William Hill — FY2013 Earnings Presentation
51 slides from William Hill's earnings presentation, Feb 28, 2014
Slide 1: Final Results for the 52 Weeks Ended 31 December 2013
WILLIAM HILL PLC FINAL RESULTS FOR THE 52 WEEKS ENDED 31 DECEMBER 2013 RALPH TOPPING, CHIEF EXECUTIVE NEIL COOPER, GROUP FINANCE DIRECTOR 28 FEBRUARY 2014 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by William Hill PLC (“William Hill”). This presentation includes 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
Slide 3: Agenda
Agenda • Overview Ralph Topping, Chief Executive • Financial highlights Neil Cooper, Group Finance Director • Delivering on our strategy Ralph Topping, Chief Executive • Q&A 3
Slide 4: Strategic progress
Online/Australian contribution increased from 20% to 36% of net revenue Strategic progress • Diversifying revenue streams • Acceleration of Sportsbook growth • Investing in mobile gaming International contribution increased from 9% to 15% of net revenue 100% 9% 15% • International expansion 80% – Se
Slide 5: Positive 2013 performance
Positive 2013 performance 2013 performance1,2 Group net revenue +12% • Outstanding growth in Sportsbook amounts wagered Group Operating profit +3% • Mobile gaming net revenue +175% Basic, adjusted EPS +7% • Retail net revenue resilience Online net revenue +12% • US amounts wagered +47%3 Online Opera
Slide 6: Agenda
Agenda • Overview Ralph Topping, Chief Executive • Financial highlights Neil Cooper, Group Finance Director • Delivering on our strategy Ralph Topping, Chief Executive • Q&A 6
Slide 7: Strategic developments shape growth
Strategic developments shape growth 52 wks to 53 wks to % change % change 31 Dec 2013 1 Jan 2013 52 wks vs 52 wks vs £m £m 53 wks 52 wks Amounts wagered1 7,800.8 5,884.8 +33% +36% Net revenue 1,486.5 1,276.9 +16% +18% Operating profit2 335.0 330.6 +1% +3% Amortisation (10.9) (5.0) +118% +122% Net fi
Slide 8: Exceptional items
Exceptional items Item £m Sportingbet acquisition (13.5) Repayment of VAT refund (5.6) tomwaterhouse.com acquisition (2.0) Write-off of fees on bridge loan (1.7) Pre-tax (22.8) Tax 1.7 Post-tax (21.1) 8
Slide 9: Resilient Retail impacted by increased duty
Resilient Retail impacted by increased duty 52 wks to 53 wks to 52 wks vs 53 wks 52 wks vs 52 wks 31 Dec 2013 1 Jan 2013 Change % Change % £m £m OTC amounts wagered 2,439.9 2,582.4 -6% -3% OTC gross win 472.8 468.8 +1% +2% OTC gross win margin 19.4% 18.2% +1.2 ppts +1.1 ppts Machines gross win 440.0
Slide 10: Retail: positive margin trend continues
Retail: positive margin trend continues Improved margin in both football …with substantial fluctuations and racing across the year as a through the year whole… 24.0% 0.3% 22.0% 0.1% 20.0% 0.3% 18.0% 19.4% 16.0% 0.2% 14.0% 0.3% 12.0% 18.2% 10.0% P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 2012 Football Ti
Slide 11: Retail: 1% growth in machines gross win
Retail: 1% growth in machines gross win1 Machine quarterly growth (£m) 116 4.0% 114 3.0% 112 2.0% 110 108 1.0% 52 wks to 53 wks to Change 106 0.0% 104 31 Dec 13 1 Jan 13 % 102 -1.0% 100 -2.0% Average number of LBOs 2,401 2,375 +1% 98 -3.0% Q1 Q2 Q3 Q4 Average number of machines 9,431 9,195 +3% Gross
Slide 12: Retail: cost causal
Retail: cost causal £m 510 12.2 0.8 507.4 505 500 495 1.4 4.4 489.3 (9.5) 490 3.6 4.3 0.9 485 480 475 470 2012 53rd week Employees Property Repairs and Content Depreciation MGD impact Other costs 2013 maintenance 12
Slide 13: Online: outstanding Sportsbook growth
Online: outstanding Sportsbook growth 52 wks to 53 wks 52 wks vs 52 wks vs 31 Dec 2013 1 Jan 2013 53 wks 52 wks £m £m change % change % Net revenue by geography3 Sportsbook 212.9 166.7 +28% +29% Casino 191.0 194.4 -2% +1% Poker 18.2 20.4 -11% -9% 18% 3% Bingo 24.2 25.2 -4% -2% 4% Gaming net revenue
Slide 14: Online: strong actives drives growth
Online: strong actives drives growth 52 wks to 53 wks to 52 wks vs 53 wks 52 wks vs 52 wks 31 Dec 2013 1 Jan 2013 change % change % Unique active players (’000)1 2,360.7 1,793.1 +32% Revenue per unique active player (£) 189.1 226.8 -17% New accounts (’000)2 1,141.0 1,064.2 +7% Average cost per acqui
Slide 15: Online: net revenue margin evolution
Online: net revenue margin evolution FY 2013 H2 2013 H1 2013 FY 2012 Sportsbook amounts wagered (£m) 2,931.7 1,548.2 1,383.5 2,258.5 Gross win (£m) 236.8 112.2 124.6 177.7 Gross win margin (%) 8.1% 7.2% 9.0% 7.9% Free bets and other fair value adjustments (£m) (23.9) (15.3) (8.6) (11.0) As % of spor
Slide 16: Online business growth drives costs
Online business growth drives costs Marketing and net revenue growth (£m) 450 NR ’09-’13 CAGR 22% 40% 400 MKT ‘09-’13 CAGR 31% 350 35% 52 wks to 53 wks to Change 300 31 Dec 2013 1 Jan 2013 % 250 30% £m £m 200 150 27% 26% 27% 25% Employee costs (45.1) (38.5) +17% 100 21% 24% 50 0 20% Marketing (122.5
Slide 17: Australia: good operational progress
Australia: good operational progress Ownership period 2013 (£m) 20122 (£m) Change (%) Amounts wagered 1,177.1 1,304.7 -10% Gross win 92.5 93.0 -1% Win margin 7.9% 7.1% +0.8ppts Net revenue 86.7 87.2 -1% Cost of sales (20.2) (19.6) +3% Gross profit 66.5 67.6 -2% Operating costs (54.5) (60.9) -11% Ope
Slide 18: Australia: delivering on our plan
Australia: delivering on our plan Rebalancing marketing mix from ....drives lower cost per acquisition, offline to online.... which is expected to continue to fall in 2014 Marketing mix1 Rolling 12 month CPA trend (A$: from Jan 13) 700 650 2014 69% 31% 600 550 500 2013 74% 26% 450 400 350 2012 81% 1
Slide 19: William Hill US
William Hill US 52 wks to 27 wks to Change 31 Dec 2013 1 Jan 20132 % £m £m Amounts wagered 310.2 132.2 +135% Gross win margin 7.3% 6.7% +0.6ppts Net revenue 22.7 8.9 +155% Cost of sales (2.0) (0.9) +122% Gross profit 20.7 8.0 +159% Operating cost (15.8) (8.6) +84% Operating profit1 4.9 (0.6) Mobile
Slide 20: Capex and working capital
Capex and working capital 52 wks to 53 wks to 31 Dec 2013 1 Jan 2013 £m £m Retail development1 38.8 37.9 Online 31.9 19.9 Australia 2.8 - US 2.6 1.2 Other (including IT) 8.5 7.3 Total cash capital expenditure 84.6 66.3 • Estate grew by a net 40 shops to 2,432 (59 openings, 19 closures, 14 re-sites)
Slide 21: Other finance matters
Other finance matters • Effective pre-exceptional income statement tax rate of 11.5% and cash tax rate of 20.0% – Reduction in deferred tax liabilities driven by enacted statutory tax rate reductions from 23% to 20% – Lower effective tax rate of Online – Effective full-year income statement rate exp
Slide 22: Balance sheet reflects strategic agenda
Balance sheet reflects strategic agenda • Debt levels increase, but remain comfortable – Net debt of £796m on bank covenant basis at 31 December 2013 – Net debt/EBTIDA at 2.0x against 3.5x maximum covenant, up from 1.0x at 2012 YE • Corporate financing activity through the year maintains comfortable
Slide 23: Agenda
Agenda • Overview Ralph Topping, Chief Executive • Financial highlights Neil Cooper, Group Finance Director • Delivering on our strategy Ralph Topping, Chief Executive • Q&A 23
Slide 24: Delivering on our targets
Delivering on our targets FY 2012 FY 2013 Sportsbook stakes to equal 87% 120% OTC stakes by 2014 World Cup Sportsbook mobile weekly average £10.9m £22.2m stakes of £15m a week by mid-2013 Mobile to be 40% of Sportsbook stakes 26% 39% by end 2013 Mobile to be 40% of Online gaming net 6% 17% r
Slide 25: UK regulatory update
UK regulatory update • ABB Code for Responsible Gambling implemented • Problem gambling prevalence – Reduced to 0.5% in English Health Survey – Unchanged at 0.7% in Scottish Health Survey • Stakes and prizes review completed in Oct, 2013 – B2 limits unchanged awaiting the conclusion of longer term r
Slide 26: Delivering strategic progress
Delivering strategic progress • Eclipse rolled out to 1,159 LBOs Developing a • Additional feeds and models for Online wider product • AccaInsurance and other innovative offers range • Cash In My Bet rolled out to mobile • Accelerated Online gaming releases in H2 Driving greater • SSBTs in 507 LBOs
Slide 27: Continued operational progress in Retail
Continued operational progress in Retail • Continued investment and expansion • 59 LBOs opened, new design in 200 shops • >700 SSBTs, 270 eight-screen video walls • Enhanced gaming offer with Eclipse rolled out to 1,159 shops • ABB Code for Responsible Gambling implemented in all shops 27
Slide 28: Online innovation…
Online innovation… PRODUCT USER EXPERIENCE MARKETING • More models and feeds • Single sign on • Opta stats • Five minute markets • Multi payments • AccaInsurance • Vegas app • Balance transfer • Push notifications • Accelerated gaming launches in H2 28
Slide 29: …driving online growth
…driving online growth Continuing development in 2014 growth in Sportsbook • Structural evolution: +33% amounts wagered1 – Embedding mobile into operations – IT embedded into product teams growth in mobile – Shoreditch development team +175% gaming net revenue1 • API / service layers proportion of a
Slide 30: Well positioned ahead of Point of Consumption
Well positioned ahead of Point of Consumption Strong competitive position • Market share increased from 10% in 2009 to 15% in 2012 • Scale operator with attractive margins • Highly competitive product range and user experience • Substantial marketing investment Our approach • Differentiate through c
Slide 31: Gaining market share in Italy
Gaining market share in Italy Sports betting market share, 2013 • Market growing at c9% pa 2014-20161 Lottomatica Bwin • 8% market share in Casino, Sportsbook 27% 21% Snai share increased from 3% to 7% over 2013 14% Sisal Paddy Power 3% • Good progress with four-year programme 5% William Hill 8% 13%
Slide 32: Spain: successful miapuesta migration
Spain: successful miapuesta migration Sports market share, Q3 20133 2% 2% • Online market growing at c6% pa 3% 7% Bet365 3% Bwin 2014-20161 William Hill • No.3 in sports with 15% market share 15% 45% miapuesta Cirse • On track with three-year programme Betfair – Strong Sportsbook performance with 23
Slide 33: William Hill US delivers profit
William Hill US delivers profit • 47% increase in amounts wagered over the same period • Mobile increased to 31% of amounts wagered (2012: 16%) • In-play for all NFL and NBA games, plus some NCAA football and basketball • >700% increase in in-play amounts wagered in football season (Sep to Dec) • 20
Slide 34: Australia: good progress on business improvement plans
Australia: good progress on business improvement plans • William Hill Australia established as one of the leading corporate bookmakers Market share of mobile wagering1 • Good progress made against half-year 5% 6% TAB/Luxbet KPIs 33% William Hill 13% • Good progress on key improvement areas Sportsbet
Slide 35: Website upgrade to improve experience
Website upgrade to improve experience • First use of responsive design • HTML5-based design, optimises content for desktop, tablet and mobile • Strong user experience • Benefiting from Project Trafalgar 35
Slide 36: Current trading
Current trading • ‘Black swan’ results in week 2 7 weeks to 18 February 20141 – Retail gross win margin 0.2% Group net revenue +2% – Online gross win margin -7.0% Online net revenue +0% • Strong volume growth: recycling - Sportsbook net revenue -18% and customer confidence plus - Gaming net revenue
Slide 37: Strategic progress, delivering results
Strategic progress, delivering results • Operational progress in Retail • Online delivering mobile and international growth as well as outstanding Sportsbook performance • US profitability achieved with product and user experience improved • Australia on track to see improvements in H2 2014 38
Slide 38: Appendices
APPENDICES Mia AL
Slide 39: Performance by division
Performance by division 52 wks to 53 wks to Change vs 52 wks to Change vs 31 Dec 13 (£m) 1 Jan 13 (£m) 1 Jan 13 (%) 25 Dec 12 (£m) 25 Dec 12 (%) - Retail net revenue1 907.0 837.9 +8% 825.0 +10% - Online net revenue 446.3 406.7 +10% 398.5 +12% - Telephone net revenue 16.5 16.0 +3% 16.2 +2% - William
Slide 40: Net revenue summary
Net revenue summary 52 wks to 31 Dec 2013 53 wks to 1 Jan 2013 Change £m £m % Retail OTC 472.8 468.8 +1% Machines1 434.2 369.1 +18% Retail total2 907.0 837.9 +8% Online Sportsbook1 212.9 166.7 +28% Gaming – Casino 191.0 194.4 -2% Gaming – Poker 18.2 20.4 -11% Gaming – Bingo 24.2 25.2 -4% Gaming tota
Slide 41: Net operating expenses by division
Net operating expenses by division1 52 wks to 31 Dec 13 53 wks to 1 Jan 13 Change £m £m % Retail (507.4) (489.3) +4% Online (258.3) (225.8) +14% Telephone (16.5) (17.8) -7% Australia (54.5) - - US (15.8) (8.6) +84% Other (6.2) (6.0) +3% Corporate (29.6) (30.3) -2% Group net operating expenses (888.3
Slide 42: Net operating expenses by cost category
Net operating expenses by cost category1 52 wks to 53 wks to Change 31 Dec 13 1 Jan 13 % £m £m Employee costs (327.1) (312.9) +5% Property costs (119.2) (111.4) +7% Depreciation (55.3) (43.7) +27% Pictures and data (65.1) (61.6) +6% Marketing (165.0) (122.3) +35% Finance charges (24.6) (21.6) +14% C
Slide 43: Retail cost split
Retail cost split 52 wks 31 Dec 2013 53 wks 1 Jan 2013 Change £m £m % Employee costs (199.9) (195.6) +2% Property costs (102.8) (98.3) +5% Content costs (64.3) (59.9) +7% Depreciation (28.4) (27.0) +5% Other costs incl. recharges (112.0) (99.0) +13% 52 week basis operating cost (507.4) (479.8) +6% 5
Slide 44: Telephone
Telephone 52 wks to 31 Dec 13 53 wks to 1 Jan 13 Change £m £m % Amounts wagered 252.0 279.2 -10% Gross win 17.4 16.9 +3% Gross win margin 6.9% 6.1% +0.8 ppts Net revenue 16.5 16.0 +3% Cost of sales 0.0 2.3 - Gross profit 16.5 18.3 -10% Staff costs (1.7) (1.7) 0% Marketing costs (2.4) (2.0) +20% Othe
Slide 45: Interest
Interest 52 wks to 53 wks to 31 Dec 13 1 Jan 13 £m £m Interest receivable (1.1) (0.6) Bank loan interest 10.6 7.3 Bond interest 30.4 21.7 Amortisation of finance fees 3.7 2.2 Net interest on pension scheme net liability 0.7 1.4 Revaluation of amounts due to - 0.9 non-controlling interest Total pre-e
Slide 46: Cash flow
Cash flow 52 wks to 31 Dec 13 53 wks to 1 Jan 13 £m £m EBITDA1 399.2 384.9 Working capital / other (16.4) 13.4 Capital expenditure net of disposals (82.8) (65.0) Cash from operations 300.0 333.3 Cash taxes (55.9) (52.0) Net interest (40.2) (39.8) Distributions to non-controlling interests (21.6) (38
Slide 47: Net debt for covenant purposes
Net debt for covenant purposes As at 31 Dec 13 As at 1 Jan 13 £m £m Bank loans 230.0 110.0 Corporate bonds 675.0 300.0 Finance leases - 0.2 Cash (206.7) (151.7) Net debt 698.3 258.5 Obligations under bank guarantees 3.0 0.6 Restricted cash – client balances 85.8 57.7 Restricted cash – non-controllin
Slide 48: Restatement of EPS and DPS
Restatement of EPS and DPS 2012 basic, adjusted EPS restatement TERP post 2 for 9 rights issue Basic adjusted EPS (pre rights) 29.4p Shares Price (p) Value Bonus factor 1.078 Holding 9 407.4 3,666.6 Rebased basic adjusted EPS 27.2p Rights 2 245.0 490.0 2012 basic EPS restatement Net holding 11 4,156
Slide 49: Amortisation
Amortisation 2014 2015 2016 2017 Sportingbet1 7.2 7.2 3.6 2.1 US 2.4 2.0 1.7 1.5 Online 1.2 1.2 1.2 1.2 Total 10.8 10.4 6.5 4.8 1. Amortisation of Sportingbet intangible assets is estimated. Owing to fluctuations in the sterling/Australian dollar exchange rate, the reported amortisation may vary aga
Slide 50: Machine MGD reconciliation
Machine MGD reconciliation 2012 reported1 Adjustments 2012 adjusted2 2013 2013 vs 2012 2013 vs 2012 (£m) (£m) (£m) actual (£m) reported (£m) adjusted (£m) OTC gross win 462.0 0.0 462.0 472.8 +2% +2% Machine gross win 436.8 0.0 436.8 440.0 +1% +1% VAT (73.8) 68.1 (5.7) (5.8) - +2% Machine net revenue
Slide 51: Australia performance in local currency
Australia performance in local currency Ownership Full year (pro forma) 2013 2012 Change 2013 2012 Change A$m A$m % A$m A$m % Amounts wagered 1,930.0 2,009.3 -4% 2530.3 2536.6 -0% Gross win 151.7 143.2 +6% 211.0 184.9 +14% Win margin 7.9% 7.1% +0.8ppts 8.3% 7.3% +1.0ppts Net revenue 142.9 134.3 +6%