4
================= ========= ======== ========== ======== ======= =========== ======== ============
Total
comprehensive
profit/(loss)
for the period - - - - - 79.1 (734.5) (655.4)
================= ========= ======== ========== ======== ======= =========== ======== ============
Purchase and
issue of own
shares - - - - - - - -
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Transfer of own
shares to
recipients - - - - 9.0 - (7.8) 1.2
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Other shares
issued during the
period - - - - - - - -
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Credit recognised
in respect of
share
remuneration - - - - - - 5.5 5.5
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Tax credit in
respect of share
remuneration - - - - - - (1.6) (1.6)
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
Dividends paid
(note 6) - - - - - - (113.5) (113.5)
----------------- --------- -------- ---------- -------- ------- ----------- -------- ------------
At 1 January 2019 88.7 689.4 6.8 (26.1) (88.0) 6.6 (378.5) 298.9
================= ========= ======== ========== ======== ======= =========== ======== ============
Attributable to equity holders of the parent
--------------------------------------------------------------------------------------
Hedging
Called-up Share Capital Own and
share premium redemption Merger shares translation Retained
capital account reserve reserve held reserve earnings Total equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ========= ======= ========== ======== ======= =========== ======== ============
At 27 December 2016 88.7 689.3 6.8 (26.1) (98.5) (63.6) 628.9 1,225.5
===================== ========= ======= ========== ======== ======= =========== ======== ============
Loss for the
financial period - - - - - - (83.2) (83.2)
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Actuarial
remeasurements in
defined benefit
pension scheme - - - - - - 33.0 33.0
===================== ========= ======= ========== ======== ======= =========== ======== ============
Tax on remeasurments
in defined benefit
pension scheme - - - - - - (5.6) (5.6)
===================== ========= ======= ========== ======== ======= =========== ======== ============
Exchange difference
on translation of
foreign operations - - - - - (8.9) - (8.9)
===================== ========= ======= ========== ======== ======= =========== ======== ============
Changes in fair value
of
available-for-sale
financial assets - - - - - - 4.0 4.0
===================== ========= ======= ========== ======== ======= =========== ======== ============
Total comprehensive
loss for the period - - - - - (8.9) (51.8) (60.7)
===================== ========= ======= ========== ======== ======= =========== ======== ============
Purchase and issue of
own shares - - - - (1.4) - (0.1) (1.5)
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Transfer of own
shares to recipients - - - - 2.9 - (1.5) 1.4
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Other shares issued
during the period - 0.1 - - - - - 0.1
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Credit recognised in
respect of share
remuneration - - - - - - 5.2 5.2
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Tax credit in respect
of share
remuneration - - - - - - 0.8 0.8
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
Dividends paid (note
6) - - - - - - (108.1) (108.1)
--------------------- --------- ------- ---------- -------- ------- ----------- -------- ------------
At 26 December 2017 88.7 689.4 6.8 (26.1) (97.0) (72.5) 473.4 1,062.7
===================== ========= ======= ========== ======== ======= =========== ======== ============
William Hill PLC
Consolidated Statement of Financial Position
as at 1 January 2019
1 January 26 December
2019 2017
Notes GBPm GBPm
============================================ ===== ========= ===========
Non-current assets
-------------------------------------------- ----- --------- -----------
Intangible assets 15 686.1 1,577.3
-------------------------------------------- ----- --------- -----------
Property, plant and equipment 16 149.8 190.5
-------------------------------------------- ----- --------- -----------
Interests in associates 23.3 28.6
-------------------------------------------- ----- --------- -----------
Investments 8 21.4 9.4
-------------------------------------------- ----- --------- -----------
Deferred tax assets 11.9 12.7
-------------------------------------------- ----- --------- -----------
Retirement benefit asset 40.5 58.7
-------------------------------------------- ----- --------- -----------
Loans receivable 4.8 49.4
-------------------------------------------- ----- --------- -----------
Derivative financial instruments - 42.0
============================================ ===== ========= ===========
937.8 1,968.6
============================================ ===== ========= ===========
Current assets
-------------------------------------------- ----- --------- -----------
Trade and other receivables 61.7 72.9
-------------------------------------------- ----- --------- -----------
Investment property held for sale 1.7 3.5
-------------------------------------------- ----- --------- -----------
Cash and cash equivalents 510.5 317.0
-------------------------------------------- ----- --------- -----------
573.9 393.4
============================================ ===== ========= ===========
Total assets 1,511.7 2,362.0
============================================ ===== ========= ===========
Current liabilities
-------------------------------------------- ----- --------- -----------
Trade and other payables (387.3) (444.4)
-------------------------------------------- ----- --------- -----------
Corporation tax liabilities (18.8) (8.3)
-------------------------------------------- ----- --------- -----------
Derivative financial instruments (14.9) (14.1)
-------------------------------------------- ----- --------- -----------
Provisions (8.3) (11.1)
============================================ ===== ========= ===========
(429.3) (477.9)
============================================ ===== ========= ===========
Non-current liabilities
-------------------------------------------- ----- --------- -----------
Borrowings 9 (719.7) (720.5)
-------------------------------------------- ----- --------- -----------
Deferred tax liabilities (63.8) (100.9)
-------------------------------------------- ----- --------- -----------
(783.5) (821.4)
============================================ ===== ========= ===========
Total liabilities (1,212.8) (1,299.3)
============================================ ===== ========= ===========
Net assets 298.9 1,062.7
============================================ ===== ========= ===========
Equity
-------------------------------------------- ----- --------- -----------
Called-up share capital 88.7 88.7
-------------------------------------------- ----- --------- -----------
Share premium account 689.4 689.4
-------------------------------------------- ----- --------- -----------
Capital redemption reserve 6.8 6.8
-------------------------------------------- ----- --------- -----------
Merger reserve (26.1) (26.1)
-------------------------------------------- ----- --------- -----------
Own shares held (88.0) (97.0)
-------------------------------------------- ----- --------- -----------
Hedging and translation reserves 6.6 (72.5)
-------------------------------------------- ----- --------- -----------
Retained earnings (378.5) 473.4
============================================ ===== ========= ===========
Total equity attributable to equity holders
of the parent 298.9 1,062.7
============================================ ===== ========= ===========
William Hill PLC
Consolidated Cash Flow Statement
for the 53 weeks ended 1 January 2019
53 weeks 52 weeks
ended ended
1 January 26 December
2019 2017
Notes GBPm GBPm
====================================================== ===== ========== ============
Net cash from operating activities - continuing
operations 11 197.1 272.6
====================================================== ===== ========== ============
Net cash from operating activities - discontinued
operations 13 1.0 17.5
====================================================== ===== ========== ============
Investing activities
------------------------------------------------------ ----- ---------- ------------
Dividends from associates 8.2 3.3
------------------------------------------------------ ----- ---------- ------------
Interest received on cash and cash equivalents 2.4 0.9
------------------------------------------------------ ----- ---------- ------------
Proceeds on disposal of property, plant and
equipment 0.7 0.6
------------------------------------------------------ ----- ---------- ------------
Proceeds on disposal of investment property 1.7 -
------------------------------------------------------ ----- ---------- ------------
Amounts drawn down on loan facility made available
to NeoGames (4.7) -
------------------------------------------------------ ----- ---------- ------------
Net proceeds on sale of Australia operations 13 141.6 -
------------------------------------------------------ ----- ---------- ------------
Net proceeds from sale of NYX investments 8 100.7 1.0
------------------------------------------------------ ----- ---------- ------------
Investment in Mr Green 8 (19.2) -
------------------------------------------------------ ----- ---------- ------------
Investment in Featurespace 8 (1.3) -
------------------------------------------------------ ----- ---------- ------------
Net proceeds on disposal of Stadia operations - 8.8
------------------------------------------------------ ----- ---------- ------------
Purchases of property, plant and equipment (41.9) (14.2)
------------------------------------------------------ ----- ---------- ------------
Expenditure on intangible assets (75.4) (69.9)
------------------------------------------------------ ----- ---------- ------------
Net cash from/(used in) investing activities
- continuing operations 112.8 (69.5)
====================================================== ===== ========== ============
Net cash used in investing activities - discontinued
operations 13 (2.9) (8.8)
====================================================== ===== ========== ============
Financing activities
------------------------------------------------------ ----- ---------- ------------
Proceeds on issue of shares under share schemes 1.2 0.1
------------------------------------------------------ ----- ---------- ------------
Debt facility issue costs (3.1) -
------------------------------------------------------ ----- ---------- ------------
Purchase of own shares - (0.1)
------------------------------------------------------ ----- ---------- ------------
Dividends paid 6 (113.5) (108.1)
------------------------------------------------------ ----- ---------- ------------
Net cash used in financing activities - continuing
operations (115.4) (108.1)
====================================================== ===== ========== ============
Net cash used in financing activities - discontinued
operations 13 - -
====================================================== ===== ========== ============
Net increase in cash and cash equivalents in
the period 192.6 103.7
------------------------------------------------------ ----- ---------- ------------
Changes in foreign exchange rates 0.9 (2.2)
------------------------------------------------------ ----- ---------- ------------
Cash and cash equivalents at start of period 317.0 215.5
====================================================== ===== ========== ============
Cash and cash equivalents at end of period 510.5 317.0
====================================================== ===== ========== ============
1. BASIS OF ACCOUNTING
General information
William Hill PLC is a company incorporated in the United Kingdom
under the Companies Act 2006. The address of the registered office
is 1 Bedford Avenue, London WC1B 3AU. The nature of the Group's
operations and its principal activities are set out in the
Strategic Report within the Annual Report and note 2.
These financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Group operates. Foreign operations are included in
accordance with our accounting policies.
Basis of accounting
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as issued
by the IASB. The Group financial statements have also been prepared
in accordance with IFRSs adopted by the European Union.
The Group financial statements have been prepared on the
historical cost basis, except where certain assets or liabilities
are held at amortised cost or at fair value as described in our
accounting policies. The accounting policies adopted are set out in
the Annual Report.
The financial statements set out in this preliminary
announcement do not constitute the Company's statutory accounts for
the 53 week period ended 1 January 2019 or 52 week period ended 26
December 2017, but are derived from those accounts. The auditor has
reported on those accounts and their reports were unqualified, did
not draw attention to any matters by way of emphasis and did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. The Company has published full financial
statements that comply with IFRS on 1 March 2019.
Adoption of new and revised standards
In preparing the Group financial statements for the current
period, the Group has adopted a number of new IFRSs, amendments to
IFRSs and IFRS Interpretations Committee (IFRIC) interpretations,
none of which has had a significant effect on the results or net
assets of the Group. A list is provided in an appendix to the
Annual Report.
Standards in issue but not YET effective
A complete list of standards that are in issue but not yet
effective is included with our full accounting policies in an
appendix to the Annual Report.
IFRS 9 'Financial Instruments'
IFRS 9 'Financial Instruments' replaces IAS 39 and is effective
for accounting periods beginning on or after 1 January 2018. This
will be adopted by the Group in the 52-week reporting period ending
31 December 2019. The Group has performed an impact assessment of
the key aspects of IFRS 9 which mainly relates to the
classification and measurement of financial instruments, and has
concluded these will not have a significant impact to the Group
financial statements. This is further explained in the following
summary of the key changes from IAS 39.
Classification and measurement
New classification and measurement criteria require financial
instruments to be classified into one of the three categories being
amortised cost, fair value through other comprehensive income or
fair value through profit or loss. The Group expects there to be
nil impact based on our current profile of financial
instruments.
Impairment
IFRS 9 requires the Group to use an expected credit loss model
for its financial assets measured at amortised cost, either on a
12-month or a lifetime basis. The Group financial assets at
amortised cost currently consist of cash and cash equivalents,
trade receivables and loans receivable. None of these financial
assets has a significant financing component and the Group expects
to apply the simplified approach and record lifetime expected
losses on all trade receivables and loans receivable measured at
amortised cost. The changes related to impairment of financial
assets are not expected to impact the Group.
Hedge accounting
The general hedge accounting mechanism of IAS 39 has been
retained, however greater flexibility has been introduced over the
instruments eligible for hedge accounting and effectiveness
testing. The changes relating to hedge accounting are not expected
to impact the Group.
IFRS 15 'Revenue from contracts with customers'
IFRS 15 'Revenue from contracts with customers' establishes a
single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers, with an effective
date for accounting periods beginning on or after 1 January 2018.
This will be adopted by the Group in the 52-week reporting period
ending 31 December 2019. Under IFRS 15, an entity recognises
revenue when a performance obligation is satisfied, i.e. when
'control' of the goods or services underlying the particular
performance obligation is transferred to the customer.
The Group's core revenues of sports betting and gaming are not
within the scope of IFRS 15. This is due to these revenues being
treated as derivatives under IFRS 9: 'Financial Instruments' and
thus falling out the scope of IFRS 15. The Group's other income
mostly represents service provider revenue, previously referred to
as bookmaking services income, rents receivable on properties let
by the Group, bookmaking software licensing income and income from
software development. Rents receivable is also not within the scope
of IFRS 15.
Assessment of this new standard suggests that the performance
obligations of service provider revenue, software licensing income
and income from software development are satisfied over time and
that the method currently used to measure the progress towards
complete satisfaction of these performance obligations will
continue to be appropriate under IFRS 15.
The Group expects there to be a nil impact on the financial
statements on adoption of IFRS 15.
IFRS 16 'Leases'
IFRS 16 'Leases' will replace IAS 17 in its entirety and is
effective for accounting periods beginning on or after 1 January
2019. This will be adopted by the Group in the 52-week reporting
period ending 31 December 2019. The distinction between operating
leases and finance leases for lessees is removed and will result in
most leases being recognised on the Statement of Financial Position
as a right-of-use asset and a lease liability. For leases
previously classified as operating leases, the lease cost will
change from an in-period operating lease expense to recognition of
depreciation of the right-of-use asset and interest expense on the
lease liability. The Group's currently classified operating leases
include rentals payable by the Group for certain of its LBOs and
office properties and amounts payable for the use of certain office
and computer equipment.
The Group will apply IFRS 16 using the modified retrospective
approach. A lease liability will be recognised equal to the present
value of the remaining lease payments discounted using an
incremental borrowing rate. A right-of-use asset will be recognised
equal to the lease liability adjusted for prepaid and accrual lease
payments. The Group intends to apply the below practical expedients
permitted under the modified retrospective approach;
- exclude leases for measurement and recognition for leases
where the term ends within 12 months from the date of initial
application and account for these leases as short-term leases;
- apply a single discount rate to a portfolio of leases with similar characteristics;
- adjust the right-of-use asset on transition by any previously
recognised onerous lease provisions;
- use hindsight to determine the lease term if the contract
contains options to extend or terminate; and
- exclude initial direct lease costs in the measurement of the right-of-use asset.
The estimated impact of IFRS 16 on the financial statements for
the opening balance at 2 January 2019 are:
- opening lease liabilities not less than GBP170m; and
- opening right-of-use assets not less than of GBP175m.
The estimated impact of IFRS 16 on the financial statements for
the period ending 31 December 2019 are:
- increase in depreciation of not less than GBP38m;
- increase in interest expense of not less than GBP3m; and
- decrease in operating lease expense of not less than GBP40m.
As a result of the Triennial Review, where the maximum stake on
B2 gaming products will be reduced from GBP100 to GBP2 effective 1
April 2019, it is anticipated that up to 900 shops may be closed.
The Group is unable to reliably estimate the specific shops which
will close. Due to this uncertainty, the lease term of shop leases
transitioning to IFRS 16 has been determined as the next available
break date after H1 2019 as the Group is not 'reasonably certain'
that the lease break option will not be exercised.
The impact of shop closures has not been included in the
estimated impact assessment of IFRS 16. The lease portfolio may
change to such an extent that the actual impact of IFRS 16 may be
materially different to the amounts disclosed.
Going concern
A full description of the Group's business activities, financial
position, cash flows, liquidity position, committed facilities and
borrowing position, together with the factors likely to affect its
future development and performance, is set out in the Strategic
Report, including the Financial Review, and in notes 23 and 24 to
the financial statements in the Annual Report.
The Group meets its day-to-day working capital requirements from
the positive cash flows generated by its trading activities and its
available cash resources. These are supplemented when required by
additional drawings under the Group's revolving credit bank loan
facilities, which are committed until October 2023. Whilst there
are a number of risks to the Group's trading performance, as
summarised in the 'Managing our risks' section within the Annual
Report, the Group is confident of its ability to continue to access
sources of funding in the medium term. The Group's strategic
forecasts, based on reasonable assumptions, indicate that the Group
should be able to operate within the level of its currently
available and expected future facilities and its banking covenants
for the period of the strategic forecast.
After making enquiries and after consideration of the Group's
existing operations, cash flow forecasts and assessment of
business, regulatory and financing risks, the potential risks and
impact of Brexit, the directors have a reasonable expectation that
the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the Annual
Report and Accounts.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in the key accounting policies above and in the Statement
of Group Accounting Policies included on pages 168 to 173 in the
financial statements within the Annual Report, the directors are
required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical accounting judgements
The directors assess there are no critical accounting judgements
that have a significant effect on the amounts recognised in the
financial statements.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial period are discussed
below.
Impairment of goodwill and intangible assets with indefinite
lives
Determining whether goodwill and intangible assets with
indefinite lives are impaired requires an estimation of the value
in use of the cash-generating units to which the goodwill or
intangible assets have been allocated. The value in use calculation
requires the directors to estimate the future cash flows expected
to arise from the cash-generating unit and a suitable discount rate
in order to calculate present value. Note 14 provides information
on the assumptions used in these financial statements, as well as
the degree of sensitivity to changes in assumptions.
The results of the Triennial Review of stakes and prizes are now
known with the maximum stakes on B2 gaming products to be reduced
from GBP100 to GBP2, effective from April 2019. This outcome has
led to a significant decline in expected future cash flows in the
Retail segment, leading to an impairment of GBP882.8m recognised in
the period (note 3). This was based on our current estimate of a
reduction in the Retail segment's annualised adjusted operating
profit (including mitigation measures) of cGBP70-GBP100m.
A regulatory change of this nature is unprecedented and its
impact on customer behaviour will not be known until some years
after implementation. As the implementation takes effect and
customer behaviour becomes known, this could result in further
impairments (or reversals of the existing impairment charge) of
assets in the Retail segment. Refer to note 14 for an analysis of
the sensitivity of the impairment to a range of reasonably possible
changes in assumptions.
Retirement benefit costs
The determination of the pension cost and defined benefit
obligation of the Group's defined benefit pension scheme depends on
the selection of certain assumptions which include discount rate,
inflation rate and mortality assumptions. Differences arising from
actual experience or future changes in assumptions will be
reflected in subsequent periods. Note 33 to the financial
statements of the Annual Report provides information on the
assumptions used in these financial statements, including a
sensitivity analysis of the principal assumptions used to measure
scheme liabilities.
2. Segment information
The Board has reviewed and confirmed the Group's reportable
segments in line with the guidance provided by IFRS 8 'Operating
Segments'. The segments disclosed below are aligned with the
reports that the Group's Chief Executive Officer and Chief
Financial Officer as chief operating decision makers reviews to
make strategic decisions.
The Retail segment comprises all activity undertaken in LBOs
including gaming machines. The Online segment comprises all online
and telephone activity, including sports betting, casino, poker and
other gaming products along with telephone betting services. The US
Existing, previously referred to as the US, segment comprises all
activity undertaken in the existing US business before the Supreme
Court overturned PASPA in May 2018. The US Expansion segment
includes all operations in new US locations where gambling is being
regulated following the Supreme Court's overturning of PASPA. This
is a new segment in the current reporting period. Given this
relates to new business in the period, there is no requirement to
report prior period information for this segment. The Other segment
comprises on-course betting pitches.
There are no inter-segmental sales within the Group.
The segmental information shown in respect of profit and loss
items in the current and previous reporting period does not include
the results of the Australian operations, which were disposed of on
23 April 2018. Details of the Australian operations performance to
23 April 2018 are shown in note 13. The segmental assets and
liabilities for the current period do not include the Australian
operations whereas these are included in the prior period
comparative.
Segment performance is shown on an adjusted basis, with a
reconciliation from adjusted operating profit to statutory results
for clarity. Information for the 53 weeks ended 1 January 2019 is
as follows:
Retail Online US Existing(1) US Expansion(1) Other Corporate Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ======= ======= ============== =============== ===== ========= =======
Direct revenue 895.2 634.4 78.2 10.4 0.2 - 1,618.4
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Service provider
revenue(2) - - 1.5 1.4 - - 2.9
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Revenue 895.2 634.4 79.7 11.8 0.2 - 1,621.3
----------------------- ------- ------- -------------- --------------- ----- --------- -------
GPT, duty, levies
and other costs
of sales (226.6) (154.1) (7.4) (1.6) - - (389.7)
======================= ======= ======= ============== =============== ===== ========= =======
Gross profit 668.6 480.3 72.3 10.2 0.2 - 1,231.6
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Depreciation (22.0) (0.6) (1.4) (0.3) - (0.2) (24.5)
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Amortisation (10.2) (38.4) (0.3) (0.2) - - (49.1)
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Other administrative
expenses (486.1) (311.1) (38.0) (42.9) 0.1 (49.3) (927.3)
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Share of results
of associates - - - - - 2.9 2.9
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Adjusted operating
profit/(loss)(3) 150.3 130.2 32.6 (33.2) 0.3 (46.6) 233.6
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Operating exceptional
items and adjustments (886.0) 3.2 (3.6) - - (35.1) (921.5)
======================= ======= ======= ============== =============== ===== ========= =======
(Loss)/profit before
interest and tax (735.7) 133.4 29.0 (33.2) 0.3 (81.7) (687.9)
======================= ======= ======= ============== =============== ===== ========= =======
Investment income 4.7 4.7
----------------------- ------- ------- -------------- --------------- ----- --------- -------
Finance costs (38.7) (38.7)
======================= ======= ======= ============== =============== ===== ========= =======
Loss before tax (721.9)
======================= ======= ======= ============== =============== ===== ========= =======
1 Both the US Existing and US Expansion segments operate within
the William Hill US business but are currently reviewed separately
by the Chief Executive Officer and the Chief Financial Officer,
being the chief operating decision makers.
2 The Group previously recognised US Existing segment service
provider revenue, previously referred to as bookmaking services
income, through other operating income. It is the Group's view that
in order not to distort the other operating income figure, income
earned through service provider revenue shall be recognised as
revenue. Prior period comparatives have been reclassified.
3 Adjusted operating profit is defined as profit before interest
and tax, excluding exceptional items and other defined adjustments.
Further detail on adjusted measures is provided in note 3.
Retail Online US Existing US Expansion Other Corporate Group
At 1 January 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ====== ====== =========== ============ ===== ========= =======
Statement of Financial
Position information
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Total segment assets 819.7 432.3 86.5 23.2 - 138.1 1,499.8
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Total segment liabilities 72.2 236.5 40.4 17.0 - 764.1 1,130.2
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Included within
total assets:
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Goodwill - 193.2 23.5 - - - 216.7
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Other intangibles
with indefinite
lives 332.8 - - - - - 332.8
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Interests in associates - - - - - 23.3 23.3
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Capital additions 24.4 53.6 20.4 9.1 - 2.2 109.7
============================ ====== ====== =========== ============ ===== ========= =======
Net assets/(liabilities) have been allocated by segment based on
the information reviewed by the Group's Chief Executive Officer and
Chief Financial Officer. Corporate net assets include net
borrowings and the net defined benefit pension asset as well as any
assets and liabilities that cannot be allocated to a particular
channel other than on an arbitrary basis. The above analysis
excludes corporation tax and deferred tax-related balances.
Capital additions in the above table are stated on an accruals
basis.
Segment information for the 52 weeks ended 26 December 2017:
Retail Online US Existing Other(1) Corporate Group
GBPm GBPm GBPm GBPm GBPm GBPm
======================== === ======= ======= =========== ======== ========= =======
Direct revenue 913.1 616.9 56.5 4.9 - 1,591.4
------------------------ --- ------- ------- ----------- -------- --------- -------
Service provider
revenue(2) - - 1.4 - - 1.4
------------------------ --- ------- ------- ----------- -------- --------- -------
Revenue 913.1 616.9 57.9 4.9 - 1,592.8
------------------------ --- ------- ------- ----------- -------- --------- -------
GPT, duty, levies
and other costs
of sales (233.6) (144.6) (4.9) (0.4) - (383.5)
------------------------ --- ------- ------- ----------- -------- --------- -------
Gross profit 679.5 472.3 53.0 4.5 - 1,209.3
------------------------ --- ------- ------- ----------- -------- --------- -------
Depreciation (23.9) (0.9) (1.4) (0.1) (2.6) (28.9)
------------------------ --- ------- ------- ----------- -------- --------- -------
Amortisation (9.1) (34.1) (0.2) - - (43.4)
------------------------ --- ------- ------- ----------- -------- --------- -------
Other administrative
expenses (485.6) (304.8) (33.7) (4.6) (35.5) (864.2)
------------------------ --- ------- ------- ----------- -------- --------- -------
Share of results
of associates - - - - 1.0 1.0
------------------------ --- ------- ------- ----------- -------- --------- -------
Adjusted operating
profit/(loss)(3) 160.9 132.5 17.7 (0.2) (37.1) 273.8
------------------------ --- ------- ------- ----------- -------- --------- -------
Operating exceptional
items and adjustments (7.3) (24.3) (3.1) (2.5) (59.2) (96.4)
======================== === ======= ======= =========== ======== ========= =======
Profit/(loss) before
interest and tax 153.6 108.2 14.6 (2.7) (96.3) 177.4
======================== === ======= ======= =========== ======== ========= =======
Investment income 6.9 6.9
------------------------ --- ------- ------- ----------- -------- --------- -------
Finance costs (37.8) (37.8)
======================== === ======= ======= =========== ======== ========= =======
Profit before tax 146.5
======================== === ======= ======= =========== ======== ========= =======
1 The Other segment includes the results of the greyhound stadia
operations up to disposal on 31 July 2017.
2 The Group previously recognised US Existing segment income
from service provider revenue, previously referred to as bookmaking
services income, through other operating income. It is the Group's
view that in order not to distort the other operating income
figure, income earned through service provider revenue shall be
recognised as revenue. Prior period comparatives have been
reclassified.
3 Adjusted operating profit is defined as profit before interest
and tax, excluding exceptional items and other defined adjustments.
Further detail on adjusted measures is provided in note 3.
As at 26 December Retail Online US Existing Australia Other Corporate Group
2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ======= ======= =========== ========= ===== ========= =========
Statement of Financial
Position information
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Total segment assets 1,406.8 419.9 64.6 132.8 - 325.2 2,349.3
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Total segment liabilities (96.1) (226.9) (24.6) (31.4) - (811.1) (1,190.1)
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Included within
total assets:
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Goodwill 680.7 193.3 22.4 62.7 - - 959.1
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Other intangibles
with indefinite
lives 484.3 - - - - - 484.3
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Interests in associates - - - - - 28.6 28.6
--------------------------- ------- ------- ----------- --------- ----- --------- ---------
Capital additions 31.6 44.8 1.9 9.3 - 9.9 97.5
=========================== ======= ======= =========== ========= ===== ========= =========
Revenues and non-current assets by geographical area are as
follows:
Non-current
Revenues assets
========== ============ =======================
53 weeks 52 weeks
ended ended
1 January 26 December 1January 26 December
2019 2017 2019 2017
GBPm GBPm GBPm GBPm
================== ========== ============ ========= ============
United Kingdom 1,379.5 1,393.0 598.8 1,572.2
------------------ ---------- ------------ --------- ------------
Rest of the World 241.8 199.8 339.0 396.4
================== ========== ============ ========= ============
1,621.3 1,592.8 937.8 1,968.6
================== ========== ============ ========= ============
Revenue information is based on the location of the customer.
Non-current asset information is based on physical location (for
property, plant and equipment) or primary operating location of the
company using the asset (for all other assets).
3. Exceptional items AND ADJUSTMENTS
Adjusted results
The Group reports adjusted results, both internally and
externally, that differ from statutory results prepared in
accordance with IFRS.
These adjusted results, which include our KPIs of adjusted
operating profit and adjusted EPS, are considered by the directors
to be a useful reflection of the underlying performance of the
Group and its businesses, since they exclude transactions which
impair visibility of the underlying activity in each segment. More
specifically, the directors judge that visibility can be impaired
in one or both of the following instances:
- a transaction is of such a material or infrequent nature that
it would obscure an understanding of underlying outcomes and trends
in revenues, costs or other components of performance (for example,
a significant impairment charge); or
- a transaction that results from a corporate activity that has
neither a close relationship to our businesses' operations nor any
associated operational cash flows (for example, the amortisation of
intangibles recognised on acquisitions).
Adjusted results are used as the primary measures of business
performance within the Group and align with the results shown in
management accounts, with the key uses being:
- management and Board reviews of performance against
expectations and over time, including assessments of segmental
performance (see note 2 and the Strategic Report within the Annual
Report);
- Remuneration Committee assessments of targets and performance
for management remuneration purposes (see pages 87 to 105 to the
Annual Report);
- in support of business decisions by the Board and by
management, encompassing both strategic and operational levels of
decision-making; and
- assessments of loan covenant compliance, which refer to adjusted results.
The Group's policies on adjusted measures have been consistently
applied over time, but they are not defined by IFRS and, therefore,
may differ from adjusted measures as used by other companies.
The Consolidated Income Statement presents adjusted results
alongside statutory measures, with the reconciling items being
itemised and described below. We discriminate between two types of
reconciling items; exceptional items and defined adjustments.
Exceptional items
Exceptional items are those items the directors consider to be
one-off or material in nature that should be brought to the
reader's attention in understanding the Group's financial
performance.
Adjustments
Adjustments are recurring items that are excluded from internal
measures of underlying performance and which are not considered by
the directors to be exceptional. This relates to the amortisation
of specific intangible assets recognised in acquisitions. This
previously also related to the recognition of interest income on
redeemable convertible preference shares and fair value movements
relating to redeemable convertible preference shares and warrants
held in NYX Limited, an available for sale financial asset which
was sold in January 2018 (see notes 16 and 25 to the financial
statements in the 2017 Annual Report for more information). These
items are defined as adjustments as the directors believe they
would impair the visibility of the underlying activities across
each segment as they are not closely related to the businesses' or
any associated operational cash flows. These items are recurring,
with the amortisation of specific intangible assets recognised in
acquisitions recognised over their useful life.
Exceptional items and adjustments as follows:
53 weeks 52 weeks
ended ended
Exceptional 1 January Exceptional 26 December
items Adjustments 2019 items Adjustments 2017
GBPm GBPm GBPm GBPm GBPm GBPm
================================== =========== =========== ========== =========== =========== ============
Operating
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Cost of sales
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Indirect taxation 4.1 - 4.1 (17.1) - (17.1)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Other operating expenses
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Impairment of Retail segment (882.8) - (882.8) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Transformation programme
restructuring costs (31.2) - (31.2) (54.4) - (54.4)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Triennial mitigation restructuring
costs (4.6) - (4.6) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Disposal of Australia operations (0.6) - (0.6) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Guaranteed minimum pension
equalisation (1.4) - (1.4) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Legal fees (0.6) - (0.6) (1.3) - (1.3)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Disposal of investments
in NYX (0.4) - (0.4) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Portfolio shop closures 0.3 - 0.3 (7.3) - (7.3)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Corporate transaction costs (1.8) - (1.8) - - -
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Onerous contract(1) - - - (10.0) - (10.0)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Compliance fines(2) - - - (6.2) - (6.2)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Disposal of Stadia operations(3) - - - (2.5) - (2.5)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Fair value movements on
derivative financial instruments - - - - 7.2 7.2
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Amortisation of acquired
intangibles - (2.5) (2.5) - (4.8) (4.8)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
(919.0) (2.5) (921.5) (98.8) 2.4 (96.4)
================================== =========== =========== ========== =========== =========== ============
Non-operating
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Investment income on redeemable
convertible preference shares - - - - 5.5 5.5
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Costs in respect of refinancing (0.6) - (0.6) - - -
================================== =========== =========== ========== =========== =========== ============
(0.6) - (0.6) - 5.5 5.5
================================== =========== =========== ========== =========== =========== ============
Total exceptional items
and adjustments before tax (919.6) (2.5) (922.1) 98.8 7.9 (90.9)
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Tax on exceptional items
and adjustments 37.6 0.3 37.9 8.3 1.1 9.4
---------------------------------- ----------- ----------- ---------- ----------- ----------- ------------
Exceptional tax items (8.0) - (8.0) - - -
================================== =========== =========== ========== =========== =========== ============
Total exceptional items
and adjustments (890.0) (2.2) (892.2) (90.5) 9.0 (81.5)
================================== =========== =========== ========== =========== =========== ============
1 In 2017, the Group recognised the costs of a specific contract
where a change in strategy due to the transformation programme
meant that the contract was considered onerous with no economic
benefits expected to be received. This was presented as exceptional
given it is material and related to a specific one-off
contract.
2 In 2017, the Group entered into a regulatory settlement with
the UK Gambling Commission and, as a result, the Group agreed to
pay a total package of GBP6.2m, including a sum of GBP1.2m to be
returned to affected parties. The amount was accrued at 26 December
2017 with the settlement agreed in February 2018. This was
presented as exceptional given the settlement is a one-off material
transaction.
3 The Group sold its Greyhound Stadia operations to Arena Racing
Company on 31 July 2017. The Group recognised a loss on disposal of
GBP2.5m, including costs to sell of GBP0.7m. This was classified as
exceptional as it is a one-off transaction and is material in the
context of the Other segment.
Indirect taxation
The Group previously accrued for certain indirect taxes that it
expected to pay following clarifications on tax interpretations in
certain jurisdictions. The retrospective element was presented as
exceptional within Costs of sales in light of the material scale
and one-off nature of the charge.
In 2018, the Group has reached tax settlements within certain
jurisdictions which led to a release of previously accrued
balances. The release was treated as exceptional consistently to
the original expense.
Impairment of Retail segment
As a result of the conclusion of the Triennial Review and their
announcement of the maximum stakes on B2 gaming products reducing
to GBP2, management recognised an impairment of the assets of the
Retail segment. Details of the impairment are provided in note 14.
This was presented as an exceptional item due to its material and
one-off nature.
Transformation programme restructuring costs
This is a continuation of the substantial corporate
restructurings the Group commenced in 2016, encompassing cost
optimisation and business model initiatives. This was previously
referred to as 'Restructuring costs'. This is part of a Group-wide
programme, which is expected to complete in 2019. This programme,
for which costs include fees for external advisers, provisions for
onerous property leases and the cost of staff redundancies, is
substantial in scope and impact. These costs do not form part of
recurring operational or management activities that the directors
would consider part of our underlying performance. For these
reasons, the directors judge the directly attributable cost to be
exceptional. A reconciliation of the costs incurred to date and
expected for the remainder of the programme is provided in the
Financial Review.
Triennial Review mitigation restructuring costs
In May 2018, the results of the triennial review were announced
with a reduction in the maximum stake on B2 gaming products to
GBP2. This is expected to lead to a reduction in the Group's annual
annualised adjusted operating profit of cGBP70m-GBP100m, with up to
900 shop closures.
In November 2018, the Government announced that the GBP2 maximum
stake on gaming products would be implemented in April 2019 with an
increase in Remote Gaming Duty from 15% to 21%. The significant
impact of these regulatory changes has led to a Group-wide
restructuring programme expected to last until 2020. This includes
costs such as shop closures, staff redundancies and fees for
external advisers. The cash cost of the total programme up to 2020
is expected to total cGBP60-75m, with the cost in the Retail
segment expected to total cGBP40-60m and the cost in remaining
segments to be up to cGBP15m.
The directors assess these costs as exceptional as they are both
material and not considered part of recurring operational or
management activities that are part of the Group's underlying
performance.
Disposal of Australia operations
On 23 April 2018, the Group sold its Australian operations to
CrownBet Holdings Pty Ltd. The resulting loss on disposal of
GBP0.6m, including costs to sell of GBP6.2m, has been classified as
exceptional due to its one-off nature. Details of the disposal are
provided in note 13.
Guaranteed minimum pension equalisation
Following the judgement in the Lloyds case on 26 October 2018,
the need to equalise for the effect of differences in guaranteed
minimum pensions (GMPs) between males and females was made more
certain and consequently an allowance for the effect of GMP
equalisation has been made in the current financial period. The
Scheme's Actuary has estimated that the potential GMP equalisation
cost as at 1 January 2019 is GBP1.4m. This is included within the
defined benefit obligation as at 1 January 2019 (see note 33 to the
financial statements in the Annual Report) and has been recognised
as a past service cost within exceptional items in the current
financial period.
Legal fees
These represent fees in respect of specific legal action
following the 2012 acquisition of businesses in Nevada, USA. These
were classified as exceptional given they are material in the
context of the US Existing segment and due to the potential for
damages and fees being awarded to the Group, which would be treated
as an exceptional gain due to their material scale and one-off
nature.
Disposal of investments in NYX
On 5 January 2018, the Group completed the disposal of its
investments in NYX. Accumulated fair value movements recognised in
other comprehensive income were reclassified to profit and loss on
disposal completion. This has been classified as an exceptional
item due to the one-off nature of the disposal with the previous
movements in this investment classified within adjustments (see
note 8).
Portfolio shop closures
During 2017, as part of the ongoing Group-wide transformation
programme, the Group performed a full strategic review of the shop
estate.
This review led to the closure of 25 shops with a provision made
for onerous leases and other costs of closure. This strategic
review was a one-off exercise leading to a material expense and,
therefore, the directors judged the cost to be exceptional. During
the period, the Group negotiated the early exit of certain leases,
resulting in a reversal of the provisions held in respect of those
leases.
Corporate transaction costs
During 2018, the Group incurred material costs relating to
corporate transactions. In early 2019, the acquisition of Mr Green
and the agreement with Eldorado both completed with certain fees
incurred in 2018 and further fees expected in 2019. These costs
were presented as exceptional since they will be material in size
over 2018 and 2019 and one-off in nature and would otherwise have
distorted an understanding of the Group's underlying cost base.
Costs in respect of refinancing
In September 2018, the Group entered into a GBP390m revolving
credit facility, replacing the existing revolving credit facility.
The remaining capitalised balance of finance fees on the terminated
facility, which were being expensed over the life of the replaced
facility, was expensed and recognised as an exceptional item given
the one-off nature of the charge.
Exceptional tax items
The exceptional tax item relates to a provision of GBP8.0m
(2017: GBPnil) in respect to potential additional tax payable
relating to a change, with retrospective effect, in specific non-UK
tax legislation.
4. Finance costS
53 weeks 52 weeks
ended ended
1 January 26 December
2019 2017
GBPm GBPm
====================================== ========== ============
Interest payable and similar charges:
-------------------------------------- ---------- ------------
Bank loans, bonds and overdrafts 36.4 36.0
-------------------------------------- ---------- ------------
Amortisation of finance costs(1) 1.7 1.8
-------------------------------------- ---------- ------------
38.1 37.8
====================================== ========== ============
1 The above does not include exceptional finance costs of
GBP0.6m as detailed in note 3.
5. Tax on (LOSS)/profit on ordinary activities for continuing
operations
The tax charge/(credit) comprises:
53 weeks 52 weeks
ended ended
1 January 26 December
2019 2017
GBPm GBPm
===================================================== ========== ============
Current tax:
----------------------------------------------------- ---------- ------------
UK corporation tax 21.8 16.3
----------------------------------------------------- ---------- ------------
Overseas tax 3.1 10.0
----------------------------------------------------- ---------- ------------
Adjustment in respect of prior periods 2.0 (19.7)
===================================================== ========== ============
Total current tax charge 26.9 6.6
===================================================== ========== ============
Deferred tax:
----------------------------------------------------- ---------- ------------
Origination and reversal of temporary differences (33.0) (3.4)
----------------------------------------------------- ---------- ------------
Adjustment in respect of prior periods 0.3 0.9
===================================================== ========== ============
Total deferred tax credit (32.7) (2.5)
===================================================== ========== ============
Total tax on (loss)/profit on ordinary activities (5.8) 4.1
===================================================== ========== ============
The effective tax rate in respect of adjusted results was 12.0%
(52 weeks ended 26 December 2017: 5.7%). The effective tax rate in
respect of statutory results was 0.8% (52 weeks ended 26 December
2017: 2.8%).
The difference between the total tax shown above and the amount
calculated by applying the standard rate of UK corporation tax to
the (loss)/profit before tax is as follows:
53 weeks ended 52 weeks ended
1 January 2019 26 December 2017
============================================ =====================================
Exceptional Exceptional
items Statutory items Statutory
Adjusted and adjustments total Adjusted and adjustments total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------
(Loss)/profit
before tax 200.2 (922.1) (721.9) 237.4 (90.9) 146.5
=================== =============== ================ ========= ======== ================ =========
Tax on Group
(loss)/profit at
standard UK
corporation tax
rate
of 19% (2017:
19.25%) 38.0 (175.2) (137.2) 45.7 (17.5) 28.2
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Different tax rates
in overseas
territories (20.1) 1.1 (19.0) (17.7) 2.9 (14.8)
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Accrual of
liabilities for
uncertain
tax positions 11.2 - 11.2 3.2 - 3.2
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Impact of future
changes in tax
rate 0.3 3.8 4.1 (0.3) - (0.3)
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Tax on share of
results of
associates (0.5) - (0.5) (0.1) - (0.1)
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Adjustment in
respect of prior
periods (5.7) 8.0 2.3 (18.8) - (18.8)
------------------- --------------- ---------------- --------- -------- ---------------- ---------
Non-deductible
expenditure 0.9 132.4 133.3 1.5 5.2 6.7
=================== =============== ================ ========= ======== ================ =========
Total tax
(credit)/charge 24.1 (29.9) (5.8) 13.5 (9.4) 4.1
=================== =============== ================ ========= ======== ================ =========
The benefit for tax rates in overseas territories reflects the
lower effective tax rate on profits earned in Gibraltar. The tax
credit in respect of prior periods reflects the routine closure of
prior period tax returns with tax authorities and the release of
provisions previously held for uncertain tax positions of GBP4.4m.
The adjusted tax charge arising in respect to uncertain tax
positions includes an amount of GBP8.0m (2017: GBPnil) in respect
to the unwinding of the intra-group funding on the disposal of the
Australian operations. The exceptional tax charge arising in
respect of non-deductible expenditure relates to the impairment of
the retail goodwill and tangible fixed assets not qualifying for
capital allowances. The exceptional tax item in respect of prior
periods of GBP8.0m (2017: GBPnil) is explained within the
exceptional tax items in note 3.
The Group's Effective Tax Rate for 2019 is expected to be
c12%.
6. Dividends proposed and paid
53 weeks 52 weeks 53 weeks 52 weeks
ended ended ended ended
1 January 26 December 1 January 26 December
2019 2017 2019 2017
Per share Per share GBPm GBPm
====================================== ========== ============ ========== ============
Equity shares:
-------------------------------------- ---------- ------------ ---------- ------------
current period interim dividend paid 4.3p 4.3p 36.7 35.6
-------------------------------------- ---------- ------------ ---------- ------------
prior period final dividend paid 8.9p 8.4p 76.8 71.6
====================================== ========== ============ ========== ============
13.2p 12.7p 113.5 108.1
====================================== ========== ============ ========== ============
Proposed final dividend 7.7p 8.9p 66.6 76.8
====================================== ========== ============ ========== ============
The proposed final dividend of 7.7p will, subject to shareholder
approval, be paid on 6 June 2019 to all shareholders on the
register on 26 April 2019. In line with the requirements of IAS 10
- 'Events after the Reporting Period', this dividend has not been
recognised within these results.
The Group estimates that approximately 861 million shares will
qualify for the final dividend.
Under an agreement signed in November 2002, the William Hill
Holdings 2001 Employee Benefit Trust agreed to waive all dividends.
Shares held in treasury also do not qualify for dividends. Details
of shares held by the William Hill Holdings 2001 Employee Benefit
Trust and held in treasury are given in note 29 to the financial
statements in the Annual Report.
7. (LOSS)/Earnings per share
The (loss)/earnings per share figures for the respective periods
are as follows:
53 weeks ended 1 January 52 weeks ended 26
2019 December 2017
============================= =============================
Potentially Potentially
dilutive dilutive
share share
Basic options Diluted Basic options Diluted
========================== ======= =========== ======= ======= =========== =======
Statutory (loss)/profit
(GBPm)
-------------------------- ------- ----------- ------- ------- ----------- -------
Continuing operations (716.1) - (716.1) 142.4 - 142.4
-------------------------- ------- ----------- ------- ------- ----------- -------
Discontinued operations 3.8 - 3.8 (225.6) - (225.6)
========================== ======= =========== ======= ======= =========== =======
Total (712.3) - (712.3) (83.2) - (83.2)
Weighted average number
of shares (million) 857.0 7.3 864.3 856.9 4.8 861.7
========================== ======= =========== ======= ======= =========== =======
(Loss)/earnings per share
(pence)
-------------------------- ------- ----------- ------- ------- ----------- -------
Continuing operations (83.6) - (83.6) 16.6 (0.1) 16.5
-------------------------- ------- ----------- ------- ------- ----------- -------
Discontinued operations 0.4 - 0.4 (26.3) - (26.3)
========================== ======= =========== ======= ======= =========== =======
Total (83.1) - (83.1) (9.7) - (9.7)
========================== ======= =========== ======= ======= =========== =======
The earnings per share figures for the adjusted results are as
follows:
53 weeks ended 1 January 52 weeks ended 26
2019 December 2017
============================ ===========================
Potentially Potentially
dilutive dilutive
share share
Basic options Diluted Basic options Diluted
============================== ====== =========== ======= ===== =========== =======
Adjusted Profit/(loss) (GBPm)
------------------------------ ------ ----------- ------- ----- ----------- -------
Continuing operations 176.1 - 176.1 223.9 - 223.9
------------------------------ ------ ----------- ------- ----- ----------- -------
Discontinued operations 4.5 - 4.5 13.0 - 13.0
============================== ====== =========== ======= ===== =========== =======
Total 180.6 - 180.6 236.9 - 236.9
============================== ====== =========== ======= ===== =========== =======
Weighted average number
of shares (million) 857.0 7.3 864.3 856.9 4.8 861.7
============================== ====== =========== ======= ===== =========== =======
(Loss)/earnings per share
(pence)
------------------------------ ------ ----------- ------- ----- ----------- -------
Continuing operations 20.6 (0.2) 20.4 26.1 (0.1) 26.0
------------------------------ ------ ----------- ------- ----- ----------- -------
Discontinued operations 0.5 - 0.5 1.5 - 1.5
============================== ====== =========== ======= ===== =========== =======
Total 21.1 (0.2) 20.9 27.6 (0.1) 27.5
============================== ====== =========== ======= ===== =========== =======
An adjusted earnings per share, based on adjusted profits (as
described in note 3), has been presented in order to highlight the
underlying performance of the Group. The basic weighted average
number of shares excludes shares held by the William Hill Holdings
2001 Employee Benefit Trust and those shares held in treasury as
such shares do not qualify for dividends. The effect of this was to
reduce the average number of shares by 28.0 million (52 weeks ended
26 December 2017: 30.4 million).
The diluted loss per share is the same as the basic loss per
share as the potentially dilutive share options are considered
antidilutive as they would reduce the loss per share and therefore
they are disregarded in the calculation.
8. INVESTMENTS
Mr Green & Co AB
On 31 October 2018, the Group announced a recommended cash offer
to acquire Mr Green & co AB (MRG) for 69 Swedish Krona (SEK)
per MRG share. The total offer value for all shares in MRG amounts
to approximately SEK 2,819.0m.
After the recommended cash offer was announced, William Hill
increased its shareholding in MRG through acquisitions of shares on
the open market.
At 1 January 2019, the Group's ownership of MRG represented
8.11% having purchased 3,311,411 shares on the open market. The
carrying value of the investment is GBP19.2m (note 25 to the
financial statements in the Annual Report).
Since the period end of 1 January 2019, the Group's offer to the
shareholders in MRG has now been accepted to such extent that
William Hill controls approximately 98.5 per cent of the shares and
votes in MRG. Further details are given in note 17.
Featurespace Limited
At 1 January 2019, the Group held ordinary shares in
Featurespace Limited valued at GBP2.1m. The initial consideration
was GBP1.3m and a fair value gain of GBP0.8m has been recognised
within investment income during the period.
On 1 February 2019, the Group sold its shares in Featurespace
for a total of GBP2.1m.
Disposal of investment in NYX
On 7 December 2017, the Group reached an agreement with
Scientific Games Corporation (SGC) to unconditionally support SGC's
acquisition of NYX. In connection with the acquisition, SGC agreed
to acquire the Group's investments in NYX of redeemable convertible
preference shares for GBP87.9m and the ordinary shares at the
acquisition price of $2.40 CAD per share (GBP9.6m). The transfer of
the investments, and receipt of consideration, was completed on 5
January 2018. At the same time, a loan made available to NYX of
GBP3.2m was repaid. The categories of financial assets disposed of
consist of loans receivable of GBP49.4m, derivative financial
instruments of GBP42.0m and investments of GBP9.3m, (see note 16 to
the financial statements in the 2017 Annual Report for more
information).
The Group also holds other investments in unquoted shares of
GBP0.1m (26 December 2017: GBP0.1m)
9. BorrowingS
1 January 26 December
2019 2017
GBPm GBPm
======================================================== ========= ===========
Borrowings at amortised cost
======================================================== ========= ===========
Bank loans - -
-------------------------------------------------------- --------- -----------
Less: expenses relating to bank loans (2.9) (1.2)
-------------------------------------------------------- --------- -----------
GBP375m 4.25% Guaranteed Notes due 2020 375.0 375.0
-------------------------------------------------------- --------- -----------
Less: expenses relating to GBP375m 4.25% Guaranteed
Notes due 2020 (0.8) (1.4)
-------------------------------------------------------- --------- -----------
GBP350m 4.875% Guaranteed Notes due 2023 350.0 350.0
-------------------------------------------------------- --------- -----------
Less: expenses relating to GBP350m 4.875% Guaranteed
Notes due 2023 (1.6) (1.9)
-------------------------------------------------------- --------- -----------
Total Borrowings as due for settlement after 12 months 719.7 720.5
======================================================== ========= ===========
The gross borrowings are repayable as follows:
-------------------------------------------------------- --------- -----------
Amounts due for settlement within one year - -
-------------------------------------------------------- --------- -----------
In the second year 375.0 -
-------------------------------------------------------- --------- -----------
In the third to fifth years inclusive 350.0 375.0
-------------------------------------------------------- --------- -----------
After more than five years - 350.0
======================================================== ========= ===========
725.0 725.0
======================================================== ========= ===========
Bank facilities
At 1 January 2019, the Group had the following bank
facilities:
1. A committed revolving credit bank loan facility (RCF) of
GBP390m provided by a syndicate of banks which expires in October
2023. This replaced the previous RCF bank loan facility of GBP540m
which was due to expire in May 2019. At the period end, GBPnil of
this facility was drawn down (26 December 2017: GBPnil).
2. An overdraft facility of GBP5m, of which GBPnil was drawn
down at the period end (26 December 2017: GBPnil).
GBP390m Revolving Credit Facility
Borrowings under the RCF are unsecured but are guaranteed by the
Company and certain of its operating subsidiaries.
Borrowings under the facility incur interest at LIBOR plus a
margin of between 1.25% and 2.50%, determined by the Group's
consolidated net debt to EBITDA ratio as defined in the loan
agreement (note 24 to the financial statements in the Annual
Report). A utilisation fee is payable if more than a certain
percentage of the loan is drawn. A commitment fee, equivalent to
40% of the margin, is also payable in respect of available but
undrawn borrowings under the RCF.
Upfront participation and arrangement fees plus associated costs
incurred in arranging the RCF have been capitalised in the
Statement of Financial Position and are being amortised on a
straight-line basis over the life of the facility.
Overdraft facility
At 1 January 2019, the Group had an overdraft facility with
National Westminster Bank plc of GBP5m (26 December 2017: GBP5m).
The balance on this facility at 1 January 2019 was GBPnil (26
December 2017: GBPnil).
Corporate bonds
(i) GBP375m 4.25% Guaranteed Notes due 2020
In June 2013, the Group issued GBP375m of corporate bonds and
used the net proceeds to repay GBP275m borrowed under a Term Loan
Facility used to part fund the acquisition of Sportingbet plc's
Australian business and Playtech's stake in Online, with the
remainder of the bonds used to reduce outstanding amounts under the
Group's RCF. The bonds, which are guaranteed by the Company and
certain of its operating subsidiaries, bear a coupon rate of 4.25%
and mature in June 2020.
(ii) GBP350m 4.875% Guaranteed Notes due 2023
On 27 May 2016, the Company issued GBP350m of corporate bonds
and used the net proceeds to refinance the Company's existing debt
and for general corporate purposes. The bonds, which are guaranteed
by the Company and certain of its operating subsidiaries, were
issued with a coupon of 4.875% and mature in September 2023.
Finance fees and associated costs incurred on the issue of bonds
have been capitalised in the Statement of Financial Position and
are being amortised over the life of the respective bonds using the
effective interest rate method.
10. RETIREMENT BENEFIT ASSET
The retirement benefit asset relating to the Group's UK Pension
Scheme at 1 January 2019 was GBP40.5m, a decrease of GBP18.2m from
26 December 2017.
This decrease arose primarily due to the cost incurred as the
Trustees of the William Hill pension scheme signed a buy-in bulk
annuity policy in April 2018. The policy was taken out to insure a
proportion of the defined benefit pension scheme obligation against
the risk of rising costs in the future.
11. Notes to the cash flow statement
53 weeks 52 weeks
ended ended
1 January 26 December
2019 2017
GBPm GBPm
============================================================= ========== ============
(Loss)/profit before interest and tax (687.9) 177.4
------------------------------------------------------------- ---------- ------------
Adjustments for:
------------------------------------------------------------- ---------- ------------
Share of results of associates (2.9) (1.0)
------------------------------------------------------------- ---------- ------------
Depreciation of property, plant and equipment 24.5 28.9
------------------------------------------------------------- ---------- ------------
Amortisation of intangibles 51.6 48.1
------------------------------------------------------------- ---------- ------------
Impairment of Retail segment 882.8 -
------------------------------------------------------------- ---------- ------------
Guaranteed minimum pension equalisation 1.4 -
------------------------------------------------------------- ---------- ------------
(Gain)/loss on disposal of property, plant and equipment (0.1) 0.4
------------------------------------------------------------- ---------- ------------
Vacant property provisions including (gains)/losses
on early settlement of vacant property leases (0.3) 7.3
------------------------------------------------------------- ---------- ------------
Loss on disposal of Stadia operations - 2.5
------------------------------------------------------------- ---------- ------------
Cost charged in respect of share remuneration 5.5 5.2
------------------------------------------------------------- ---------- ------------
Defined benefit pension cost less cash contributions (8.5) (9.6)
------------------------------------------------------------- ---------- ------------
Fair value movements on investment property 0.1 -
------------------------------------------------------------- ---------- ------------
Fair value movements on ante post bet liabilities 1.6 0.2
------------------------------------------------------------- ---------- ------------
Fair value movements and losses on disposal on derivative
financial instruments 0.4 (7.2)
------------------------------------------------------------- ---------- ------------
Loss on disposal of Australia operations 6.8 -
============================================================= ========== ============
Operating cash flows before movements in working
capital: 275.0 252.2
------------------------------------------------------------- ---------- ------------
(Increase)/decrease in receivables (2.6) 2.2
------------------------------------------------------------- ---------- ------------
(Decrease)/increase in payables (28.4) 82.9
============================================================= ========== ============
Cash generated by operations 244.0 337.3
------------------------------------------------------------- ---------- ------------
Income taxes paid (11.3) (28.4)
------------------------------------------------------------- ---------- ------------
Interest paid (35.6) (36.3)
============================================================= ========== ============
Net cash from operating activities - continuing operations 197.1 272.6
============================================================= ========== ============
Net cash from operating activities - discontinued
operations 1.0 17.5
============================================================= ========== ============
12. CONTINGENT ASSETS and LIABILITIES
Contingent asset
The Group has incurred legal fees in respect of specific legal
action following the 2012 acquisition of business in Nevada, USA.
These fees have been classified as exceptional (note 3). There are
potential damages and fees being awarded to the Group. We are
unable to quantify the amount or the timing of the potential gains
while the court process is ongoing.
Contingent liability
The Group is monitoring developments in relation to EU State Aid
investigations including the EU Commission's announcement that it
will be opening a State Aid investigation into the UK's Controlled
Foreign Company regime (announced on 26 October 2017). The
assessment of uncertain tax positions is subjective and significant
management judgement is required. This judgement is based on
interpretation of legislation, management experience and
professional advice.
The Austrian tax authorities have appealed a decision of the
Austrian Tax Court which supports the Group's position on gambling
tax. Whilst the Group is confident that its position, as supported
by the court, will be respected, the potential exposure if the tax
authorities were to be successful is in the region of EUR 4.5m to
EUR 5.0m.
13. SALE OF AUSTRALIAN OPERATIONS
On 6 March 2018, the Group publicly announced the agreement to
dispose of William Hill Australia, the Group's Australia segment.
On 23 April 2018, following receipt of regulatory approvals from
the Foreign Investment Review Board and the Northern Territory
Racing Commission, the Group completed the sale of William Hill
Australia to CrownBet Holdings Pty Ltd, a wholly owned subsidiary
of CrownBet, which is owned by The Stars Group Inc. and a group of
shareholders associated with the founder and CEO of CrownBet,
Matthew Tripp, for an enterprise value of A$300m, equivalent to an
equity value of A$313.7m (GBP173.2m).
Calculation of the loss on sale, including net assets disposed
of and net cash received, are shown below:
GBPm
====================================================== ======
Cash consideration received 173.2
------------------------------------------------------ ------
Less:
------------------------------------------------------ ------
Cash disposed of (25.4)
------------------------------------------------------ ------
Disposal costs (6.2)
------------------------------------------------------ ------
Net proceeds on disposal of Australia Operations 141.6
====================================================== ======
Less:
------------------------------------------------------ ------
Net assets disposed of (excluding cash)
------------------------------------------------------ ------
Intangible assets (78.9)
------------------------------------------------------ ------
Property, plant and equipment (1.4)
------------------------------------------------------ ------
Deferred tax assets (3.3)
------------------------------------------------------ ------
Trade and other receivables (12.8)
------------------------------------------------------ ------
Trade and other payables 29.5
------------------------------------------------------ ------
Corporation tax liability 3.8
------------------------------------------------------ ------
Derivative financial instruments (liabilities) 1.1
------------------------------------------------------ ------
Deferred tax liabilities 4.1
------------------------------------------------------ ------
Net assets disposed of excluding cash (57.9)
====================================================== ======
Less:
------------------------------------------------------ ------
Transfer from foreign currency translation reserve on
disposal (84.3)
------------------------------------------------------ ------
Loss on disposal of discontinued operations (0.6)
====================================================== ======
Results of discontinued operations
53 weeks ended 1 52 weeks ended 26
January 2019(1) December 2017
===================================== =====================================
Exceptional Exceptional
items Statutory items Statutory
Adjusted and adjustments total Adjusted and adjustments total
GBPm GBPm GBPm GBPm GBPm GBPm
============================== ======== ================ ========= ======== ================ =========
Revenue 31.0 - 31.0 119.7 - 119.7
------------------------------- -------- ---------------- --------- -------- ---------------- ---------
Cost of sales (7.3) - (7.3) (31.4) - (31.4)
=============================== ======== ================ ========= ======== ================ =========
Gross profit 23.7 - 23.7 88.3 - 88.3
------------------------------- -------- ---------------- --------- -------- ---------------- ---------
Other operating income 1.2 - 1.2 4.9 - 4.9
------------------------------- -------- ---------------- --------- -------- ---------------- ---------
Other operating expenses(2) (21.1) (0.7) (21.8) (75.7) (238.6) (314.3)
------------------------------- -------- ---------------- --------- -------- ---------------- ---------
Profit/(loss) before interest
and tax 3.8 (0.7) 3.1 17.5 (238.6) (221.1)
------------------------------- -------- ---------------- --------- -------- ---------------- ---------
Tax 0.7 - 0.7 (4.5) - (4.5)
=============================== ======== ================ ========= ======== ================ =========
Profit/(loss) for the
period from discontinued
operations 4.5 (0.7) 3.8 13.0 (238.6) (225.6)
=============================== ======== ================ ========= ======== ================ =========
(1) These results are in respect of the four month period up to
the disposal date of 23 April 2018.
(2) Exceptional items and adjustments for the period include
GBP0.6m relating to specific staff incentive payments due to the
completion of the sale of the business and GBP0.1m for amortisation
of specific intangible assets recognised on acquisition (52 weeks
ended 26 December 2017: GBP0.3m). In the 52 week period to 26
December 2017, as a result of the adverse regulatory changes and
the strategic review of the Australian business that was
undertaken, management recognised an impairment of GBP238.3m
against goodwill in the Australia CGU presented as an exceptional
item within other operating expenses.
Earnings/(loss) per share from discontinued operations
1 January 26 December
2019 2017
================================================ ========= ===========
Basic earnings/(loss) per share (pence) (note
7) 0.4 (26.3)
------------------------------------------------- --------- -----------
Diluted earnings/(loss) per share (pence) (note
7) 0.4 (26.3)
------------------------------------------------- --------- -----------
Net cash flows from/(used in) discontinued operations
1 January 26 December
2019 2017
GBPm GBPm
================================================ ========= ===========
Operating activities 1.0 17.5
------------------------------------------------ --------- -----------
Investing activities (2.9) (8.8)
------------------------------------------------ --------- -----------
Financing activities - -
------------------------------------------------ --------- -----------
Net cash from/(used in) discontinued operations (1.9) 8.7
================================================ ========= ===========
14. retail SEGMENT impairment
Impairment review
The Group performs an annual impairment review for goodwill and
other intangible assets with indefinite lives, by comparing the
carrying amount of these assets with their recoverable amount. This
is an area where the directors exercise judgement and estimation.
Testing is carried out by allocating the carrying value of these
assets to cash-generating units (CGUs) and determining the
recoverable amounts of those CGUs through value in use
calculations. Where the recoverable amount exceeds the carrying
value of the assets, the assets are considered as not impaired.
Each CGU is defined as its segment, which is described in note
2.
The most recent test was conducted at 1 January 2019. An
additional impairment test was performed at the interim 26 June
2018 on the goodwill and other intangible assets with indefinite
lives in the Retail CGU, as an indicator of impairment was
identified, being the results of the Triennial Review and maximum
stake on the B2 gaming products of GBP2. This led to an impairment
charge recognised of GBP882.8m against the Retail CGU.
Value in use calculations are based upon estimates of future
cash flows derived from the Group's adjusted operating profit
forecasts by segment. Adjusted operating profit forecasts are
derived from the Group's annual strategic planning or similarly
scoped exercise.
The Board approved two-year forecasts for each segment in
December 2018. These form the basis of our value in use
calculation, with separate extrapolation of net revenue and
expenses by segment based on a combination of recently observable
trends, management expectations and known future events. For the
purposes of the value in use calculation, the two-year forecasts
were extended to cover a five-year period. Cash flows beyond that
five-year period are extrapolated using long-term growth rates as
estimated for each CGU separately.
Discount rates are applied to each CGU's cash flows that reflect
both the time value of money and the risks that apply to the cash
flows of that CGU. Discount rates are calculated using the weighted
average cost of capital formula based on the CGU's leveraged beta.
The leveraged beta is determined by management as the mean
unleveraged beta of listed gaming and betting companies, with
samples chosen where applicable from comparable markets or
territories as the CGU, leveraged to the CGU's and Group's capital
structure. Further risk premia and discounts are applied, if
appropriate, to this rate to reflect the risk profile of the
specific CGU relative to the market in which it operates. Our
discount rates are calculated on a pre-tax basis.
The principal assumptions underlying our cash flow forecasts are
as follows:
- we assume that the underlying business model will continue to
operate on a comparable basis, as adjusted for key sporting events,
known regulatory or tax changes and planned business
initiatives;
- our forecasts anticipate the continuation of recent growth or
decline trends in staking, gaming net revenues and expenses, as
adjusted for changes in our business model or expected changes in
the wider industry or economy;
- we assume that we will achieve our target sports betting gross
win margins as set for each territory, which we base upon our
experience of the outturn of sports results over the long term,
given the tendency for sports results to vary in the short term but
revert to a norm over a longer term; and
- in our annual forecasting process, expenses incorporate a
bottom-up estimation of our cost base. For employee remuneration,
this takes into account staffing numbers and models by segment,
while other costs are assessed separately by category, with
principal assumptions including an extrapolation of recent cost
inflation trends and the expectation that we will incur costs in
line with agreed contractual rates.
The other significant assumptions incorporated into our
impairment reviews are those relating to discount rates and
long-term growth assumptions, refer to note 12 to the financial
statements in the Annual Report.
Retail impairment
In May 2018, the DCMS concluded its Triennial Review of stakes
and prizes and announced maximum stakes on B2 gaming products are
to be reduced from GBP100 to GBP2, with the change being brought
into effect from 1 April 2019. A regulatory change of this nature
is unprecedented and its impact on customer behaviour will not be
known until some years after implementation. Based on a series of
assumptions, preliminary estimates suggest that this could reduce
the Retail segment's annualised adjusted operating profit following
mitigation measures by cGBP70-100m, based on the size of the Retail
estate at the time of the announcement in May 2018.
The range of cGBP70-100m was estimated based on internal
modelling using management judgement and external information where
available. The model was performed firstly on a shop-by-shop level
before considering further central impacts across the segment. This
model covered a range of years up to 2022 using a decrease in
contribution per shop based on the underlying performance of each
shop with a continuation of recently observable trends, management
expectations and known future events. This was further reduced for
the decrease in gaming revenues based on assumptions surrounding
both customer and competitor behaviour. Based on this modelling,
certain loss-making shops were assumed to close, with the cost of
closure included as a cash outflow within the impairment review. On
top of the contribution by shop, certain estimated savings within
the central support functions of the Retail segment were included.
The range of cGBP70-100m was included within the two-year forecasts
for the Retail segment that was used as the basis of the value in
use calculation.
The additional principal assumptions underlying the Retail cash
flow forecasts were, therefore, as follows:
- we assume that certain competitor shops will close, with a
portion of this revenue lost from the sector and that the Group
will earn a share of the remaining revenue based on current market
shares;
- our model anticipates that there will be an element of product
substitution from B2 gaming to other Retail products; and
- we assume that 900 shops could become loss making and will
close over 2019 and 2020 with losses incurred up to estimated dates
of closure and cash closure costs incurred after closure.
Results of impairment reviews
The result of the Retail CGU impairment review was to recognise
an impairment charge of GBP882.8m in Other operating expenses
recognised as an exceptional item (note 3). This impairment charge
was recognised at the interim based on the impairment review
performed at 26 June 2018. The impairment review performed at 1
January 2019 has led to no change in the impairment charge
recognised in the period. Although the implementation date of the
GBP2 maximum stake on B2 gaming products was confirmed as 1 April
2019, one year earlier than assumed in the impairment review
performed at the interim, this impact was offset by increasing
profitability expected in the medium-term based on enhanced
modelling and a rebasing of the impact of the Triennial Review
mitigation against a smaller base Retail business.
The impairment charge was first allocated in full to goodwill.
The remaining impairment charge, once goodwill had been decreased
to nil, was allocated pro-rata against the remaining non-current
assets of the Retail segment excluding software, namely licences
within intangible assets and land and buildings and fixtures,
fittings and equipment. No impairment charge was taken against the
software balances as it was assessed that for each of these assets
the recoverable amount was greater than the asset carrying
value.
Impairment
charge allocation
Impairment charge recognised GBPm
=================================================== ==================
Intangible Assets - Goodwill (note 15) (680.7)
---------------------------------------------------- ------------------
Intangible Assets - Licence Value (note 15) (151.5)
---------------------------------------------------- ------------------
Intangible Assets - Software (note 15) -
--------------------------------------------------- ------------------
Property, plant and equipment - Land and Buildings
(note 16) (38.6)
---------------------------------------------------- ------------------
Property, plant and equipment - Fixtures, fittings
and equipment (note 16) (12.0)
---------------------------------------------------- ------------------
Total (882.8)
==================================================== ==================
Sensitivity of impairment reviews
For the Retail CGU, the following reasonably possible changes in
assumptions upon which the recoverable amount was estimated, would
lead to the following changes in the net present value of the
Retail CGU:
Decrease in value in use
Change in assumption of Retail CGU (GBPm)
======================================== ========================
Decrease in operating cash flows by 20% 109.0
---------------------------------------- ------------------------
Increase in discount rate by 1% 43.5
---------------------------------------- ------------------------
Decrease in long term growth rate by 1% 26.9
---------------------------------------- ------------------------
15. INTANGIBLE ASSETS
Brands,
trade
names Acquired
and customer technology Computer
Goodwill Licences relationships platforms software Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ -------- -------- -------------- ----------- --------- -------
Cost:
------------------------------ -------- -------- -------------- ----------- --------- -------
At 27 December 2016 1,251.1 484.3 161.2 11.0 302.4 2,210.0
------------------------------ -------- -------- -------------- ----------- --------- -------
Additions - - - - 80.7 80.7
------------------------------ -------- -------- -------------- ----------- --------- -------
Impairment losses (note
14) (238.3) - - - - (238.3)
------------------------------ -------- -------- -------------- ----------- --------- -------
Disposals (7.1) - - - - (7.1)
------------------------------ -------- -------- -------------- ----------- --------- -------
Effect of foreign exchange
rates (5.0) - (1.4) - (0.9) (7.3)
============================== ======== ======== ============== =========== ========= =======
At 26 December 2017 1,000.7 484.3 159.8 11.0 382.2 2,038.0
------------------------------ -------- -------- -------------- ----------- --------- -------
Additions - - - - 78.1 78.1
------------------------------ -------- -------- -------------- ----------- --------- -------
Impairment losses (680.7) (151.5) - - - (832.2)
------------------------------ -------- -------- -------------- ----------- --------- -------
Disposals (59.5) - (3.6) - (57.3) (120.4)
------------------------------ -------- -------- -------------- ----------- --------- -------
Effect of foreign exchange
rates (2.2) - 0.3 - (3.1) (5.0)
------------------------------ -------- -------- -------------- ----------- --------- -------
At 1 January 2019 258.3 332.8 156.5 11.0 399.9 1,158.5
============================== ======== ======== ============== =========== ========= =======
Accumulated amortisation:
------------------------------ -------- -------- -------------- ----------- --------- -------
At 27 December 2016 41.6 - 147.9 11.0 204.2 404.7
------------------------------ -------- -------- -------------- ----------- --------- -------
Charge for the period - - 5.1 - 52.4 57.5
------------------------------ -------- -------- -------------- ----------- --------- -------
Effect of foreign exchange
rates - - (0.9) - (0.6) (1.5)
============================== ======== ======== ============== =========== ========= =======
At 26 December 2017 41.6 - 152.1 11.0 256.0 460.7
------------------------------ -------- -------- -------------- ----------- --------- -------
Charge for the period - - 2.5 - 52.4 54.9
============================== ======== ======== ============== =========== ========= =======
Disposals - - (1.5) - (40.0) (41.5)
============================== ======== ======== ============== =========== ========= =======
Effect of foreign exchange
rates - - 0.3 - (2.0) (1.7)
============================== ======== ======== ============== =========== ========= =======
At 1 January 2019 41.6 - 153.4 11.0 266.4 472.4
============================== ======== ======== ============== =========== ========= =======
Net book value:
============================== ======== ======== ============== =========== ========= =======
At 1 January 2019 216.7 332.8 3.1 - 133.5 686.1
============================== ======== ======== ============== =========== ========= =======
At 26 December 2017 959.1 484.3 7.7 - 126.2 1,577.3
============================== ======== ======== ============== =========== ========= =======
16. PROPERTY, PLANT AND EQUIPMENT
Fixtures,
Land and fittings
buildings and equipment Total
GBPm GBPm GBPm
==================================== ========== ============== ======
Cost:
------------------------------------ ---------- -------------- ------
At 27 December 2016 398.0 148.6 546.6
------------------------------------ ---------- -------------- ------
Additions 13.9 2.9 16.8
------------------------------------ ---------- -------------- ------
Disposals (21.0) (1.0) (22.0)
------------------------------------ ---------- -------------- ------
Effect of foreign exchange rates (0.5) (0.7) (1.2)
==================================== ========== ============== ======
At 26 December 2017 390.4 149.8 540.2
------------------------------------ ---------- -------------- ------
Additions 12.6 24.7 37.3
------------------------------------ ---------- -------------- ------
Impairment losses (note 14) (38.6) (12.0) (50.6)
------------------------------------ ---------- -------------- ------
Disposals (8.8) (0.5) (9.3)
------------------------------------ ---------- -------------- ------
Effect of foreign exchange rates - 0.3 0.3
------------------------------------ ---------- -------------- ------
At 1 January 2019 355.6 162.3 517.9
==================================== ========== ============== ======
Accumulated depreciation:
------------------------------------ ---------- -------------- ------
At 27 December 2016 228.5 105.6 334.1
------------------------------------ ---------- -------------- ------
Charge for the period 22.1 8.0 30.1
------------------------------------ ---------- -------------- ------
Disposals (13.3) (0.6) (13.9)
------------------------------------ ---------- -------------- ------
Effect of foreign exchange rates (0.2) (0.4) (0.6)
==================================== ========== ============== ======
At 26 December 2017 237.1 112.6 349.7
------------------------------------ ---------- -------------- ------
Charge for the period 17.7 6.8 24.5
------------------------------------ ---------- -------------- ------
Disposals (5.2) (0.7) (5.9)
------------------------------------ ---------- -------------- ------
Effect of foreign exchange rates - (0.2) (0.2)
==================================== ========== ============== ======
At 1 January 2019 249.6 118.5 368.1
==================================== ========== ============== ======
Net book value:
==================================== ========== ============== ======
At 1 January 2019 106.0 43.8 149.8
==================================== ========== ============== ======
At 26 December 2017 153.3 37.2 190.5
==================================== ========== ============== ======
17. Events after the reporting period
Mr Green & Co AB
In the period since 1 January 2019, the Group has continued to
increase its shareholding in Mr Green (MRG) through acquisition of
shares on the open market. On 4 February 2019, the Group announced
that the offer to the shareholders in MRG has now been accepted to
such extent that the Group controls approximately 98.5% of the
shares and voting rights in MRG. The Group has initiated compulsory
acquisition of the remaining shares in MRG.
The acquisition accelerates the diversification of William Hill
- immediately making the Group a more digital and more
international business.
Eldoraldo Resorts, Inc.
During the period ended 1 January 2019, the Group announced a
nationwide partnership between William Hill US and Eldorado
Resorts, Inc. (Eldorado), a digital and land-based sports betting
and online gaming company in the US.
On 29 January 2019, the Group announced that, following receipt
of gaming and regulatory approvals, the Group has completed the
transaction with Eldorado and has entered into an exclusive US
nationwide partnership for digital and land-based sports betting
and online gaming in the US.
In connection with completion of the transaction, Eldorado has
been issued with 13,430,434 fully paid ordinary shares of 10p each
in William Hill PLC and shares representing 20% of the share
capital of William Hill U.S Holdco, Inc. the holding company of the
Group's US operations. The consideration shares are subject to a
lock-up of three years in respect of 50% of the consideration
shares and five years in respect of the remainder of the
consideration shares, and rank pari passu with the existing
ordinary shares of the Group.
ABBreviations and glossary
Adjusted operating profit
Profit before interest and tax, excluding exceptional items and
other defined adjustments. Further detail on adjusted measures is
provided in note 3.
Amounts wagered
This is an industry term that represents the gross takings on
sports betting.
Direct revenue
Direct revenue is measured at the fair value of consideration
received or receivable from customers and represents amount
received for goods and services that the Group is in business to
provide, net of discounts, marketing inducements and VAT.
EPS
Earnings per share.
EBITDA
Earnings before interest, tax, depreciation and
amortisation.
FVAs
Fair value adjustments. These are principally free bets, which
are recorded as a cost between gross win and net revenue.
Gross win
Gross win is an industry measure which is calculated as total
customer stakes less customer winnings. This measure is
non-statutory and differs from net revenue as net revenue is stated
after deductions for free bets and customer bonuses. It is used by
management to evaluate the impact of sporting results and customer
activity on performance.
Gross win margin
This is an industry measure that represents gross win as a
proportion of amounts wagered.
OTC
Over-the-counter.
MGD
Machine Games Duty. A duty charged by the UK Government on
gaming machine net revenue.
Net debt for covenant purposes
Net debt less certain restricted cash items of which the largest
is balances in customers' accounts. This is not a statutory measure
and may differ from loan covenant measures used by other
companies.
Net revenue
This is an industry equivalent to Revenue as described in the
Statement of Group Accounting Policies in the Annual Report.
New accounts
Customers who registered and transacted within the reporting
period.
PBIT
Profit before interest and tax.
Service provider revenue
Service provider revenue is receivable from third party
operators where the Group provides sportsbooks and gaming services
to the operator.
Sportsbook
Bets placed and accepted online on sporting and other events, or
via OTC and SSBTs in Retail
Sports books
The dedicated sports betting areas operated within casinos in
Nevada.
SSBT
Self-Service Betting Terminal
Unique active players
Customers who placed a bet within the reporting period.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAADFEADNEEF
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