TIDMWMH
RNS Number : 1248E
William Hill PLC
26 February 2020
William Hill PLC
Final results 2019
26 February 2020
A well-executed year of transition
William Hill PLC (LSE: WMH) (William Hill or the Group)
announces its final results for the 52 weeks ended 31 December 2019
(the period or 2019). Comparatives relate to the 53 weeks ended 1
January 2019.
Statutory results(1) Adjusted results(1)
--------------------------- ---------------------------
52 wks 53 wks Change 52 wks 53 wks Change
to to % to to %
31 Dec 1 Jan 31 Dec 1 Jan
19 19 19 19
GBPm GBPm GBPm GBPm
-------- -------- -------- -------- -------
Net revenue 1,581.7 1,621.3 -2% 1,581.7 1,621.3 -2%
Adjusted operating profit(2) - - - 147.0 233.6 -37%
Profit/(loss) before interest
and tax 12.9 (687.9) - - - -
(Loss)/profit before tax (37.6) (721.9) -95% 96.5 200.2 -52%
-------- -------- ------- -------- -------- -------
(Loss)/earnings per share
(EPS) (p)(3) (3.1) (83.6) - 10.7 20.6 -48%
Dividend per share (p) 8.0 12.0 -33%
------------------------------- -------- -------- ------- -------- -------- -------
Financial results
-- Group net revenue fell 2% to GBP1,581.7m
-- Adjusted operating profit(2) from existing operations fell
37% to GBP147.0m, ahead of management expectations, following the
implementation of the GBP2 stake limit
-- Exceptional charge and adjustments of GBP134.1m, primarily in
relation to the closure of shops and redundancies, leading to a
statutory loss before tax of GBP37.6m
-- Operating cash flow fell 7% to GBP183.0m reflecting the 37%
reduction in adjusted operating profit(2) , offset by the
reclassification of lease expenses under IFRS 16
-- Net debt for covenant purposes(4) increased, as anticipated,
to GBP535.7m, reflecting the acquisition of Mr Green, the impact on
adjusted operating profit(2) of the GBP2 stake limit and
disciplined investment in the US expansion, resulting in net
debt/EBITDA of 2.4x
-- Full year dividend of 8p is confirmed
Operational highlights
-- Safer Gambling
o Committed to protecting our customers; signed up to the Safer
Gambling Commitments in November 2019, significant increase in
accounts setting deposit limits
o Self-regulatory measures implemented in 2019 including the
'whistle-to-whistle' advertising ban and the voluntary levy for
research, education and training
-- Online
o UK maintained market share; three consecutive quarters of
growth(5) in line with the market
o UK absorbed GBP13m impact from the increase in Remote Gaming
Duty
o International net revenue fell 3% on a pro forma basis(6) ,
impacted by regulatory headwinds and legacy product
o Mr Green performed in line with expectations and achieved cost
synergies of GBP4m
-- Retail
o Decisive response to the GBP2 stake limit , closing 713
shops
o Net revenue fell 13% on a like-for-like basis(7) , at the
better end of our expectations
o Sportsbook staking increased 6% with average weekly staking on
SSBTs increasing 17% both on a like-for-like basis(7)
-- US
o US net revenue increased 38%, capturing nationwide market
share of 24%
o US Expansion net revenue tripled and Nevada grew for the
seventh consecutive year
o New purpose-built digital platform live; 55% of all US wagers
handled through our online channels
o Preparations to incorporate the operation of Caesars and CG
Technology sports books are well underway which we anticipate will
occur in the first half of 2020, pending regulatory approval
o CBS media partnership established; grants exclusive rights to
promote William Hill across CBS Sports' digital properties, a
unique integration of sports betting, media, product and
technology
Ulrik Bengtsson, Chief Executive Officer, commented:
"2019 was a year of transition during which we executed on our
ambition to diversify internationally with the acquisition of Mr
Green and the continued strong growth of our US business. The Group
delivered a strong operating performance, ahead of our expectations
and against a challenging regulatory backdrop.
"We move into 2020 in a stronger position. Almost a quarter of
revenue is now generated outside the UK compared to 15% in 2018. We
made positive progress with our digital platform, launching our
purpose-built platform in the US and product developments in the
Online business in 2019. We will invest in our proprietary
technology as we continue to improve the competitiveness of our
customer offering. We have also made great progress embedding a
culture of safer gambling across the Group.
"This is an exciting time to be William Hill's CEO. Our industry
is evolving and this brings great opportunities, underlining the
importance of our efforts to reposition the business. We look
forward to building on these foundations with a renewed focus on
customer, team and execution."
Notes:
1. Both the statutory and adjusted results include the
performance of Mr Green since the acquisition completed in January
2019.
2. Adjusted operating profit/loss is defined as profit/loss 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 2019 Annual Report.
3. Basic EPS is based on an average of 873.0 million shares for
2019 and an average of 857.0 million shares for 2018. Adjusted EPS
is based upon adjusted profits after tax.
4. Net debt for covenant purposes and EBITDA for covenant
purposes are non-statutory measures. The basis of the calculation
is as described in note 25 to the financial statements within our
2019 Annual Report, with the addition of the EBITDA of Mr Green for
the full rolling 12 month period.
5. Reported on a pro forma basis, assuming Mr Green was
consolidated into the Group at the end of January 2018 and also
adjusting Q4 2018 so that it is on a 13 week basis given 2018 was a
53 week period.
6. Where pro forma results are stated, this assumes Mr Green was
consolidated into the group at the end of January 2018, in order to
provide a more meaningful comparator period. Further detail on pro
forma results are provided in note 18 to the financial statements
within our 2019 Annual Report.
7. Where like-for-like (LFL) results are stated, this adjusts
the 2018 comparative for shops closed during 2019.
8. Broker research, CIA country profiles, U.S. Census Bureau, H2 Gambling Capital.
9. Results in the Online operating review table are presented on
an adjusted basis including Mr Green's results post acquisition on
28 January 2019.
10. The US Existing business has now been simplified to contain
only revenues from Nevada, with all revenues from Delaware now
recognised in US Expansion. 2018 results are restated to reflect
this change.
11. 24 states is contingent on the completion of the acquisition
of Caesars by Eldorado. Excluding the inclusion of Caesars, William
Hill US has access to 18 states. When referring to states this
includes Washington D.C.
OAM: Additional Regulated Information
William Hill LEI: 213800MDW
41W5UZQIX82
Enquiries
==========================================================================================
William Hill Louise Turner-Smith, Director of Tel: +44 (0) 20 7612
Investor Relations 3251
Ciaran O'Brien, Director of Corporate Tel: +44 (0) 20 7404
Communications 5959
Brunswick Andrew Porter / Samantha Chiene Tel: +44 (0) 20 7404
5959
Analyst and investor presentation
========================================================================================
Meeting Wednesday 26 February 2020 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: 302959
call
Archive conference Tel: +44 (0) 20 3936 3001. Access code: 697204#.
call Available until 5 March 2020
Video webcast www.williamhillplc.com
Debt investor conference call
========================================================================================
Live conference 11.30 am GMT. Tel: +44 (0) 20 3936 2999. Passcode:
call 058293
Archive conference Tel: +44 (0) 20 3936 3001. Passcode: 140092#.
call Available until 5 March 2020
About William Hill
=============================================================================================
William Hill PLC is one of the world's leading betting and
gaming companies, employing c12,000 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 GBP1.6bn 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. William Hill's European Online business is
headquartered in Gibraltar and Malta, and is licensed online in 12
countries following the acquisition of Mr Green & Co AB in
January 2019. In 2012, it established William Hill US with a focus
on retail and mobile operations in Nevada and became 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 nine states: Delaware, Indiana, Iowa, Mississippi,
Nevada, New Mexico, New Jersey, Rhode Island and West Virginia.
Eldorado Resorts, Inc. currently owns shares representing 20% of
the share capital of William Hill US Holdco, Inc., the holding
company of William Hill US.
Cautionary note regarding forward-looking statements
=====================================================
This announcement 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 "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
=========
We have made good progress on the commitment made in 2018 to
develop William Hill into a digitally led, internationally diverse
sports betting and gaming business of scale with a strong online
position and access to fast-growing markets, particularly the
US.
Performance summary
2019 was a year of transition, although it was not without its
challenges. To accelerate our international diversification, we
acquired Mr Green giving us an established hub in Malta, with
relevant teams and capabilities, from which to grow our
international business. Mr Green also gives us a strong market
position in a number of European markets, for example Denmark and
Sweden. Our UK Online business has stabilised, growing in line with
the market for three consecutive quarters(5) and maintaining market
share. We achieved this through a relentless customer focus and
investing in both product and service.
The implementation of the GBP2 stake limit on B2 gaming products
in April 2019 led us to remodel the Retail estate and close 713
shops in the third quarter which impacted the profitability of
Retail by GBP67m. The UK Online business absorbed the increase in
the Remote Gaming Duty which impacted profitability by cGBP13m and
regulatory developments in the International Online business
restricted growth. These events underline the challenging trading
environment due to regulatory pressures and reinforces the
importance of our drive to diversify the business
geographically.
We continued to invest in our biggest opportunity, the US, where
one in every four sports bets is made through William Hill.
Following the Supreme Court's decision to overturn the Professional
and Amateur Sports Person Act (PASPA) in May 2018, the opportunity
for William Hill US is significant. By the end of 2019, 14 states
were live and we are in nine of them, more than any other sports
betting operator. We will continue to leverage our recently
launched, purpose-built US technology platform and market access
partnerships, most notably with Eldorado Resorts, Inc. ("Eldorado")
which is expected to complete its proposed acquisition of Caesars
Entertainment ("Caesars") in the second quarter of 2020. Market
estimates suggest that the US could generate between US$5bn and
US$19bn(8) of sports betting revenues by 2023, depending on the
speed and nature of state-by-state regulation, and William Hill is
well positioned to participate with market leading access secured
in 24(11) states.
Delivering on our strategy
At our capital markets day in 2018 we laid out our ambition to
be a digitally led, internationally diverse business of scale which
remains unchanged. At the time we set out a number of strategic
objectives: to drive digital growth, remodel the UK and grow scale
in the US while developing a culture of customer protection and
self-regulation. We have already made material progress towards
achieving our objective to remodel Retail. The business responded
with conviction to the regulatory challenges and is once again
ready to focus on the future.
To accelerate the delivery of our ambition, we will increase the
operational emphasis, holistically across the Group, on the keys to
our success: Customer, Team and Execution. We will achieve this
through five strategic priorities that will be implemented
Group-wide: competitive customer offering, a collaborative and
agile team, revenue growth, operational efficiency and scale.
Customer
Create a 'competitive customer offering' through continuous
innovation, increasing personalisation and best-in-class customer
support while protecting our customers.
We have a clear product mission to delight our customers and we
have already automated our customer support functions leading to an
all-time high customer satisfaction score. The immediate future
will be about product, with five areas of operational focus:
-- Brilliant Basics. Be a market leader on app performance for
the customer moments that matter: Deposits, Withdrawals, Login,
Settlement, Registration;
-- Establish a sustainable competitive advantage through faster
innovation, a focus on football and in-play experience, provide a
rich gaming experience and enable flexibility and scalability in
the US;
-- Exceed our customer's service expectations through faster
response times based on a combination of automated back office,
increased self-service and high-touch service when necessary;
-- Promote Safer Gambling activities through innovation,
including Real Time Monitoring, UK customer dashboards, unified
Safer Gambling tools for the UK & International;
-- US technology platform evolution, introducing sophisticated trading capability at scale.
Team
We will build capability around a 'collaborative and agile
team'. We have introduced a Chief Product and Technology Officer
who will have end-to-end accountability for driving our customer
offering across all divisions. The new role of Chief Operating
Officer will focus our key business support operations into a
single, customer centric function.
We are streamlining our processes, evolving our ways of working
and investing in our people to ensure we reach our long-term goals.
Improvements have already been made within engagement and we will
continue to develop the end-to-end employee experience to attract,
retain and motivate our people. During the coming year we will
further simplify the operating model to enable collaboration and
facilitate a focus on execution. We are building skills programmes
and talent academies to ensure we are future-proofed.
Execution
Our focus on customer and team will be supported by the
execution of three key drivers; revenue growth, operational
efficiency and scale.
Revenue Growth
Revenue growth will be achieved by growing our International and
US businesses and maintaining share in the UK, where we expect to
perform in line with the market. Our intention to provide
personalised customer experiences and targeted real-time engagement
to drive share of wallet will be enabled by robust customer data
analytics delivered in parallel with cost optimisation, driving
operational leverage to improve our operating profit. Each division
has a clear plan in place to drive revenue growth:
-- Online UK:
o Maintain UK market share by optimising the yield of existing
customers through the new Smart Data Platform and continuous
product enhancements.
-- Online International:
o Accelerate growth in the Nordics by capitalising on the launch
of Sweden, improving content in Denmark and increasing localised
marketing;
o Grow Spain & Italy by monetising recent product
improvements and launch Mr Green in Spain.
-- US:
o Capitalise on the competitive customer experience and products
that will be supported by the new technology platform;
o Improve marketing return on investment;
o Leverage our partnerships to accelerate our expansion as the
states continue to legalise and regulate.
Operational Efficiency
We will evolve our operating models, through a culture of
continuous improvement, to deliver simplified ways of working,
increased automation and improved marketing efficiency.
In 2019 we commenced an Operating Model review to drive
automation, improve location footprint and remove duplication of
efforts, and this will continue throughout 2020. We defined a set
of initiatives within our Customer Service operations, including
robotic process automation to substantially improve service quality
and consequently reduce costs. Further in 2019 we launched the
Smart Data Platform and analytics tools that will allow us to make
timely decisions and ensure greater efficiency from our marketing
efforts going forward.
Scale
We will generate economies of scale by using selected core
platform components and processes across multiple divisions and
selective non-organic opportunities. As we invest in our
proprietary technology, our Global Trading Platform and Smart Data
Platform will be utilised across the Group. As we evolve our
business, we will optimise our technology blueprint, location
strategies and core back office operations to ensure we maximise
the benefits of scale.
Safer gambling
Throughout 2019 we responded to regulatory change across all
regions, facing into the challenges in Europe, the opportunities in
the US and continuing to drive forward with safer gambling
measures. At the start of the year we set ourselves the objective
of increasing the number of online customers that set deposit
limits by 50% and we have delivered on that target.
In July we agreed to increase our funding for research,
education and treatment, in collaboration with industry peers. This
will see a ten-fold increase in our financial support for safer
gambling measures in the next five years with our contribution
rising from 0.1% of UK gross gambling yield (GGY) to 1% by 2023. In
August, the voluntary whistle-to-whistle ban on advertising around
live sports matches came into effect with the intention to reduce
exposure to under 18s. We are pleased to note this has been a
successful initiative with analysis revealing a 97% reduction in
sports gambling adverts seen by children.
In November the launch of a new representative body, the Betting
and Gaming Council, was accompanied by the announcement of a
package of Safer Gambling Commitments, a comprehensive set of
measures intended to deliver long-term benefits to minimise the
harm caused by gambling. We, along with many of our peers, have
committed to prevent underage gambling, increase support for
treatment, strengthen our advertising and marketing codes of
practice, protect our customers and create a culture of safer
gambling. At William Hill that journey is already well
advanced.
In January 2020 the Gambling Commission announced that the use
of credit cards to gamble in the UK would be banned from April
2020, a restriction which extends to e-wallets funded by credit
cards. A small proportion of deposits, approximately 5%, are taken
through credit cards online and our retail outlets accept cash and
debit cards only. We will continue to engage with the Gambling
Commission and wider stakeholders as we have done increasingly over
the past few years.
Our aim is that all of our customers play safely and within
their means. To support this goal, we have continued to invest in
personnel, IT systems and rigorous processes to ensure our
customers are appropriately protected. With the support of
technology we closely monitor patterns of play, provide our players
with tools they can use to remain in control and, where
appropriate, we will enforce a break in play. As we continue to
embed customer protection and self-regulation at the heart of our
culture, we will develop tools and processes that ensure we protect
our customers from gambling related harm. There is more to do with
respect to customer protection but the progress that has been made
at William Hill and by the industry is real.
Board changes
During 2019 we reshaped our board to reflect our intention to be
digitally led and internationally diverse. We welcomed Gordon
Wilson, Jane Hanson and Lynne Weedall to the board as non-executive
directors, bringing with them experience in technology,
international expansion, regulation and compliance and cultural
change. In September Philip Bowcock stepped down and Ulrik
Bengtsson was appointed Chief Executive Officer (CEO).
In January 2020, Ruth Prior, Chief Financial Officer (CFO),
notified the board of her intention to step down to return to the
private equity sector. She has supported the Group through
considerable change and we thank her for all she has done for the
Group. More recently we announced the appointment of Adrian Marsh
as William Hill's new CFO. Adrian is a proven CFO of a FTSE listed
company with M&A, deal execution and multi-sector finance
experience in US and European markets and we are delighted to
welcome him to the Group. The effective date of Adrian's
appointment to the Board and Ruth's departure will be announced in
due course.
Outlook
2019 was a year of transition during which we laid the
foundations to deliver our long term ambition to be a digitally
led, internationally diverse business underpinned by our commitment
to safer gambling. We are on track to perform in line with our
expectations for 2020, assuming normalised gross win margins and a
stable regulatory landscape. We will continue to manage our
leverage carefully as we balance the investment opportunities
available to us against the potential for regulatory developments
across the Group.
More specifically, the growth of Online, the stabilisation of
Retail and the continued strong growth of the US are addressed in
more detail in each of the divisional outlook statements.
OPERATING REVIEW
=================
The commentary below on divisional performance addresses
adjusted results, reflecting 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 2019 Annual Report.
The following narrative, unless stated otherwise, relates to the
52-week period to 31 December 2019, with comparatives relating to
the 53-weeks ended 1 January 2019.
Online(9) (47% of Group revenue)
================================
FY 2019 FY 2018 Change Pro forma(6)
GBPm GBPm
-------- ------- -------- ------------
Sportsbook amounts wagered 4,528.4 4,702.8 -4% -6%
Gross win margin 8.0% 8.0% +0.0ppts +0.0ppts
UK net revenue 481.0 484.0 -1% -3%
International net revenue 257.3 150.4 +71% -3%
----------------------------- -------- ------- -------- ------------
Sportsbook net revenue 307.6 318.7 -3% -6%
Gaming net revenue 430.7 315.7 +36% -1%
----------------------------- -------- ------- -------- ------------
Online net revenue 738.3 634.4 +16% -3%
Cost of sales (202.4) (154.1) +31%
Operating costs (417.1) (350.1) +19%
-------- ------- -------- ------------
Adjusted operating profit(2) 118.8 130.2 -9%
------------------------------ -------- ------- -------- ------------
The following commentary is presented on a pro forma(6) basis
unless otherwise stated.
At the end of January 2019 we completed the acquisition of Mr
Green and, as a consequence, 35% of Online statutory revenues are
now delivered outside the UK compared to 24% in 2018. The
integration has enabled us to operate from two distinct hubs;
Gibraltar now focuses on all UK operations while all International
operations are conducted from Malta. The integration has progressed
well, Mr Green has performed in line with our expectations, and we
have delivered GBP4m of cost synergies in 2019 against our Year 3
target of cGBP6m.
During 2019 we repositioned our brand and marketing proposition
to modernise the appeal of William Hill and focus on betting and
gaming as a shared experience. The Anthony Joshua-led campaign,
which successfully increased brand recognition, was followed by the
'Brotherhood' campaign which encourages moderate and social
gambling. The new campaign unified our sportsbook and gaming
position, delivered positive shifts in brand perception and
increased marketing efficiency.
Aligned with these campaigns, and to reflect the more mature
nature of the UK Online market, we redirected our UK marketing
activity to deliver return on investment with a focus on yield
rather than volumes. As a consequence, in the UK we saw unique
active users decrease by 14% while average revenue per user (ARPU)
increased by 13%.
FY 2019 Pro forma(6) UK International
----- --------------
Net revenue -3% -3%
Unique actives -14% +2%
Average revenue per
user +13% -4%
Online UK continued to experience headwinds during the first
quarter from the enhanced customer due diligence actions taken in
2018. However, we were encouraged to see three consecutive quarters
of growth(5) , in line with the market, and market share
maintained.
UK sportsbook amounts wagered declined, driven predominantly by
horseracing, while the gross win margin increased by 0.3 percentage
points, supported by favourable results, particularly towards the
year end. Gaming net revenue fell as we implemented customer
protection measures and reflected self-exclusions across acquired
brands. In combination this led to a fall in Online UK net revenue
of 3% in the year.
Online International grew unique active users 2% and ARPU fell
4% as we continued to pursue a traditional growth strategy in
international markets. International experienced a number of
regulatory headwinds during 2019, most notably the introduction of
a new regime in Sweden, an advertising ban in Italy and the closure
of Switzerland.
Online International sportsbook amounts wagered were stable
although gross win margin fell 0.4 percentage points due to poor
sports results and legacy product limitations. International gaming
net revenue was stable. As a result, Online International net
revenue fell 3%. During the second half, customers adjusted to
accommodate the new regulatory landscape and we saw early signs of
a recovery in Sweden.
On a statutory basis, taking into account the acquisition of Mr
Green, gaming net revenue increased 36% and total net revenue
increased 16%.
Cost of sales increased 31% as we absorbed the increase in UK
Remote Gaming Duty from 15% to 21% which was applied on 1 April.
Operating costs increased 19%, reflecting the incorporation of Mr
Green, resulting in an adjusted operating profit(2) of GBP118.8m,
down 9%.
We continued to enhance our customer offering with product and
service improvements, embedding player protection processes and
tools across the platform. International launched new developments
in the fourth quarter, as planned, with a new sportsbook front end
and single wallet solution in Spain and further product launches
are planned in Italy in 2020. We are pursuing a modular platform
architecture. The new Smart Data Platform is already in use as part
of our purpose-built US platform and we expect to see it deployed
in the UK in 2020.
Online Outlook
At the time of the Mr Green acquisition, the UK facing gaming
business was subject to an investigation arising from systemic
compliance failings following a corporate evaluation undertaken by
the Gambling Commission in summer 2018. Since we completed our
acquisition we have implemented enhanced policies and processes
designed to ensure that the business meets all requisite compliance
standards. We made a provision of GBP3m for a fine from the
Gambling Commission relating to the failings identified and we
expect to conclude a regulatory settlement with the Gambling
Commission in line with the provision imminently.
The UK credit card ban will take effect on 14 April 2020; we
take c5% of Online UK deposits through credit cards and we will be
working with our payment providers to ensure compliance ahead of
this deadline. We anticipate the impact on adjusted operating
profit(2) will be in the range of GBP5m to GBP10m, based on the
current information regarding e-wallet payments.
The Online business will return to growth, assuming a stable
regulatory landscape. As we enter a UEFA European Football
Championship year, and continue to deliver product launches to
advance our customer offering, we will grow net revenue in line
with the market in the UK and reach high-single digit net revenue
growth in the International business.
Retail (45% of Group revenue)
=============================
FY 2019 FY 2018 Change Like-for-like(7)
GBPm GBPm
-------- -------- -------- ----------------
Sportsbook amounts wagered 2,161.6 2,195.9 -2% +6%
Gross win margin 18.5% 18.2% +0.3ppts +0.3ppts
Sportsbook net revenue 400.0 398.9 +0% +8%
Gaming net revenue 317.0 496.3 -36% -30%
----------------------------- -------- -------- -------- ----------------
Retail net revenue 717.0 895.2 -20% -13%
Cost of sales (162.2) (226.6) -28%
Operating costs (471.6) (518.3) -9%
-------- -------- -------- ----------------
Adjusted operating profit(2) 83.2 150.3 -45%
------------------------------ -------- -------- -------- ----------------
The GBP2 stake limit on B2 gaming products was implemented on 1
April 2019 and, as expected, materially impacted the retail
business. As a result we took decisive action to remodel the
estate, closing 713 shops in the third quarter to ensure the best
possible future for our business, colleagues and customers. As a
consequence, the following commentary will focus on
like-for-like(7) (LFL) results related to the remaining estate of
1,568 shops.
Against this backdrop Retail produced a robust performance in
2019. LFL(7) Retail net revenue declined 13% overall as customers
substituted gaming activities with more sports betting.
LFL(7) Sportsbook wagering was up 6% with material increases
seen in greyhounds, other sports and virtual products. Total
Sportsbook gross win margin was up 0.3 percentage points to 18.5%,
benefiting from a strong end to the year, especially in football.
Sportsbook LFL(7) net revenue increased 8%, although on a statutory
basis sportsbook net revenue was flat due to the shop closures.
In Gaming, LFL(7) net revenue fell 30%, driven by the GBP2 stake
limit. During the course of the year gaming revenues began to
settle as our customers adjusted to the new limits and the fourth
quarter result was ahead of our expectations.
Our proprietary Self Service Betting Terminals (SSBTs) accounted
for 19% of all sports betting and 62% of all football wagering. We
redistributed the SSBT inventory from our closed shops across the
remaining estate, increasing density from 1.6 to 2.4 machines per
shop. We now have over 3,700 machines and the average amount
wagered per machine per week increased 17% in 2019.
We took an exceptional charge of GBP95.1m relating to continuing
costs incurred as part of the mitigation strategy regarding shop
closures, redundancy costs and other related costs. We continue to
closely manage the mitigation of our outstanding property costs, as
we maintain our disciplined cash focus in Retail, anticipating an
exceptional cash impact of cGBP70m.
We agreed the sale of 35 shops in Northern Ireland and the Isle
of Man to BoyleSports in January 2020. These actions constitute
part of the planned mitigation activities and, as such, the
financial impact is included in our expectations for the coming
year.
Operating costs reduced 9%, primarily as a result of the shop
closures and we continue to focus on managing controllable costs to
offset the impact of inflation and the National Living Wage.
Adjusted operating profit(2) fell 45% to GBP83.2m, ahead of our
original expectations of GBP50-70m, driven partly by the strong
gross win margin, resilient gaming net revenue and successful
migration and retention of our customers from closed shops.
The average number of shops fell 11% to 2,087 (2018: 2,333),
primarily as a direct result of the shop closures. The revised
estate, following the shop closures and sale of Northern Ireland
and the Isle of Man, will be 1,533 shops located across the British
Isles.
Retail outlook
With the GBP2 stake limit implemented and the planned shop
closures completed we now have certainty regarding our Retail
business and we are uniquely positioned to focus on the future. It
remains early in the evolution of the UK licenced betting office
(LBO) industry and we anticipate the total UK betting shop industry
will continue to reduce. Assuming a normalised gross win margin,
and reflecting an additional quarter of operations impacted by the
GBP2 stake limit when compared to 2019, we expect adjusted
operating profit(2) in 2020 to be in the range of GBP60m to
GBP70m.
William Hill US (8% of Group revenue)
=====================================
Throughout 2019 we made material progress towards our strategic
objective to grow a business of scale in the US. There are
currently 14 states where sports betting is live and we are
operational in nine of them, having launched in New Mexico, Iowa
and Indiana during the year, capturing 24% of the regulated
nationwide market. In November we ceased operating in Pennsylvania
although we expect to resume taking wagers following the
anticipated completion of the acquisition of Caesars by Eldorado
during the first half of 2020, subject to regulatory approval. We
now have market access secured in 24(11) states, a purpose-built
digital platform and a strong local team operating from East and
West coast locations.
Numbers referenced in the following commentary are presented on
a local currency basis.
The regulatory landscape is complex and changing as the US
evolves towards what we expect will be a primarily online market in
the long term. However, at the current time, only nine of the
states that are live are online and William Hill US offers online
wagering in Nevada, New Jersey, Iowa and Rhode Island. During 2019
William Hill US handled US$2.9bn of gross amounts wagered, either
directly or indirectly, and 55% was placed through online
channels.
In 2019 we committed to generating adjusted operating profit(2)
of US$0m to -US$20m in the combined US business. We are pleased to
report that the US performed ahead of expectations and delivered
adjusted operating profit(2) of US$1.6m driven by strong wagering
growth, disciplined investment and the gain generated from the sale
of the equity interest in The Stars Group.
US Existing(10)
On a statutory reporting On a local currency
basis basis
---------------------------- ----------------------------
FY 2019 FY 2018 Change FY 2019 FY 2018 Change
GBPm GBPm US$m US$m
--------- ------- -------- -------- -------- --------
Amounts wagered 1,282.1 1,084.5 +18% 1,640.2 1,442.8 +14%
Gross win margin 6.6% 7.2% -0.6ppts 6.6% 7.2% -0.6ppts
--------- ------- -------- -------- -------- --------
Net revenue 83.6 78.4 +7% 106.9 104.3 +2%
Cost of sales (8.0) (7.4) +8% (10.3) (9.8) +5%
Operating costs (48.5) (39.7) +22% (61.8) (52.6) +17%
--------- ------- -------- -------- -------- --------
Adjusted operating
profit(2) 27.1 31.3 -13% 34.8 41.9 -17%
------------------- --------- ------- -------- -------- -------- --------
During 2019 the US Existing business delivered its seventh
consecutive year of growth, providing sports betting at 114
locations. We saw amounts wagered grow 14% to US$1.6bn of which 69%
were placed through digital channels. Gross win margin normalised
to 6.6%, 0.6 percentage points lower due to strong sports results
in the prior year. As a result, net revenue grew 2%.
We maintained market share of 32% across Nevada. Operating costs
increased 17% as we expanded our Nevada base, primarily due to
increased staff and property costs. As a consequence, adjusted
operating profit(2) fell 17% on a local currency basis.
In the fourth quarter we agreed to acquire the sports book
assets of CG Technology, more commonly known as Cantor, subject to
regulatory approval. This brings access to a number of marquee
sites on the Las Vegas Strip, including The Cosmopolitan of Las
Vegas, The Venetian and The Palazzo.
US Expansion(10)
On a statutory reporting On a local currency
basis basis
---------------------------- ---------------------------
FY 2019 FY 2018 Change FY 2019 FY 2018 Change
GBPm GBPm US$m US$m
--------- ------- -------- -------- ------- --------
Amounts wagered 512.5 164.4 +212% 655.0 212.5 +208%
Gross win margin 7.1% 6.7% +0.4ppts 7.1% 6.7% +0.4ppts
--------- ------- -------- -------- ------- --------
Net revenue 42.8 13.1 +227% 54.8 16.9 +224%
Cost of sales (5.3) (1.6) +231% (6.8) (2.0) +240%
Operating costs (63.6) (43.4) +47% (81.2) (56.9) +43%
--------- ------- -------- -------- ------- --------
Adjusted operating
loss(2) (26.1) (31.9) -18% (33.2) (42.0) -21%
------------------- --------- ------- -------- -------- ------- --------
During 2019 the US Expansion business handled US$1.3bn of gross
amounts wagered, nearly half of the US$2.9bn transacted across the
whole of William Hill US. In our capacity as a sports book operator
we directly handled US$655m of gross amounts wagered, an increase
of more than 200% as we took sports bets in three new states and
opened nine retail sports books. Gross win margin increased 0.4
percentage points to 7.1%. As a result, net revenue increased 224%,
including the income from our service provider activities which
increased 280%.
The expansion business delivered a blended market share of 20%,
with leading retail market share of 35% and number three digital
market share of 9%. Our disciplined growth strategy saw operating
costs increase 43% as we continued to grow the local team and
expand our New Jersey presence. As a result adjusted operating
losses(2) decreased to US$33.2m, an improvement of 21%.
Under the terms of an agreement by Eldorado with The Stars Group
(TSG) in 2018, granting TSG certain second skin access rights for
sports betting using the Eldorado casino licences, Eldorado and
William Hill share the economic benefit of equity and revenue share
payments related to those access rights. In 2019, William Hill's
beneficial interest in the initial equity received by Eldorado was
sold, generating a gain of US$13.5m. The value of this interest is
reflected in the US Expansion net operating costs.
We launched our purpose built, proprietary technology platform
in New Jersey in time for the beginning of the NFL season as
planned. The new platform gives us a market-leading technology
solution with the flexibility and scalability to support our US
growth ambitions.
Our partnerships are key to our success in the US. In January
2019, we entered a partnership with Eldorado to be their exclusive
sports book provider, sharing in all economics related to sports
betting. Eldorado is a leading casino entertainment company in the
United States, currently owning or operating 23 properties in 11
states and a loyalty club with c10 million members. Under the terms
of the deal, Eldorado received a 20% stake in William Hill US.
We were pleased to see Eldorado announce the proposed
acquisition of Caesars Entertainment in June 2019 where William
Hill's exclusive sports betting rights across retail and mobile
will carry forward to the acquired company. If completed, Eldorado
will be the largest owner and operator of US gaming assets. We
estimate the profit contribution possible from additional retail
operations at Caesars casinos would be cUS$20m-US$35m of annual
EBITDA within three years.
In October 2019 we formed an exclusive partnership with
Monumental Sports and Entertainment to open a sports book at the
Capital One arena in Washington D.C. In addition, we established
official sports betting partnerships with the National Basketball
Association (NBA) and the National Hockey League (NHL).
More recently, during February 2020 we announced a strategic
media partnership with CBS Sports, making William Hill the official
sports book and wagering data provider across all CBS Sports'
platforms. The partnership grants William Hill exclusive rights to
promote our brand across CBS Sports' broad range of digital
properties, including through CBS Sports Fantasy, one of the
largest fantasy platforms in the world, resulting in highly
efficient customer acquisition and another major step forward for
our US expansion. With more than 80m users per month, the
partnership enables a unique integration of sports betting, media,
product and technology and includes opportunities to feature
William Hill data, odds and markets across CBS television
programming. Initial integrations will kick-off in March with a
full rollout planned for the fantasy football season.
US outlook
We are encouraged by the momentum in the number of states
regulating sports betting. We are increasingly confident of the
potential size of the market and see it falling comfortably within
a US$5bn to US$19bn(8) range within the first five years post
PASPA.
Our US business is well placed to capitalise on the market
leading access we have secured to 24(11) states, which altogether
would cover a population of c200m people. Preparations are well
underway to bring the operation of the existing Caesars and Cantor
sports books into the William Hill network, subject to regulatory
approval. We will continue to develop our proprietary technology
platform to enable a best-in-class customer experience as well as
the ability to roll out quickly to new states as they regulate. The
partnership with CBS Sports, across multiple media platforms,
enables efficient nationwide customer acquisition. In combination
the building blocks for continued strong revenue growth are now in
place.
A number of additional states are preparing to regulate sports
betting in 2020 and we anticipate we will launch in up to eight new
states and we will continue to incur start-up costs. However, we
anticipate the overall US business will be broadly breakeven in
2020.
Going forward we will report the combined US Existing and US
Expansion business as William Hill US.
FINANCIAL REVIEW
=================
Overview
The difference between statutory results and adjusted results(1)
is due to exceptional items and other defined adjustments. These
principally relate to GBP99.8m of costs relating to our mitigation
strategy following the implementation of the GBP2 stake limit on B2
gaming products in April 2019, including the costs associated with
the 713 shop closures in the third quarter. It also includes
corporate transaction and integration costs of GBP8.2m
predominantly relating to the acquisition of Mr Green in January
2019, GBP5.2m of dual running costs associated with the transition
of the Group's land-based data centres into the cloud and GBP18.2m
of amortisation of acquired intangibles. In the previous period,
this principally related to an impairment charge of GBP882.8m
recognised in the Retail division following the original
announcement of the GBP2 stake limit on B2 gaming products.
Further detail on adjusted results is provided in note 3 to the
financial statements.
The analysis below considers only continuing operations unless
specifically stated otherwise. In the previous period, the Group
disposed of William Hill Australia, the Australia segment, in April
2018. This was classified as a discontinued operation and therefore
not included within the comparative in the below analysis. The
Group acquired Mr Green in January 2019. The analysis does not
include Mr Green performance before acquisition date unless the
financials are specifically stated as pro forma.
The Group's revenue declined by 2% or GBP39.6m to GBP1,581.7m,
with the decline in Retail revenue following the implementation of
the GBP2 stake limit offset by revenue growth in the US and Online
divisions, including the revenue recognised from Mr Green. The
prior period was also a 53-week trading period compared to 52-weeks
in the current period.
With costs of sales decreasing by 2%, this led to gross profit
of GBP1,203.8m, a decrease of 3% or GBP31.9m. Net operating
expenses declined by GBP732.7m (38%) on a statutory basis, mainly
reflecting movements in exceptional items and adjustments with
GBP882.8m impairment charge of the Retail segment recognised in the
previous period.
On an adjusted basis, net operating expenses grew by GBP58.8m
(6%) to GBP1,056.8m. This includes the costs of Mr Green, as well
as increased investment costs in the continued expansion in the US
business since PASPA was overturned in May 2018. This led to a
decrease in the Group adjusted operating profit(2) of 37% to
GBP147.0m.
On a statutory basis, net finance costs have increased by 49% or
GBP16.5m, primarily due to parallel running of bonds with a new
GBP350m bond issued in May 2019 and due to the implementation of
the new IFRS 16 Leases accounting standard. We recognised a total
tax credit of GBP10.6m on a loss before tax of GBP37.6m. This
represented an effective tax rate of 28.2% (2018: 0.8%). A lower
amount of non-deductible expenditure attributable to exceptional
costs in 2019 together with a release of prior year tax provisions
no longer required have contributed to a larger tax credit this
year. Loss after tax for the period was GBP27.0m (2018: loss after
tax GBP716.1m). This was driven by the exceptional items across
both periods with GBP99.8m cost relating to the mitigation
strategies as a result of the GBP2 stake limit on B2 gaming
products in the current period and with GBP882.8m impairment charge
of the Retail segment in the previous period. This corresponds to a
loss per share(3) of 3.1p (2018: loss per share of 83.6p). On an
adjusted basis, profit after tax decreased by 47%, or GBP82.3m, to
GBP93.8m with a corresponding 48%, or 9.9p, decrease in basic
earnings per share(3) to 10.7p.
We continued to generate strong operational cash flow in the
period, despite the drop in adjusted operating profits due to the
implementation of the GBP2 stake limit on B2 gaming products, with
net cash flow from operating activities of GBP183.0m. This was a
decrease of GBP14.1m or 7% compared to the previous period. The
acquisition of Mr Green and continued investment in capital
expenditure and the expanding US business has led to an increase in
net debt(4) to GBP535.7m compared to GBP308.1m in the prior period.
This, coupled with a reduction in EBITDA for covenant purposes(4)
due to reduced operating profits as a result of the GBP2 stake
limit on B2 gaming products, led to an increase in net debt to
EBITDA for covenant purposes(4) to 2.4 times (2018:1.0 times).
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 52-week period compared to a 53-week
comparative. This has not been adjusted for in the analysis
below.
Divisional performance
Online revenues of GBP738.3m grew 16% following the acquisition
of Mr Green offsetting regulatory impacts in both the UK and
International markets. The increase in remote gaming duty in the UK
from 15% to 21% at a cost of cGBP13m coupled with inflationary cost
pressures resulted in adjusted operating profit of GBP118.8m, 9%
lower YoY. The Online division also benefited by cGBP8m through the
treatment of software depreciation on acquisition being classified
as an adjusted item.
Retail revenue fell GBP178.2m or 20% as gaming machines
decreased by 36% due to the implementation of the GBP2 stake limit
on B2 gaming products and Sportsbook remained flat with a 2%
decrease on staking offset by a 0.3%pt increase in margin. On a
like-for-like ("LFL")(7) basis sportsbook staking grew 6% as shops
benefited from both substitution of customer spend from gaming
machines into sports and customers migrating from closed shops
across the industry. Adjusted operating profit(2) of GBP83.2m was
down GBP67.1m or 45% YoY as a result of the lower revenues offset
by the closure of loss making shops and a cGBP7m benefit from the
rental costs of the closed shops being classified as exceptional
costs for the three month period between announcing the closure and
them closing.
Our US division, which comprises the US Existing segment (with
all operations existing before PASPA was overturned in May 2018
excluding Delaware) and the US Expansion segment (with all
operations in new jurisdictions since PASPA was overturned
including Delaware) saw revenue growth of 38% to GBP126.4m. The US
Existing segment, with growth at 7%, has experienced seven
consecutive years of growth. The US Expansion segment benefited
from the opening of three new states in the year, which resulted in
revenues of GBP42.8m, growth of 227%. US Revenue includes service
provider revenue, which represents net profit share where William
Hill US provides sportsbooks to the operator. Adjusted operating
profit(2) in the US was GBP1.0m, an increase of GBP1.6m from 2018
following the contribution from new states, disciplined investment
across the Expansion segment and the GBP10.3m income from the sale
of shares held in The Stars Group, which we were entitled to as
part of our agreement with Eldorado (see note 11 to the financial
statements).
Exceptional items and adjustments
Exceptional items and adjustments amounted to GBP120.8m after
tax, a decrease of GBP771.4m compared to the prior period, which
included an impairment charge of the Retail division of GBP882.8m
following the announcement of the stake limit on B2 gaming products
being reduced from GBP100 to GBP2.
The largest exceptional item in the year at GBP99.8m relates to
the triennial mitigation restructuring programme following the
implementation of the GBP2 stake limit on B2 gaming products.
GBP95.1m of the GBP99.8m relates to costs in the Retail
division, the majority associated with the planned shop closures of
which GBP47.3m was an impairment charge against the relevant
right-of-use lease assets. The remaining costs in the Retail
division relate to other costs of closure, onerous costs and
redundancy costs.
This programme is expected to last through 2020 with cash costs
of cGBP70m relating to the Retail segment. This has increased from
the costs disclosed previously, as we are not expecting to receive
the amount of cash inflows from certain asset disposals in the
Retail division as we previously estimated.
The accounting costs incurred to date during 2018 and 2019 of
GBP104.4m are greater than the expected cash costs to deliver the
programme, which include potential mitigation strategies through
the sale of freehold properties and any savings from early exit
from lease arrangements. The accounting and cash costs will
converge but will not equal each other by the end of 2020 when the
programme ends as mitigation strategies will continue to be
realised after 2020.
GBP3.5m of costs relate to the final elements of the
Transformation programme that commenced in 2016. This programme has
now ended. The total incurred since 2016 is GBP99.3m. This
programme delivered a range of cost optimisation and business model
initiatives which continue to underpin the future growth in the
business. The costs incurred in 2019 were less than expected, in
part due to a profit on disposal of the previous Group head office,
Greenside House, and in part due to a higher than expected
proportion of cost being capitalised. Corporate transaction and
integration costs of GBP8.2m have been incurred in relation to the
Mr Green acquisition as well as the partnership with Eldorado.
In 2019 we recognised an exceptional cost of GBP5.2m relating to
dual running costs as we move our land-based data centres into the
cloud. The dual running costs treated as exceptional are
specifically those costs relating to our land-based data centres
that will no longer be incurred once the migration to the cloud is
complete. These dual running costs are expected to be incurred
until 2021 at a total of cGBP15m split equally across the
three-year programme.
Adjustments totalled a net charge before tax GBP18.2m (2018:
GBP2.5m). This related to amortisation charges on acquired
intangibles, which have increased due to the additional intangibles
recognised in the period from the acquisition of Mr Green and the
partnership with Eldorado Resorts.
Taxation
On a statutory basis, the Group recognised a tax credit of
GBP10.6m on losses before tax of GBP37.6m, giving an effective tax
rate of 28.2% (2018:0.8%). The tax credit and therefore the tax
rate is adversely impacted by the non-deductibility of certain
exceptional costs (principally the impairment of the lease
right-of-use asset).
On an adjusted basis, the Group recognised a tax charge of
GBP2.7m on adjusted profits before tax of GBP96.5m, giving an
effective tax rate of 2.8% (2018: 12.0%). This rate is lower than
the UK statutory rate, primarily as a result of operating in
territories with lower tax rates such as Gibraltar and Malta. The
rate also benefits this year from the release of provisions
previously held for uncertain tax positions and which have been
offset by the recognition of a provision for additional tax payable
following a potential change, with retrospective effect, in
specific UK tax legislation.
The Group's adjusted effective tax rate for 2020 is now expected
to be c9%.
Earnings per share
Basic EPS(3) was a loss per share of 3.1p compared to a loss per
share of 83.6p in the prior period. This reflected the current
period loss after tax made of GBP27.0m including GBP99.8m of
exceptional costs relating to the mitigation strategies following
the implementation of the GBP2 stake limit on B2 gaming products,
compared to a loss after tax of GBP716.1m, due predominantly to the
GBP882.8m impairment of the Retail segment. Adjusted EPS(3)
decreased by 48% to 10.7p, due to the 47% decrease in adjusted
profits after tax to GBP93.8m.
Of the statutory loss after tax of GBP27.0m, a loss of GBP26.9m
related to equity holders of the company and GBP0.1m loss related
to non-controlling interest. This predominantly relates to the 20%
stake in William Hill US held by Eldorado Resorts created as part
of our partnership agreement which completed In January 2019, in
addition to certain non-controlling interests created as part of
the acquisition of Mr Green.
IFRS 16 Leases
We have applied the new IFRS 16 Leases accounting standard for
the first time in 2019. This standard has a material impact on the
financial statements as it leads to most leases being recognised on
the Statement of Financial Position as a right of use asset and a
lease liability. 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.
We have adopted the modified retrospective transition approach
and therefore comparative periods are not restated.
The impact of IFRS 16 in 2019 is to increase depreciation by
GBP43.5m and interest expense by GBP5.1m while reducing other
administrative expenses by GBP45.8m. This includes the impact of
the reduced Retail estate after 713 shop closures in the third
quarter. This therefore leads to an increase in profit before
interest and tax of GBP2.3m and an increase in loss before tax of
GBP2.8m in the period.
On the Statement of Financial Position, we hold a lease
right-of-use asset of GBP129.6m within property, plant and
equipment within non-current assets, which has been reduced by a
GBP47.3m impairment against the relevant lease assets from the 713
shop closures in the third quarter. We also hold lease liabilities
of GBP163.2m split between current and non-current liabilities.
Statement of Financial Position
Intangible assets have increased by GBP409.8m compared to 1
January 2019 to GBP1,095.9m. The increase relates in part to the
acquisition of Mr Green with intangible assets of GBP114.5m
recognised on acquisition across brands (GBP83.9m); customer
relationships (GBP12.8m); acquired tech platform (GBP16.3m) and
other software intangibles (GBP1.5m), in addition to goodwill on
acquisition of GBP153.0m. The increase also relates to an asset
recognised of GBP138.0m representing exclusive access to licences
and markets as part of the partnership with Eldorado Resorts. This
asset is amortised over the 25-year life of the agreement.
Property, plant and equipment has increased by GBP115.2m
compared to 1 January 2019 primarily due to the recognition of the
right-of-use lease asset on implementation of IFRS 16 Leases.
Deferred tax assets increased by GBP31.6m to GBP43.5m primarily as
a result of recognising the benefit of current year tax losses and
other deductions for companies that are anticipated to make profits
in the foreseeable future. These increases, alongside the increase
in intangible assets, resulted in an increase in non-current assets
of GBP549.8m to GBP1,487.6m compared to 1 January 2019.
Within current assets and current liabilities we have recognised
net assets held for sale of GBP6.6m relating to the Group's 35
shops across its Northern Ireland and Isle of Man operations. We
have agreed to dispose of these operations with the sale expected
to complete in full in Q1 2020.
Total current liabilities have increased by GBP352.9m to
GBP782.2m compared to 1 January 2019. This increase mainly relates
to the transfer of the GBP203.2m outstanding on the 2020 Notes from
non-current to current and the recognition of the current portion
of the IFRS 16 lease liability (GBP37.5m). In addition the increase
relates to provisions of GBP76.9m relating in part to a provision
acquired with Mr Green relating to a gaming tax liability in
Austria (GBP53.7m) and in part the remaining provision on the costs
of closure associated with the 713 shops closed in the third
quarter (GBP17.4m). Note the relevant lease liabilities on the 713
shop closures continue to be presented within lease liabilities as
opposed to provisions.
Non-current liabilities increased by GBP118.6m compared to 1
January 2019 following the recognition of lease liabilities under
IFRS 16 of GBP125.7m. Borrowings decreased by GBP26.2m reflecting
the part early settlement and part transfer to current liabilities
of the 2020 GBP375m bond, offset by the GBP350m 2026 bond issued in
the period. Deferred tax liabilities increased by GBP17.5m to
GBP81.3m reflecting the acquisition of Mr Green's balances.
Net assets of GBP320.2m is an increase of GBP21.3m compared to 1
January 2019. Of the GBP320.2m, GBP312.9m relates to total equity
attributable to equity holders of the parent whereas GBP7.3m
relates to non-controlling interest, relating to the 20% stake in
William Hill US held by Eldorado Resorts after the completion of
our partnership agreement in January 2019 and certain small
minority interest holdings acquired as part of the acquisition of
Mr Green.
Cash flow and net debt
Operating cash flows were GBP183.0m, higher than the adjusted
operating profit(2) of GBP147.0m primarily due to the
reclassification of the costs associated with leases, which are now
presented as cash from financing activities since the
implementation of the IFRS 16 Leases accounting standard in the
current period. This was GBP14.1m (7%) lower than the prior period,
reflecting the 37% reduction in adjusted operating profits, offset
by the reclassification of lease expenses in the current
period.
We issued a new GBP350m corporate bond in the period with
GBP171.6m used to repurchase part of the outstanding 2020 Notes.
The Group returned GBP90.9m to shareholders through dividends and
the costs associated with leases were GBP46.7m in the period.
Overall, this led to a cash inflow from financing activities of
GBP30.7m.
We completed the acquisition of Mr Green in the period with a
net cash outflow of GBP173.7m in the period in addition to the
GBP19.2m in H2 2018. This includes the cost of the acquisition of
the shares in Mr Green of GBP244.8m net of the cash acquired of
GBP51.9m.
We invested GBP94.6m on capital expenditure in the period with
disposals of property, plant and equipment of GBP6.1m. This
includes investment in our proprietary technology platform in New
Jersey, which launched in time for the beginning of the NFL season,
as well as the new sportsbook front end and single wallet in
Spain.
Overall, this led to a cash outflow of GBP48.5m in the period,
compared to a cash inflow of GBP192.6m in 2018, mainly driven by
the disposals of the Australia operations and NYX investments in
the prior period. This reduced the cash and cash equivalents
balance to GBP459.4m (2018: GBP510.5m) with cash excluding customer
balances and restricted cash reducing GBP49.3m or 12% to
GBP371.5m.
Net debt for covenant purposes(4) has increased from GBP308.1m
at 1 January 2019 to GBP535.7m at 31 December 2019, reflecting the
cash outflows in the period from the acquisition of Mr Green and
the mitigation strategy to the implementation of the GBP2 stake
limit on B2 gaming products. The rolling 12 month EBITDA for
covenant purposes(4) fell 28% from GBP312.7m in the prior period to
GBP226.2m for the current period, reflecting the decrease in
adjusted operating profit after the implementation of the GBP2
stake limit on B2 gaming products from 1 April 2019. This EBITDA
for covenant purposes removes the impact of IFRS 16 Leases
accounting standard. This led to an increase in the net debt to
EBITDA for covenant purposes ratio to 2.4x (2018: 1.0x).
The Board has continued with the 8p underpin of the dividend
during this period of transition.
PRINCIPAL RISKS AND UNCERTAINTIES
===================================
We have reviewed our risk profile as set out in the 2019 Annual
Report and considered the risks facing the Group in the 2020
financial year. The key risks are identified as:
-- Regulatory, political and legal risk;
-- Strategic risk;
-- Market/financial risk;
-- Operational risk; and
-- Tax changes.
Further information is available on pages 59 to 61 of the 2019
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 2019 Annual Report and financial statements, taken as a
whole, is 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 2019 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:
U. Bengtsson R. Prior
Chief Executive Officer Chief Financial Officer
26 February 2020 26 February 2020
William Hill PLC
Consolidated Income Statement
for the 52 weeks ended 31 December 2019
52 weeks ended 31 53 weeks ended 1 January
December 2019 2019
=============================== ===== ====================================== ======================================
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
=============================== ===== ========= ================ ========= ========= ================ =========
Revenue 2 1,581.7 - 1,581.7 1,621.3 - 1,621.3
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Cost of sales 2 (377.9) - (377.9) (389.7) 4.1 (385.6)
=============================== ===== ========= ================ ========= ========= ================ =========
Gross profit 2 1,203.8 - 1,203.8 1,231.6 4.1 1,235.7
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Other operating income 16.1 - 16.1 5.7 - 5.7
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Other operating expenses 3 (1,073.8) (134.1) (1,207.9) (1,006.6) (925.6) (1,932.2)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Share of results of associates 0.9 - 0.9 2.9 - 2.9
=============================== ===== ========= ================ ========= ========= ================ =========
Profit/(loss) before interest
and tax 2 147.0 (134.1) 12.9 233.6 (921.5) (687.9)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Investment income 3.0 - 3.0 4.7 - 4.7
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Finance costs 4 (53.5) - (53.5) (38.1) (0.6) (38.7)
=============================== ===== ========= ================ ========= ========= ================ =========
(Loss)/profit before tax 2 96.5 (134.1) (37.6) 200.2 (922.1) (721.9)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Tax 3,5 (2.7) 13.3 10.6 (24.1) 29.9 5.8
=============================== ===== ========= ================ ========= ========= ================ =========
(Loss)/profit for the
period from continuing
operations 93.8 (120.8) (27.0) 176.1 (892.2) (716.1)
=============================== ===== ========= ================ ========= ========= ================ =========
Profit for the period
from discontinued operations - - - 4.5 (0.7) 3.8
=============================== ===== ========= ================ ========= ========= ================ =========
(Loss)/profit for the
period from continuing
and discontinued operations 93.8 (120.8) (27.0) 180.6 (892.9) (712.3)
=============================== ===== ========= ================ ========= ========= ================ =========
Attributable to:
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Equity holders of the
parent (26.9) (712.3)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Non-controlling interests (0.1) -
=============================== ===== ========= ================ ========= ========= ================ =========
(Loss)/earnings per share
from continuing and
discontinued
operations (pence)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Basic 7 10.7 (3.1) 21.1 (83.1)
------------------------------- ----- --------- ---------------- --------- --------- ---------------- ---------
Diluted 7 10.7 (3.1) 20.9 (83.1)
=============================== ===== ========= ================ ========= ========= ================ =========
(Loss)/earnings per share
from continuing operations
(pence)
---------------------------- ---- ----- ---- ------
Basic 710.7 (3.1) 20.6 (83.6)
---------------------------- ---- ----- ---- ------
Diluted 710.7 (3.1) 20.4 (83.6)
============================ ==== ===== ==== ======
William Hill PLC
Consolidated Statement of Comprehensive Income
for the 52 weeks ended 31 December 2019
52 weeks 53 weeks
ended ended
31 December 1 January
2019 2019
GBPm GBPm
================================================= ============ ==========
Loss for the period (27.0) (712.3)
================================================== ============ ==========
Items that will not be reclassified subsequently
to profit or loss:
------------------------------------------------- ------------ ----------
Actuarial remeasurements in defined benefit
pension scheme (2.0) (27.3)
-------------------------------------------------- ------------ ----------
Tax on remeasurements in defined benefit pension
scheme 0.3 4.7
-------------------------------------------------- ------------ ----------
Gains on fair value through other comprehensive
income financial assets:
------------------------------------------------- ------------ ----------
Changes in fair value reclassified to profit
and loss on disposal of investments in NYX - 0.4
-------------------------------------------------- ------------ ----------
Items that may be reclassified subsequently
to profit or loss:
------------------------------------------------- ------------ ----------
Exchange differences:
------------------------------------------------- ------------ ----------
Translation of foreign operations (4.0) (5.2)
-------------------------------------------------- ------------ ----------
Reclassified to profit and loss on disposal
of Australian operations - 84.3
-------------------------------------------------- ------------ ----------
Other comprehensive (loss)/income for the period (5.7) 56.9
================================================== ============ ==========
Total comprehensive loss for the period (32.7) (655.4)
================================================== ============ ==========
Attributable to:
------------------------------------------------- ------------ ----------
Equity holders of the parent (32.6) (655.4)
-------------------------------------------------- ------------ ----------
Non-controlling interests (0.1) -
================================================== ============ ==========
(32.7) (655.4)
================================================= ============ ==========
William Hill PLC
Consolidated Statement of Changes in Equity
for the 52 weeks ended 31 December 2019
Attributable to equity holders of the parent
------------------------------------------------------------ ----------- -----------------------
Hedging
Called-up Share Capital Own and
share premium redemption Merger shares translation Accumulated Total
capital account reserve reserve held reserve losses Non-controlling equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm interests GBPm GBPm
================= ========= ======= ========== ======= ====== =========== =========== =============== ======
At 1 January 2019 88.7 689.4 6.8 (26.1) (88.0) 6.6 (378.5) - 298.9
================= ========= ======= ========== ======= ====== =========== =========== =============== ======
Loss for the
financial period - - - - - - (26.9) (0.1) (27.0)
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Actuarial
remeasurements
in defined
benefit pension
scheme - - - - - - (2.0) - (2.0)
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Tax on
remeasurements
in defined
benefit pension
scheme - - - - - - 0.3 - 0.3
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Exchange
difference on
translation of
foreign
operations - - - - - (4.0) - - (4.0)
================= ========= ======= ========== ======= ====== =========== =========== =============== ======
Total
comprehensive
loss for the
period - - - - - (4.0) (28.6) (0.1) (32.7)
================= ========= ======= ========== ======= ====== =========== =========== =============== ======
Purchase and
issue of own
shares - - - - (0.5) - - - (0.5)
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Transfer of own
shares to
recipients - - - - 1.5 - (1.5) - -
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Partnership with
Eldorado (note
11) 1.3 20.5 - - - - 110.3 5.9 138.0
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Credit recognised
in respect of
share
remuneration - - - - - - 4.5 - 4.5
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Tax credit in
respect of share
remuneration - - - - - - 1.4 - 1.4
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Acquisition of Mr
Green (note 13) - - - - - - - 1.5 1.5
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
Dividends paid
(note 6) - - - - - - (90.9) - (90.9)
----------------- --------- ------- ---------- ------- ------ ----------- ----------- --------------- ------
At 31 December
2019 90.0 709.9 6.8 (26.1) (87.0) 2.6 (383.3) 7.3 320.2
================= ========= ======= ========== ======= ====== =========== =========== =============== ======
Attributable to equity holders of the parent
------------------------------------------------------------ ----------- ------------------------
Hedging
Called-up Share Capital Own and
share premium redemption Merger shares translation Accumulated Total
capital account reserve reserve held reserve losses Non-controlling equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm interests 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
Australian
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 charge 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
================= ========= ======= ========== ======= ====== =========== =========== =============== =======
William Hill PLC
Consolidated Statement of Financial Position
as at 31 December 2019
31 December 1 January
2019 2019
Notes GBPm GBPm
============================================ ===== =========== =========
Non-current assets
-------------------------------------------- ----- ----------- ---------
Intangible assets 14 1,095.9 686.1
-------------------------------------------- ----- ----------- ---------
Property, plant and equipment 15 265.0 149.8
-------------------------------------------- ----- ----------- ---------
Interests in associates 24.5 23.3
-------------------------------------------- ----- ----------- ---------
Investments 8 0.4 21.4
-------------------------------------------- ----- ----------- ---------
Deferred tax assets 43.5 11.9
-------------------------------------------- ----- ----------- ---------
Retirement benefit asset 48.4 40.5
-------------------------------------------- ----- ----------- ---------
Loans receivable 9.9 4.8
-------------------------------------------- ----- ----------- ---------
1,487.6 937.8
Current assets
-------------------------------------------- ----- ----------- ---------
Trade and other receivables 45.0 61.7
-------------------------------------------- ----- ----------- ---------
Cash and cash equivalents 459.4 510.5
-------------------------------------------- ----- ----------- ---------
Freehold property held for sale 0.7 -
-------------------------------------------- ----- ----------- ---------
Investment property held for sale 1.7 1.7
-------------------------------------------- ----- ----------- ---------
Disposal group asset held for sale 12 10.1 -
-------------------------------------------- ----- ----------- ---------
516.9 573.9
============================================ ===== =========== =========
Total assets 2,004.5 1,511.7
============================================ ===== =========== =========
Current liabilities
-------------------------------------------- ----- ----------- ---------
Trade and other payables (421.8) (387.3)
-------------------------------------------- ----- ----------- ---------
Corporation tax liabilities (20.3) (18.8)
-------------------------------------------- ----- ----------- ---------
Derivative financial instruments (19.0) (14.9)
-------------------------------------------- ----- ----------- ---------
Borrowings 9 (203.2) -
-------------------------------------------- ----- ----------- ---------
Lease liabilities 16 (37.5) -
-------------------------------------------- ----- ----------- ---------
Provisions 17 (76.9) (8.3)
-------------------------------------------- ----- ----------- ---------
Disposal group liabilities held for sale (3.5) -
-------------------------------------------- ----- ----------- ---------
(782.2) (429.3)
============================================ ===== =========== =========
Non-current liabilities
-------------------------------------------- ----- ----------- ---------
Borrowings 9 (693.5) (719.7)
-------------------------------------------- ----- ----------- ---------
Lease liabilities 16 (125.7) -
-------------------------------------------- ----- ----------- ---------
Provisions 17 (1.6) -
-------------------------------------------- ----- ----------- ---------
Deferred tax liabilities (81.3) (63.8)
============================================ ===== =========== =========
(902.1) (783.5)
============================================ ===== =========== =========
Total liabilities (1,684.3) (1,212.8)
============================================ ===== =========== =========
Net assets 320.2 298.9
============================================ ===== =========== =========
Equity
-------------------------------------------- ----- ----------- ---------
Called-up share capital 90.0 88.7
-------------------------------------------- ----- ----------- ---------
Share premium account 709.9 689.4
-------------------------------------------- ----- ----------- ---------
Capital redemption reserve 6.8 6.8
-------------------------------------------- ----- ----------- ---------
Merger reserve (26.1) (26.1)
-------------------------------------------- ----- ----------- ---------
Own shares held (87.0) (88.0)
-------------------------------------------- ----- ----------- ---------
Hedging and translation reserves 2.6 6.6
-------------------------------------------- ----- ----------- ---------
Accumulated losses (383.3) (378.5)
============================================ ===== =========== =========
Total equity attributable to equity holders
of the parent 312.9 298.9
============================================ ===== =========== =========
Non-controlling interests 7.3 -
============================================ ===== =========== =========
Total equity 320.2 298.9
============================================ ===== =========== =========
William Hill PLC
Consolidated Cash Flow Statement
for the 52 weeks ended 31 December 2019
52 weeks 53 weeks
ended ended
31 December 1 January
2019 2019
Notes GBPm GBPm
========================================================= ===== ============ ==========
Net cash from operating activities - continuing
operations 10 183.0 197.1
========================================================= ===== ============ ==========
Net cash from operating activities - discontinued
operations 10 - 1.0
========================================================= ===== ============ ==========
Investing activities
--------------------------------------------------------- ----- ------------ ----------
Dividends from associates 1.4 8.2
--------------------------------------------------------- ----- ------------ ----------
Interest received on cash and cash equivalents 1.5 2.4
--------------------------------------------------------- ----- ------------ ----------
Proceeds on disposal of property, plant and
equipment 6.1 0.7
--------------------------------------------------------- ----- ------------ ----------
Proceeds on disposal of investment property - 1.7
--------------------------------------------------------- ----- ------------ ----------
Amounts drawn down on loan facility made available
to NeoGames (5.0) (4.7)
--------------------------------------------------------- ----- ------------ ----------
Net proceeds on sale of Australian operations - 141.6
--------------------------------------------------------- ----- ------------ ----------
Net proceeds from sale of NYX investments - 100.7
--------------------------------------------------------- ----- ------------ ----------
Acquisition of Mr Green & Co AB - net of cash
acquired 13 (173.7) (19.2)
--------------------------------------------------------- ----- ------------ ----------
Investment in and subsequent disposal of Featurespace 2.1 (1.3)
--------------------------------------------------------- ----- ------------ ----------
Purchases of property, plant and equipment (10.7) (41.9)
--------------------------------------------------------- ----- ------------ ----------
Expenditure on intangible assets (83.9) (75.4)
--------------------------------------------------------- ----- ------------ ----------
Net cash (used in)/from investing activities
- continuing operations (262.2) 112.8
========================================================= ===== ============ ==========
Net cash used in investing activities - discontinued
operations - (2.9)
========================================================= ===== ============ ==========
Financing activities
--------------------------------------------------------- ----- ------------ ----------
Proceeds on issue of shares under share schemes - 1.2
--------------------------------------------------------- ----- ------------ ----------
Purchase of own shares (0.5) -
--------------------------------------------------------- ----- ------------ ----------
Debt facility issue costs (1.5) (3.1)
--------------------------------------------------------- ----- ------------ ----------
Proceeds on issue of 4.75% senior unsecured
notes due May 2026 9 350.0 -
--------------------------------------------------------- ----- ------------ ----------
Amount paid on redemption of existing senior
unsecured notes 9 (171.6) -
--------------------------------------------------------- ----- ------------ ----------
Existing senior unsecured notes redemption
costs (8.1) -
--------------------------------------------------------- ----- ------------ ----------
Lease liabilities - principal payments (46.7) -
--------------------------------------------------------- ----- ------------ ----------
Dividends paid 6 (90.9) (113.5)
--------------------------------------------------------- ----- ------------ ----------
Net cash from/(used in) financing activities
- continuing operations 30.7 (115.4)
========================================================= ===== ============ ==========
Net (decrease)/increase in cash and cash equivalents
in the period (48.5) 192.6
--------------------------------------------------------- ----- ------------ ----------
Changes in foreign exchange rates (2.2) 0.9
--------------------------------------------------------- ----- ------------ ----------
Transferred to disposal group held for sale (0.4) -
--------------------------------------------------------- ----- ------------ ----------
Cash and cash equivalents at start of period 510.5 317.0
========================================================= ===== ============ ==========
Cash and cash equivalents at end of period 459.4 510.5
========================================================= ===== ============ ==========
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 52 week period ended 31 December 2019 or 53 week period ended 1
January 2019, 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 26 February 2020.
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.
The standards that do not have a material effect on the results or
net assets of the Group are listed in an appendix to the Annual
Report. IFRS 16 'Leases' does have a material impact on the Group's
financial statements.
IFRS 16 'Leases'
IFRS 16 'Leases' has replaced IAS 17 'Leases' in its entirety.
The distinction between operating leases and finance leases for
lessees is removed and it results 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 has changed 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
previously 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 and
vehicles.
The Group has applied IFRS 16 using the modified retrospective
approach. A lease liability has been recognised equal to the
present value of the remaining lease payments discounted using an
incremental borrowing rate. A right-of-use asset has been
recognised equal to the lease liability adjusted for prepaid and
accrual lease payments. The Group has applied the below practical
expedients permitted under the modified retrospective approach:
- exclude leases from measurement and recognition where the
lease 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 - the weighted average of the discount
rates used on transition was 2.76%;
- 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.
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.
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 24 and 25 to
the Group financial statements within the Annual Report.
As highlighted in notes 24 and 25 to the Group financial
statements, 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. Currently these facilities are undrawn and the Group holds a
cash balance of GBP371.5m (excluding customer balances and other
restricted cash of GBP87.9m). The outstanding balance of the
Group's 2020 GBP375m bond of GBP203.4m (note 9) is repayable within
the next 12 months and is shown as a current liability. The Group
issued a new GBP350m bond in May 2019 and is using these proceeds
in part to refinance this debt, which alongside the undrawn
facilities and existing working capital, will be used to meet this
current liability.
Whilst there are a number of risks to the Group's trading
performance, as summarised in the 'Managing our risks' section on
pages 59 to 61, 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 and the potential risks and impacts
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 186 to 192 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.
Exceptional items and adjustments
The Group separately reports exceptional items and adjustments
in order to calculate adjusted results, as it believes these
measures provide additional useful information on underlying
performance and trends to shareholders, together with an
understanding of the effect of non-recurring or large individual
items upon the overall profitability of the Group. These adjusted
results are not recognised results under IFRS and may not be
directly comparable with those used by other companies.
The classification of adjusting items requires significant
management judgement after considering the nature and materiality
of a transaction. The Group's definitions of adjusting items are
outlined within both the Group accounting policies and note 3.
These definitions have been applied consistently year on year. Note
3 provides further details on current year adjusting items and
their adherence to Group policy.
IFRS 16 'Leases'
IFRS 16 'Leases' has replaced IAS 17 'Leases' in its entirety.
The directors have addressed the key judgements, including the
assessment of the lease term at the point where the lessee can be
reasonably certain of its right to use the underlying asset.
Across the Retail estate, the Group has recognised a
right-of-use lease liability of GBP121.3m at 31 December 2019.
Given the recent unprecedented regulatory change with the
implementation of the GBP2 stake limit on B2 gaming products in the
Retail business on 1 April 2019 and the decision the Group has
taken to close 713 shops in the third quarter of 2019, the
directors have determined the lease term under IFRS 16 across the
Retail shop estate as the next available break date as the current
uncertainty means the Group is not 'reasonably certain' that any
lease break will not be exercised.
Mr Green valuation of intangibles
The Group acquired Mr Green & Co AB (Mr Green) on 28 January
2019 for GBP244.8m. As part of the purchase price allocation the
Group recognised separately identifiable acquired intangibles
comprising brands (GBP83.9m); customer relationships (GBP12.8m) and
platform software (GBP16.3m). Goodwill of GBP153.0m was recognised
on acquisition. See note 13 for additional information.
The Group exercised judgement in determining the intangible
assets acquired and their fair value on the Mr Green business
combination, with the support of external experts to support the
valuation process, where appropriate. The judgements made are based
on recognised valuation techniques such as the "relief from
royalty" method for brands, recognised industry comparative data
and the Group's industry experience and specialist knowledge.
Eldorado Resorts, Inc. partnership
On 6 September 2018, the Group announced a partnership between
William Hill US and Eldorado Resorts, Inc. (Eldorado). This
partnership agreement obtained all regulatory clearances on 29
January 2019.
This agreement led to William Hill US becoming the exclusive
partner in the provision of betting services conducted through all
retail and online channels and gaming services in online channels
at or attached to all current and future Eldorado properties. As
part of the agreement, Eldorado received 13,430,434 William Hill
PLC shares, which are subject to an initial 3-5 year lock-up
period, as well as a 20% shareholding in William Hill US and 40% of
betting and gaming profits generated in respect of Eldorado
properties. The agreement is for an initial 25-year term.
The directors have made the following critical accounting
judgements related to the Eldorado partnership:
-- The partnership agreement represents a share-based payment
transaction and is therefore accounted for under IFRS 2 'Share
Based Payment' as opposed to a Business Combination under IFRS
3;
-- The exclusive access and use of gaming licences meet the
criteria for recognition of an asset;
-- The assets acquired were all identifiable with no
unidentifiable assets acquired as part of the partnership that
would be recognised in the Consolidated Income Statement on
inception under IFRS 2; and
-- The equity consideration disposed of is an equitable cost for
the asset acquired and therefore the asset has been valued based on
the fair value of the equity consideration disposed of.
This led to the Group recognising an intangible asset of
GBP138.0m with the value representing both the shares in William
Hill PLC valued at GBP21.8m based on the share price on the date of
completion of the agreement, and GBP116.2m ($153.0m) value
attributable to 20% of the William Hill US business.
Further detail on the partnership with Eldorado is provided in
note 11.
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 12 to the Group financial
statements within the Annual Report provides information on the
assumptions used in these financial statements, as well as the
degree of sensitivity to changes in assumptions.
In 2018, the Group recognised an impairment of GBP882.8m in the
Retail segment due to the reduced expected future cash flows as a
result of the announcement of the GBP2 stake limit on B2 gaming
products in the Retail business. This impairment was based on the
estimate at the time that this would lead to a reduction in the
Retail segment's annualised adjusted operating profit (including
mitigation measures) of cGBP70-100m.
The GBP2 stake limit was implemented from April 1 2019, which
led to the Group taking the decision to close 713 shops in the
third quarter of 2019. A regulatory change of this nature is
unprecedented and although the Group now has nine months of trading
since implementation to aid estimation of the future cash flows,
the full impact of this change will not be fully known until some
years after implementation. In particular, assumptions surrounding
the rate of closures of competitor shops are outside of the control
of the Group and will have a significant impact on the expected
future cash flows of the segment.
The Group performed an impairment review of the intangible
assets with indefinite lives remaining in the Retail segment and
adjudged that there were no further impairments (or reversals of
the previous impairment charge recognised). As the impact becomes
more fully known in time, this could result in further impairments
(or reversals of the existing impairment charge) of assets in the
Retail segment. Refer to note 12 to the Group financial statements
within the Annual Report 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 34 to the Group 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.
Dilapidations provisions
As a result of the implementation of the GBP2 stake limit on
April 1 2019, the Group took the decision to close 713 shops in the
third quarter of 2019. The Group has provided for onerous costs and
costs of closure with a remaining provision held at 31 December
2019 of GBP17.4m. Within this provision, GBP12.1m relates to
dilapidations and shop strip out cost provisions which have been
estimated using a best estimate cost per square foot and exit date
on each lease. The actual results may differ as lease exits are
negotiated with any changes to the amount provided recognised in
the Consolidated Income Statement as part of the Triennial
mitigation restructuring cost classified as an exceptional
item.
Based on management's knowledge and experience and third party
advice, the directors believe a range of possible values for the
dilapidations provisions as at 31 December 2019 would be GBP7.7m -
GBP18.6m.
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 review 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
Online segment includes the results of Mr Green since the Group's
acquisition in January 2019, as the Chief Operating Decision Makers
review the Online business as a whole when making decisions
regarding the allocation of resources between segments. The US
Existing segment comprises all activity undertaken in Nevada and
the Bahamas locations, before the Supreme Court overturned PASPA in
May 2018. The US Expansion segment includes all operations in
remaining US locations where gambling has been regulated following
the Supreme Court's overturning of PASPA. There are no
inter-segmental sales within the Group.
Segment performance is shown on an adjusted basis, with a
reconciliation from adjusted operating profit to statutory results
for clarity. Information for the 52 weeks ended 31 December 2019 is
as follows:
US Expansion(1,2)
Retail Online US Existing(1) GBPm Other Corporate Group
GBPm GBPm GBPm GBPm GBPm GBPm
======================= ======= ======= ================ ================= ===== ========= =======
Direct revenue 717.0 738.3 83.1 32.4 - - 1,570.8
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Service provider
revenue - - 0.5 10.4 - - 10.9
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Revenue 717.0 738.3 83.6 42.8 - - 1,581.7
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
GPT, duty, levies
and other costs
of sales (162.2) (202.4) (8.0) (5.3) - - (377.9)
======================= ======= ======= ================ ================= ===== ========= =======
Gross profit 554.8 535.9 75.6 37.5 - - 1,203.8
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Depreciation (48.4) (3.8) (3.3) (2.6) - (8.5) (66.6)
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Amortisation (9.4) (41.8) (2.5) (1.0) - (2.7) (57.4)
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Other administrative
expenses (413.8) (371.5) (42.7) (60.0) 0.2 (45.9) (933.7)
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Share of results
of associates - - - - - 0.9 0.9
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Adjusted operating
profit/(loss)(3) 83.2 118.8 27.1 (26.1) 0.2 (56.2) 147.0
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Operating exceptional
items and adjustments (95.1) (18.7) (2.1) (5.1) - (13.1) (134.1)
======================= ======= ======= ================ ================= ===== ========= =======
(Loss)/profit before
interest and tax (11.9) 100.1 25.0 (31.2) 0.2 (69.3) 12.9
======================= ======= ======= ================ ================= ===== ========= =======
Investment income - - - - - 3.0 3.0
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Finance costs (3.5) (0.1) (0.5) (0.3) - (49.1) (53.5)
======================= ======= ======= ================ ================= ===== ========= =======
(Loss)/profit before
tax (15.4) 100.0 24.5 (31.5) 0.2 (115.4) (37.6)
======================= ======= ======= ================ ================= ===== ========= =======
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. Results from the state of Delaware were previously split
between US Existing and US Expansion. The approach has changed and
now all Delaware results are presented in US Expansion to provide a
clearer presentation, this had an adjusted operating profit impact
of GBP1.3m in the prior period.
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.
At 31 December Retail Online US Existing US Expansion Other Corporate Group
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ====== ====== =========== ============ ===== ========= =======
Statement of Financial
Position information
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Total segment assets 593.2 739.3 100.3 189.1 - 339.1 1,961.0
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Total segment liabilities 245.1 302.2 65.3 22.0 - 947.2 1,581.8
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Included within
total assets:
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Goodwill - 344.3 22.9 - - - 367.2
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Other intangibles
with indefinite
lives 326.6 - - - - - 326.6
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Interests in associates - 1.7 - - - 23.1 24.8
---------------------------- ------ ------ ----------- ------------ ----- --------- -------
Capital additions 6.0 54.8 19.1 19.1 - 5.6 104.6
============================ ====== ====== =========== ============ ===== ========= =======
Assets and liabilities have been allocated by segment based on
the information reviewed by the Group's Chief Executive Officer and
Chief Financial Officer. Corporate assets and liabilities include
net borrowings and the net defined benefit pension asset as well as
any assets and liabilities that cannot be allocated to a particular
segment other than on an arbitrary basis. The above analysis
excludes corporation tax, deferred tax-related balances and
balances related to the disposal group held for sale.
Capital additions in the above table are stated on an accruals
basis.
Segment information for the 53 weeks ended 1 January 2019:
US Expansion(1,2)
Retail Online US Existing(1) GBPm Other Corporate Group
GBPm GBPm GBPm GBPm GBPm GBPm
======================= ======= ======= ================ ================= ===== ========= =======
Direct revenue 895.2 634.4 78.2 10.4 0.2 - 1,618.4
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Service provider
revenue - - 0.2 2.7 - - 2.9
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Revenue 895.2 634.4 78.4 13.1 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 71.0 11.5 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 31.3 (31.9) 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 27.7 (31.9) 0.3 (81.7) (687.9)
======================= ======= ======= ================ ================= ===== ========= =======
Investment income - - - - - 4.7 4.7
----------------------- ------- ------- ---------------- ----------------- ----- --------- -------
Finance costs - - - - - (38.7) (38.7)
======================= ======= ======= ================ ================= ===== ========= =======
(Loss)/profit before
tax (735.7) 133.4 27.7 (31.9) 0.3 (115.7) (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. Results from the state of Delaware were previously split
between US Existing and US Expansion. The approach has changed and
now all Delaware results are presented in US Expansion to provide a
clearer presentation, this had an adjusted operating profit impact
of GBP1.3m in the prior period.
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 1 January Retail Online US Existing US Expansion Other Corporate Group
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
=========================== ====== ====== =========== ============ ===== ========= =======
Revenues and non-current assets by geographical area are as
follows:
Non-current
Revenues assets
============ ========== ========================
52 weeks 53 weeks
ended ended
31 December 1 January 31 December 1 January
2019 2019 2019 2019
GBPm GBPm GBPm GBPm
================== ============ ========== ============ ==========
United Kingdom 1,197.9 1,379.5 711.5 598.8
------------------ ------------ ---------- ------------ ----------
USA 126.4 91.5 222.7 56.8
------------------ ------------ ---------- ------------ ----------
Rest of the World 257.4 150.3 553.4 282.2
================== ============ ========== ============ ==========
1,581.7 1,621.3 1,487.6 937.8
================== ============ ========== ============ ==========
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 key
metrics 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 93 to 119 within
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 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 item
is defined as an adjustment as the directors believe it would
impair the visibility of the underlying activities across each
segment as it is not closely related to the businesses' or any
associated operational cash flows. The amortisation of specific
intangible assets recognised in acquisitions is recurring and
recognised over their useful life.
Exceptional items and adjustments as follows:
52 weeks 53 weeks
ended ended
Exceptional 31 December Exceptional 1 January
items Adjustments 2019 items Adjustments 2019
GBPm GBPm GBPm GBPm GBPm GBPm
================================== =========== =========== ============ =========== =========== ==========
Operating
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Cost of sales
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Indirect taxation(1) - - - 4.1 - 4.1
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Other operating expenses
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Impairment of Retail segment(2) - - - (882.8) - (882.8)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Transformation programme
restructuring costs (3.5) - (3.5) (31.2) - (31.2)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Triennial mitigation restructuring
costs (99.8) - (99.8) (4.6) - (4.6)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Disposal of Australian
operations(3) - - - (0.6) - (0.6)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Guaranteed minimum pension
equalisation(4) - - - (1.4) - (1.4)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Legal fees (0.4) - (0.4) (0.6) - (0.6)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Disposal of investments
in NYX(5) - - - (0.4) - (0.4)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Portfolio shop closures(6) 1.2 - 1.2 0.3 - 0.3
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Corporate transaction and
integration costs (8.2) - (8.2) (1.8) - (1.8)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Dual running costs (5.2) - (5.2) - - -
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Amortisation of acquired
intangibles - (18.2) (18.2) - (2.5) (2.5)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
(115.9) (18.2) (134.1) (919.0) (2.5) (921.5)
================================== =========== =========== ============ =========== =========== ==========
Non-operating
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Costs in respect of refinancing(7) - - - (0.6) - (0.6)
================================== =========== =========== ============ =========== =========== ==========
- - - (0.6) - (0.6)
================================== =========== =========== ============ =========== =========== ==========
Total exceptional items
and adjustments before tax (115.9) (18.2) (134.1) (919.6) (2.5) (922.1)
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Tax on exceptional items
and adjustments 11.4 1.9 13.3 37.6 0.3 37.9
---------------------------------- ----------- ----------- ------------ ----------- ----------- ----------
Exceptional tax items(8) - - - (8.0) - (8.0)
================================== =========== =========== ============ =========== =========== ==========
Total exceptional items
and adjustments (104.5) (16.3) (120.8) (890.0) (2.2) (892.2)
================================== =========== =========== ============ =========== =========== ==========
1. 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 cost of sales in light of the material scale
and one-off nature of the charge. In 2018, the Group reached tax
settlements within certain jurisdictions which led to a release of
previously accrued balances. The release was treated as exceptional
consistent with the original expense.
2. In 2018, as a result of the conclusion of the Triennial
Review and the announcement of the maximum stakes on B2 gaming
products reducing to GBP2, management recognised an impairment of
the assets of the Retail segment. This was presented as an
exceptional item due to its material and one-off nature.
3. On 23 April 2018, the Group sold its Australian operations to
CrownBet Holdings Pty Ltd. The resulting loss on disposal of
GBP0.6m was classified as an exceptional item in 2018 due to its
one-off nature.
4. Following the judgement in the Lloyds case on 26 October
2018, the need to equalise for the effect of differences in
guaranteed minimum pensions (GMP) between males and females was
made more certain and consequently an allowance for the effect of
GMP equalisation was made in 2018. The Scheme's Actuary estimated
that the potential GMP equalisation cost as at 1 January 2019 was
GBP1.4m, which is included within the defined benefit obligation.
This was recognised as a past service cost within exceptional items
in 2018.
5. 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 on completion. This was classified as an exceptional item
in 2018 due to the one-off nature of the disposal with the previous
movements in this investment classified within adjustments.
6. During 2017, as part of the ongoing Group-wide transformation
programme, the Group performed a full strategic review of its 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.
7. In 2018, the Group entered into GBP390m of revolving credit
facilities, replacing the existing revolving credit facilities. The
remaining capitalised balance of finance fees on the terminated
facilities, which was being expensed over the life of the replaced
facilities, were expensed and recognised as an exceptional item
given the one-off nature of the charge.
8. In 2018, the Group recognised an exceptional tax provision of
GBP8.0m in respect to potential additional tax payable relating to
a change, with retrospective effect, in specific non-UK tax
legislation.
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 is part of a
Group-wide programme, which has completed this year. 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 costs to be exceptional. As the programme has closed,
no further costs will be incurred from 2020. Further detail has
been 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 in
retail to GBP2. 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% to
compensate for the loss of machines gaming duty. 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.
GBP95.1m of the cost recognised in the period relates to costs
associated with the closure of 713 shops, GBP47.3m relates to an
impairment charge against the relevant right-of-use assets and
GBP47.8m relates to other costs of closure, onerous costs,
redundancy costs and other related costs. The remaining GBP4.7m
relates to other Group-wide costs as a part of the cost-saving
restructuring programme.
The programme is due to last until 2020. We previously expected
the cash costs of the programme to be cGBP75m, of which cGBP60m
relates to the Retail segment and cGBP15m of cost from the
Group-wide cost-saving programme initiated as a specific result of
the Triennial Review decision. We now expect the cash cost relating
to the Retail segment to be cGBP70m and the total cash cost of the
programme to be cGBP80m with the increase reflecting anticipated
cash inflows from certain asset disposals in the Retail division
being lower than previously estimated. The costs recognised to date
across 2018 and 2019 of GBP104.4m are greater than this cash cost,
as they do not include a range of mitigation strategies such as any
savings from early exit from lease arrangements and the potential
sale of freehold properties.
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.
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. The potential damages were previously disclosed as a
contingent asset.
During the period, the Group acquired CG Technology, who were
the counterparty in the legal action. The damages and fees to be
awarded to the Group by CG Technology would be treated as a
reduction in consideration to be paid for the acquisition. As such,
there will be no further legal fees in respect of this case and the
previous potential gain will be recognised on completion of the
acquisition in 2020.
Corporate transaction and integration costs
In 2019, the Group completed both the acquisition of Mr Green
and its strategic partnership with Eldorado. The costs relating to
these corporate transactions incurred in 2018 were recognised as
exceptional and these costs continue to be recognised on a
consistent basis in 2019. The Group will continue to incur
integration costs surrounding Mr Green in 2020 and these costs will
continue to be presented as exceptional given their one-off nature
that would otherwise distort an understanding of the Group's
underlying cost base.
Dual running costs
During the period, the Group has embarked on a project to move
its land-based data centres into the cloud. This is a
transformational programme that is expected to last until 2021 and
the Group has classified the dual running costs of this programme
as exceptional because the dual running costs are deemed to be a
one-off incremental cost to the business. The costs of developing
or migrating into the cloud have been treated as underlying.
Further, the costs are considered material, both in aggregate and
in each individual year of the programme. The cost of the programme
is expected to be cGBP15m, broadly split equally between the three
years.
4. Finance costS
52 weeks 53 weeks
ended ended
31 December 1 January
2019 2019
GBPm GBPm
====================================== ============ ==========
Interest payable and similar charges:
-------------------------------------- ------------ ----------
Bank loans, bonds and overdrafts 46.6 36.4
-------------------------------------- ------------ ----------
Amortisation of finance costs(1) 1.8 1.7
-------------------------------------- ------------ ----------
Interest on lease liabilities 5.1 -
-------------------------------------- ------------ ----------
53.5 38.1
====================================== ============ ==========
1. The above does not include exceptional finance costs of
GBP0.6m as detailed in note 3 for the prior period.
5. Tax on (LOSS)/profit on ordinary activities for continuing
operations
The tax charge/(credit) comprises:
52 weeks 53 weeks
ended ended
31 December 1 January
2019 2019
GBPm GBPm
===================================================== ============ ==========
Current tax:
----------------------------------------------------- ------------ ----------
UK corporation tax 3.1 21.8
----------------------------------------------------- ------------ ----------
Overseas tax 10.0 3.1
----------------------------------------------------- ------------ ----------
Adjustment in respect of prior periods (7.5) 2.0
===================================================== ============ ==========
Total current tax charge 5.6 26.9
===================================================== ============ ==========
Deferred tax:
----------------------------------------------------- ------------ ----------
Origination and reversal of temporary differences (15.7) (33.0)
----------------------------------------------------- ------------ ----------
Adjustment in respect of prior periods (0.5) 0.3
===================================================== ============ ==========
Total deferred tax credit (16.2) (32.7)
===================================================== ============ ==========
Total tax on (loss)/profit on ordinary activities
for continuing operations (10.6) (5.8)
===================================================== ============ ==========
The effective tax rate in respect of adjusted results was 2.8%
(53 weeks ended 1 January 2019: 12.0%). The effective tax rate in
respect of statutory results was 28.2% (53 weeks ended 1 January
2019: 0.8%).
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:
52 weeks ended 53 weeks ended
31 December 2019 1 January 2019
============================================= ======================================
Exceptional Exceptional
items Statutory items Statutory
Adjusted and adjustments total Adjusted and adjustments total
GBPm GBPm GBPm GBPm GBPm GBPm
-----------------
(Loss)/profit
before tax 96.5 (134.1) (37.6) 200.2 (922.1) (721.9)
================= ================ ================ ========= ======== ================= =========
Tax on Group
(loss)/profit at
standard UK
corporation
tax rate of 19%
(2018: 19%) 18.3 (25.5) (7.2) 38.0 (175.2) (137.2)
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Different tax
rates in
overseas
territories (12.8) 1.9 (10.9) (20.1) 1.1 (19.0)
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Losses not
recognised for
deferred
tax 1.5 - 1.5 - - -
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Accrual of
liabilities for
uncertain
tax positions 3.1 - 3.1 11.2 - 11.2
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Impact of future
changes in tax
rate (1.2) 1.0 (0.2) 0.3 3.8 4.1
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Tax on share of
results of
associates (0.5) - (0.5) (0.5) - (0.5)
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Adjustment in
respect of prior
periods (7.7) (0.3) (8.0) (5.7) 8.0 2.3
----------------- ---------------- ---------------- --------- -------- ----------------- ---------
Non-deductible
expenditure 2.0 9.6 11.6 0.9 132.4 133.3
================= ================ ================ ========= ======== ================= =========
Total tax
(credit)/charge 2.7 (13.3) (10.6) 24.1 (29.9) (5.8)
================= ================ ================ ========= ======== ================= =========
The benefit for tax rates in overseas territories reflects the
lower effective tax rate on profits earned in Gibraltar and Malta.
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 GBP11.2m, offset by the recognition of a provision for
additional tax payable following a potential change, with
retrospective effect, in specific UK tax legislation. The
exceptional tax charge arising in respect of non-deductible
expenditure relates to the impairment of the lease right-of-use
asset and the costs of acquiring Mr Green.
The Group's effective tax rate for 2020 is expected to be
c9%.
6. Dividends proposed and paid
52 weeks 53 weeks 52 weeks 53 weeks
ended ended ended ended
31 December 1 January 31 December 1 January
2019 2019 2019 2019
Per share Per share GBPm GBPm
====================================== ============ ========== ============ ==========
Equity shares:
-------------------------------------- ------------ ---------- ------------ ----------
Current period interim dividend paid 2.7p 4.3p 23.2 36.7
-------------------------------------- ------------ ---------- ------------ ----------
Prior period final dividend paid 7.7p 8.9p 67.7 76.8
====================================== ============ ========== ============ ==========
10.4p 13.2p 90.9 113.5
====================================== ============ ========== ============ ==========
Proposed final dividend 5.3p 7.7p 46.7 66.6
====================================== ============ ========== ============ ==========
The proposed final dividend of 5.34p will, subject to
shareholder approval, be paid on 4 June 2020 to all shareholders on
the register on 24 April 2020. 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 874 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 30 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:
52 weeks ended 31 53 weeks ended 1 January
December 2019 2019
============================== =============================
Potentially Potentially
dilutive dilutive
share share
Basic options Diluted Basic options Diluted
================================ ======== =========== ======= ======= =========== =======
Statutory (loss)/profit
attributable to equity holders
of the parent (GBPm)
-------------------------------- -------- ----------- ------- ------- ----------- -------
Continuing operations ( 26 .9) - (26.9) (716.1) - (716.1)
-------------------------------- -------- ----------- ------- ------- ----------- -------
Discontinued operations - - - 3.8 - 3.8
================================ ======== =========== ======= ======= =========== =======
Total (26.9) - (26.9) (712.3) - (712.3)
Weighted average number
of shares (million) 873.0 4.8 877.8 857.0 7.3 864.3
================================ ======== =========== ======= ======= =========== =======
(Losses) per share (pence)
-------------------------------- -------- ----------- ------- ------- ----------- -------
Continuing operations (3.1) - (3.1) (83.6) - (83.6)
-------------------------------- -------- ----------- ------- ------- ----------- -------
Discontinued operations - - - 0.4 - 0.4
================================ ======== =========== ======= ======= =========== =======
Total (3.1) - (3.1) (83.1) - (83.1)
================================ ======== =========== ======= ======= =========== =======
The earnings per share figures for the adjusted results are as
follows:
52 weeks ended 31 53 weeks ended 1 January
December 2019 2019
=========================== ============================
Potentially Potentially
dilutive dilutive
share share
Basic options Diluted Basic options Diluted
=========================== ===== =========== ======= ====== =========== =======
Adjusted profit (GBPm)
--------------------------- ----- ----------- ------- ------ ----------- -------
Continuing operations 93.8 - 93.8 176.1 - 176.1
--------------------------- ----- ----------- ------- ------ ----------- -------
Discontinued operations - - - 4.5 - 4.5
=========================== ===== =========== ======= ====== =========== =======
Total 93.8 - 93.8 180.6 - 180.6
=========================== ===== =========== ======= ====== =========== =======
Weighted average number
of shares (million) 873.0 4.8 877.8 857.0 7.3 864.3
=========================== ===== =========== ======= ====== =========== =======
Earnings per share (pence)
--------------------------- ----- ----------- ------- ------ ----------- -------
Continuing operations 10.7 - 10.7 20.6 (0.2) 20.4
--------------------------- ----- ----------- ------- ------ ----------- -------
Discontinued operations - - - 0.5 - 0.5
=========================== ===== =========== ======= ====== =========== =======
Total 10.7 - 10.7 21.1 (0.2) 20.9
=========================== ===== =========== ======= ====== =========== =======
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 26.8 million (53 weeks ended
1 January 2019: 28.0 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
The Stars Group (TSG) shares
As part of the Group's agreement with Eldorado, completed on 29
January 2019, the Group is entitled to 50% of equity interest in
any third party issued as consideration of any betting skins.
In November 2018, TSG announced an agreement with Eldorado to
give TSG certain options to operate online betting and gaming in
states where Eldorado operates casino properties. As part of this
agreement, TSG offered Eldorado upfront equity interest of $25m
(with potentially an additional $5m of equity upon exercise of the
first option by TSG). A further equity stake may be provided after
five years, based on TSG's net gaming revenue generated in markets
accessed via Eldorado. The Group will also receive the first $25m
of revenue share payable by TSG and the majority of the revenue
share thereafter.
The Group was therefore entitled to 50% of the $25m of equity
interest in TSG. During the period, the Group received and sold all
of its shares for a total of $13.5m (GBP10.3m). These shares were
classified as fair value through profit or loss and therefore the
gain on sale of these shares has been recognised within other
operating income.
The Group also holds other investments in unquoted shares of
GBP0.4m (1 January 2019: GBP0.1m).
9. BorrowingS
31 December 1 January
2019 2019
GBPm GBPm
============================================================= =========== =========
Borrowings at amortised cost
============================================================= =========== =========
Bank loans - -
------------------------------------------------------------- ----------- ---------
Less: expenses relating to bank loans (2.6) (2.9)
------------------------------------------------------------- ----------- ---------
GBP375m 4.25% Senior Unsecured Notes due 2020 203.4 375.0
------------------------------------------------------------- ----------- ---------
Less: expenses relating to GBP375m 4.25% Senior Unsecured
Notes due 2020 (0.2) (0.8)
------------------------------------------------------------- ----------- ---------
GBP350m 4.875% Senior Unsecured Notes due 2023 350.0 350.0
------------------------------------------------------------- ----------- ---------
Less: expenses relating to GBP350m 4.875% Senior
Unsecured Notes due 2023 (1.2) (1.6)
------------------------------------------------------------- ----------- ---------
GBP350m 4.75% Senior Unsecured Notes due 2026 350.0 -
------------------------------------------------------------- ----------- ---------
Less: expenses relating to GBP350m 4.75% Senior Unsecured
Notes due 2026 (2.7) -
------------------------------------------------------------- ----------- ---------
Total Borrowings 896.7 719.7
============================================================= =========== =========
Less: Borrowings as due for settlement in 12 months (203.2) -
============================================================= =========== =========
Total Borrowings as due for settlement after 12 months 693.5 719.7
============================================================= =========== =========
The gross borrowings are repayable as follows:
------------------------------------------------------------- ----------- ---------
Amounts due for settlement within one year 203.4 -
------------------------------------------------------------- ----------- ---------
In the second year - 375.0
------------------------------------------------------------- ----------- ---------
In the third to fifth years inclusive 350.0 350.0
------------------------------------------------------------- ----------- ---------
After more than five years 350.0 -
============================================================= =========== =========
903.4 725.0
============================================================= =========== =========
Bank facilities
At 31 December 2019, the Group had the following bank
facilities:
Committed revolving credit facilities (RCF) of GBP425m (1
January 2019: GBP390m) provided by a syndicate of banks, expiring
in October 2023. At the period end, GBPnil of these facilities were
drawn down (1 January 2019: GBPnil).
An overdraft facility of GBP5m, of which GBPnil was drawn down
at the period end (1 January 2019: GBPnil).
GBP425m Revolving Credit Facilities
Borrowings under the RCF are unsecured but are guaranteed by the
Company and certain of its operating subsidiaries.
Borrowings under the facilities incur interest at LIBOR plus a
margin of between 1.10% and 2.50%, determined by the Group's
consolidated net debt to EBITDA ratio as defined in the facilities'
agreement (note 25 to the Group financial statements within 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.
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 facilities.
Overdraft facility
At 31 December 2019, the Group had an overdraft facility with
National Westminster Bank plc of GBP5m (1 January 2019: GBP5m). The
balance on this facility at 31 December 2019 was GBPnil (1 January
2019: GBPnil).
Senior Unsecured Notes
(i) GBP375m 4.25% Senior Unsecured Notes due 2020
In June 2013, the Group issued GBP375m of senior unsecured notes
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 notes used to reduce outstanding amounts under the
Group's RCF. The notes, which are guaranteed by the Company and
certain of its operating subsidiaries, bear a coupon of 4.25% and
mature in June 2020.
On 30 April 2019, the Company invited holders of its 2020 notes
to tender such notes for purchase subject to the successful
completion of the issue of the new 2026 notes. Since this condition
was met, the Company was able to repurchase GBP170.2m of the 2020
notes. A further GBP1.4m was subsequently redeemed through a
reverse enquiry leaving GBP203.4m outstanding.
(ii) GBP350m 4.875% Senior Unsecured 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.
(iii) GBP350m 4.75% Senior Unsecured Notes due 2026
On 1 May 2019, the Company issued GBP350m of senior unsecured
notes 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 4.75% and mature in May
2026.
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. Notes to the cash flow statement
52 weeks 53 weeks
ended ended
31 December 1 January
2019 2019
GBPm GBPm
============================================================ ============ ==========
Profit/(loss) before interest and tax 12.9 (687.9)
------------------------------------------------------------ ------------ ----------
Adjustments for:
------------------------------------------------------------ ------------ ----------
Share of results of associates (0.9) (2.9)
------------------------------------------------------------ ------------ ----------
Depreciation of property, plant and equipment 66.6 24.5
------------------------------------------------------------ ------------ ----------
Amortisation of intangibles 75.6 51.6
------------------------------------------------------------ ------------ ----------
Impairment of Retail segment and right-of-use lease
assets 47.3 882.8
------------------------------------------------------------ ------------ ----------
Provision for LBO closures 43.9 -
------------------------------------------------------------ ------------ ----------
Guaranteed minimum pension equalisation - 1.4
------------------------------------------------------------ ------------ ----------
Gain on disposal of property, plant and equipment (3.2) (0.1)
------------------------------------------------------------ ------------ ----------
Vacant property provisions including gains on early
settlement of vacant property leases - (0.3)
------------------------------------------------------------ ------------ ----------
Cost charged in respect of share remuneration 4.5 5.5
------------------------------------------------------------ ------------ ----------
Defined benefit pension cost less cash contributions (8.6) (8.5)
------------------------------------------------------------ ------------ ----------
Fair value movements on investment property - 0.1
------------------------------------------------------------ ------------ ----------
Fair value movements on derivative financial instruments 4.1 2.0
------------------------------------------------------------ ------------ ----------
Loss on disposal of Australian operations - 6.8
============================================================ ============ ==========
Operating cash flows before movements in working
capital: 242.2 275.0
------------------------------------------------------------ ------------ ----------
Decrease/(increase) in receivables 14.8 (2.6)
------------------------------------------------------------ ------------ ----------
Decrease in payables (26.8) (28.4)
============================================================ ============ ==========
Cash generated by operations 230.2 244.0
------------------------------------------------------------ ------------ ----------
Income taxes paid (3.1) (11.3)
------------------------------------------------------------ ------------ ----------
Interest paid (39.0) (35.6)
------------------------------------------------------------ ------------ ----------
Interest paid on leases (5.1) -
============================================================ ============ ==========
Net cash from operating activities - continuing operations 183.0 197.1
============================================================ ============ ==========
Net cash from operating activities - discontinued
operations - 1.0
============================================================ ============ ==========
1 1 . ELDORADO RESORTS, INC. PARTNERSHIP
On 6 September 2018, the Group announced a partnership between
William Hill US and Eldorado Resorts, Inc. (Eldorado). This
partnership agreement obtained all regulatory clearances on 29
January 2019.
This agreement led to William Hill US becoming the exclusive
partner in the provision of betting services conducted through all
retail and online channels and gaming services in online channels
at or attached to all current and future Eldorado properties. As
part of the agreement, Eldorado received 13,430,434 William Hill
PLC shares, which are subject to an initial 3-5 year lock-up
period, as well as a 20% shareholding in William Hill US and 40% of
betting and gaming profits generated in respect of Eldorado
properties. The agreement is for an initial 25-year term.
William Hill Plc issued 13,430,434 ordinary shares to Eldorado
with a nominal value of 10p each. Shares were issued at a premium
of 152.77p per share, making a total of 162.77p per share.
The sale of William Hill US shares has been treated as a partial
disposal of a 20% stake in a previously wholly-owned subsidiary and
accounted for as an equity transaction, with a non-controlling
interest created. William Hill US has retained 80% of the enhanced
business, retaining strategic and operational control. The
non-controlling interest has been recognised as a proportionate
share of the William Hill US net assets.
The partnership agreement represents a share-based payment
transaction and is therefore accounted for under IFRS 2 'Share
Based Payment'. All rights arising from the partnership with
Eldorado Resorts, pertaining to exclusive access and use of gaming
licences obtained by Eldorado, have been recognised as an
intangible asset, with a useful life of 25 years. Under IFRS 2, the
Group have determined that the equity consideration disposed of is
an equitable cost for the asset acquired and therefore have valued
the asset based on the fair value of the equity consideration
disposed of. As such, at inception the Group recognised an
intangible asset of GBP138.0m with the value representing both the
shares in William Hill PLC valued at GBP21.8m based on the share
price on the date of completion of the agreement, and GBP116.2m
($153.0m) value attributable to 20% of the William Hill US
business. This was based on a third-party valuation of $765m for
the US business as a whole at inception and estimates of
risk-adjusted cash flows provided by management using their best
estimate at that point in time. These future cash flows involve a
high degree of judgement about which states will regulate retail
and/or online gaming and when. It also includes estimates on the
market size of each state and the expected market share William
Hill US would be expected to obtain.
This third-party valuation produced a range of values of $675m
to $890m, providing a range of the 20% holding of $135m to
$178m.
At inception, 20% of the book value of William Hill US was
recognised as non-controlling interest with the difference between
the value of the intangible asset and the non-controlling interest
recognised directly in equity.
12. DISPOSAL GROUP HELD FOR SALE
On 12 January 2020, the Group agreed to sell its Northern
Ireland and Isle of Man operations to BoyleSports Limited. These
operations have been classified as a disposal group held for sale
and presented separately in the Consolidated Statement of Financial
Position. The Northern Ireland operations were disposed on 7
February 2020 and the Isle of Man operations are expected to be
disposed of in the first quarter pending regulatory approvals. The
estimated proceeds less costs to sell are expected to be greater
than the book value of the disposal group and therefore the
disposal group held for sale is carried at book value as at 31
December 2019.
The major classes of assets and liabilities comprising
operations classified as a disposal group held for sale are as
follows:
31 December
2019
GBPm
=========================================== ===========
Cash and cash equivalents 0.4
------------------------------------------- -----------
Intangible assets - licences 6.2
------------------------------------------- -----------
Property, plant and equipment 1.3
------------------------------------------- -----------
Lease assets 1.8
------------------------------------------- -----------
Trade and other receivables 0.4
------------------------------------------- -----------
Disposal group assets held for sale 10.1
=========================================== ===========
Lease liabilities (2.1)
------------------------------------------- -----------
Trade and other payables (0.4)
------------------------------------------- -----------
Deferred tax liabilities (1.0)
------------------------------------------- -----------
Disposal group liabilities held for sale (3.5)
=========================================== ===========
Net assets of disposal group held for sale 6.6
=========================================== ===========
In addition to the disposal group held for sale, 48 freehold
properties, which were closed as part of the 713 shops shut in the
third quarter, were transferred to asset held for sale in the
period and held in current assets. These assets are held at the
combined net book value of GBP0.7m as the fair value less costs to
sell is greater than the carrying amount on a shop-by-shop
basis.
13. mr green & co ab acquisition
On 28 January 2019, the Group completed the acquisition of Mr
Green & Co AB (Mr Green), acquiring 98.5% of the issued share
capital. Mr Green is a fast-growing, innovative iGaming group with
operations in 13 markets and brands including Mr Green and Redbet.
Mr Green holds remote gambling licences in Denmark, Italy, Latvia,
Malta, United Kingdom, Ireland and Sweden. Mr Green has leading
gaming and casino products supported by a fast growing sportsbook.
The acquisition is expected to strengthen the Group's Online
business and drive further online penetration.
During the period post-acquisition, the Group acquired the
further 1.5% of the issued share capital of Mr Green & Co AB
for GBP3.7m.
Details of the purchase consideration, the net assets acquired
and goodwill are as follows:
GBPm
================================= ======
Net assets acquired:
--------------------------------- ------
Cash and cash equivalents 51.9
--------------------------------- ------
Intangible assets 114.5
--------------------------------- ------
Property, plant and equipment 5.5
--------------------------------- ------
Deferred tax assets 0.3
--------------------------------- ------
Trade and other receivables 5.4
--------------------------------- ------
Trade and other payables (32.4)
--------------------------------- ------
Provisions (43.9)
--------------------------------- ------
Corporation tax liabilities (0.1)
--------------------------------- ------
Lease liabilities (2.8)
--------------------------------- ------
Deferred tax liabilities (5.1)
--------------------------------- ------
Net identifiable assets acquired 93.3
================================= ======
Less: Non-controlling interest (1.5)
--------------------------------- ------
Add: Goodwill 153.0
--------------------------------- ------
Total consideration 244.8
--------------------------------- ------
GBPm
========================================= ======
Purchase consideration:
----------------------------------------- ------
Cash paid 244.8
----------------------------------------- ------
Less: cash and cash equivalents acquired (51.9)
----------------------------------------- ------
Net consideration 192.9
========================================= ======
The goodwill is attributable to Mr Green's assembled workforce,
its strong position and profitability from trading in iGaming and
synergies expected to arise in Online after the Group's
acquisition. The goodwill has been allocated to the Online CGU. The
amount of goodwill that is expected to be deductible for tax
purposes is GBPnil.
Acquisition-related costs and integration costs of GBP7.2m have
been recognised as exceptional (see note 3).
Intangible assets comprised of separately identifiable acquired
intangibles that comprised brands, customer relationships and
platform software.
The fair value of acquired trade receivables is GBP5.4m. The
gross contractual amount for trade receivables due is GBP5.4m.
The provision acquired of GBP43.9m relates to a contested gaming
tax liability in Austria (note 23 to the Group financial statements
within the Annual Report).
The Group has chosen to recognise the non-controlling interests
at its fair value.
The acquired business contributed revenue of GBP136.9m, adjusted
profit of GBP13.1m and statutory profit before tax of GBP1.7m to
the Group from 29 January 2019 to 31 December 2019. If the
acquisition had occurred on 2 January 2019, the contributed
consolidated revenue, adjusted profit and statutory loss after tax
for the period ended 31 December 2019 would have been GBP148.6m,
GBP11.5m and GBP0.3m respectively.
For comparative purposes, the results for the period of
February-December in the prior period are shown in note 18 to the
Group financial statements within the Annual Report.
14. INTANGIBLE ASSETS
Brands,
trade
names Acquired Market
and customer technology access Computer
Goodwill Licences relationships platforms and exclusivity software Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Cost:
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
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
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Additions - - - - 138.0 94.6 232.6
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Additions via acquisition 153.0 - 96.7 16.3 - 1.5 267.5
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Disposals - - - - - (22.0) (22.0)
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Transfer to disposal
group held for sale - (6.2) - - - - (6.2)
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Effect of foreign exchange
rates (2.7) - (1.9) (0.2) (2.4) (2.0) (9.2)
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
At 31 December 2019 408.6 326.6 251.3 27.1 135.6 472.0 1,621.2
============================== ======== ======== ============== =========== ================= ========= =======
Accumulated amortisation:
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
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
------------------------------ -------- -------- -------------- ----------- ----------------- --------- -------
Charge for the period - - 8.0 5.1 5.2 57.3 75.6
============================== ======== ======== ============== =========== ================= ========= =======
Disposals - - - - - (22.0) (22.0)
============================== ======== ======== ============== =========== ================= ========= =======
Effect of foreign exchange
rates - - (0.4) (0.1) (0.1) (0.1) (0.7)
============================== ======== ======== ============== =========== ================= ========= =======
At 31 December 2019 41.6 - 161.0 16.0 5.1 301.6 525.3
============================== ======== ======== ============== =========== ================= ========= =======
Net book value:
============================== ======== ======== ============== =========== ================= ========= =======
At 31 December 2019 367.0 326.6 90.3 11.1 130.5 170.4 1,095.9
============================== ======== ======== ============== =========== ================= ========= =======
At 1 January 2019 216.7 332.8 3.1 - - 133.5 686.1
============================== ======== ======== ============== =========== ================= ========= =======
15. PROPERTY, PLANT AND EQUIPMENT
Land Fixtures,
and fittings Right-of-use
buildings and equipment asset Total
GBPm GBPm GBPm GBPm
=========================================== ========== ============== ============== =======
Cost:
------------------------------------------- ---------- -------------- -------------- -------
At 26 December 2017 390.4 149.8 - 540.2
------------------------------------------- ---------- -------------- -------------- -------
Additions 12.6 24.7 - 37.3
------------------------------------------- ---------- -------------- -------------- -------
Impairment losses (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
------------------------------------------- ---------- -------------- -------------- -------
Additions 11.7 - 218.4 230.1
------------------------------------------- ---------- -------------- -------------- -------
Additions via acquisition - 1.9 3.6 5.5
------------------------------------------- ---------- -------------- -------------- -------
Impairment losses - - (47.2) (47.2)
------------------------------------------- ---------- -------------- -------------- -------
Disposals (97.8) (7.1) - (104.9)
------------------------------------------- ---------- -------------- -------------- -------
Transfers to disposal group held for
sale (1.0) (0.3) (1.8) (3.1)
------------------------------------------- ---------- -------------- -------------- -------
Transfers to freehold property held for
sale (0.7) - - (0.7)
------------------------------------------- ---------- -------------- -------------- -------
Effect of foreign exchange rates (0.1) - - (0.1)
------------------------------------------- ---------- -------------- -------------- -------
At 31 December 2019 267.7 156.8 173.0 597.5
=========================================== ========== ============== ============== =======
Accumulated depreciation:
------------------------------------------- ---------- -------------- -------------- -------
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
------------------------------------------- ---------- -------------- -------------- -------
Charge for the period 16.3 6.9 43.4 66.6
------------------------------------------- ---------- -------------- -------------- -------
Disposals (94.8) (7.1) - (101.9)
------------------------------------------- ---------- -------------- -------------- -------
Effect of foreign exchange rates - (0.3) - (0.3)
=========================================== ========== ============== ============== =======
At 1 January 2019 171.1 118.0 43.4 332.5
=========================================== ========== ============== ============== =======
Net book value:
=========================================== ========== ============== ============== =======
At 31 December 2019 96.6 38.8 129.6 265.0
=========================================== ========== ============== ============== =======
At 1 January 2019 106.0 43.8 - 149.8
=========================================== ========== ============== ============== =======
16. IFRS 16 'LEASES'
IFRS 16 'Leases' has replaced IAS 17 'Leases' in its entirety.
The distinction between operating leases and finance leases for
lessees is removed and it results 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 has changed 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
previously 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 and
vehicles.
The Group has applied IFRS 16 using the modified retrospective
approach. A lease liability has been recognised equal to the
present value of the remaining lease payments discounted using an
incremental borrowing rate. A right-of-use asset has been
recognised equal to the lease liability adjusted for prepaid and
accrued lease payments. The Group has applied the below practical
expedients permitted under the modified retrospective approach:
- exclude leases from measurement and recognition where the
lease 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 - the weighted average of the discount
rates used on transition was 2.76%;
- 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 following reconciliation to the opening balance for the
lease liabilities as at 2 January 2019 is based upon the operating
lease obligations as at 1 January 2019:
GBPm
============================================================== ======
Minimum lease payments under operating leases at 1 January
2019 228.9
-------------------------------------------------------------- ------
Short-term and low-value leases not recognised as liabilities (21.8)
============================================================== ======
Gross lease liabilities as at 2 January 2019 207.1
-------------------------------------------------------------- ------
Effect of discounting using the incremental borrowing
rate at 2 January 2019 (16.9)
============================================================== ======
Present value of lease liabilities at 2 January 2019 190.2
-------------------------------------------------------------- ------
Present value of finance lease liabilities under IAS
17 as 1 January 2019 -
============================================================== ======
Lease liabilities recognised as at 2 January 2019 190.2
============================================================== ======
The cumulative impact of the changes made to the Consolidated
Statement of Financial Position as at 2 January 2019 for the
adoption of IFRS 16 is summarised as follows:
1 January
2019 (as IFRS 16
previously adoption 2 January
reported) effect 2019
GBPm GBPm GBPm
================================= =========== ========= =========
Non-current assets
--------------------------------- ----------- --------- ---------
Property, plant and equipment 149.8 196.1 345.9
--------------------------------- ----------- --------- ---------
Non-current assets
--------------------------------- ----------- --------- ---------
Trade and other receivables 61.7 (5.9) 55.8
--------------------------------- ----------- --------- ---------
Total assets 1,511.7 190.2 1,701.9
--------------------------------- ----------- --------- ---------
Current liabilities
--------------------------------- ----------- --------- ---------
Lease liabilities - (43.7) (43.7)
--------------------------------- ----------- --------- ---------
Non-current liabilities
--------------------------------- ----------- --------- ---------
Lease liabilities - (146.5) (146.5)
--------------------------------- ----------- --------- ---------
Total liabilities (1,212.8) (190.2) (1,403.0)
--------------------------------- ----------- --------- ---------
Net assets 298.9 - 298.9
================================= =========== ========= =========
The impact of the adjustments made to adjusted results in the
Consolidated Income Statement for the 52 weeks ended 31 December
2019 due to the adoption of IFRS 16 is summarised as follows:
GBPm
===================================== ======
Decrease in Other operating expenses 45.8
------------------------------------- ------
Increase in Depreciation (43.5)
===================================== ======
Profit before interest and tax 2.3
------------------------------------- ------
Finance costs (5.1)
===================================== ======
Loss before tax (2.8)
===================================== ======
A schedule detailing a maturity analysis of the contractual
undiscounted cash flows is as follows:
GBPm
================================= ====
Due within one year 52.8
--------------------------------- ----
Due between one and two years 41.4
--------------------------------- ----
Due between two and three years 32.2
--------------------------------- ----
Due between three and four years 24.5
--------------------------------- ----
Due between four and five years 17.8
--------------------------------- ----
Due beyond five years 52.6
--------------------------------- ----
17. PROVISIONS
Provisions comprise:
Other
Triennial Other restructuring Indirect Legal
mitigation property costs tax provision provision Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----------- --------- -------------- --------------- ---------- ------
As at 1 January 2019 - 7.4 0.9 - - 8.3
---------------------------------- ----------- --------- -------------- --------------- ---------- ------
Provision assumed on acquisition
(note 13) - - - 43.9 3.0 46.9
---------------------------------- ----------- --------- -------------- --------------- ---------- ------
Charged/(credited) to profit
or loss
--------------------------------- ----------- --------- -------------- --------------- ---------- ------
Additional provisions
recognised 43.9 - - 9.8 - 53.7
---------------------------------- ----------- --------- -------------- --------------- ---------- ------
Unused amounts reversed (0.2) (1.2) - - - (1.4)
================================== =========== ========= ============== =============== ========== ======
Total charged/(credited)
to profit or loss 43.7 (1.2) - 9.8 - 52.3
---------------------------------- ----------- --------- -------------- --------------- ---------- ------
Provisions utilised (26.3) (1.8) (0.9) - - (29.0)
================================== =========== ========= ============== =============== ========== ======
As at 31 December 2019 17.4 4.4 - 53.7 3.0 78.5
================================== =========== ========= ============== =============== ========== ======
Triennial Mitigation
As part of the Triennial Review mitigation restructuring
programme (note 3), the Group recognised a provision relating to
the associated costs of closure of 713 shops within the period.
These costs were fully provided for in the period, with GBP15.8m
held within current liabilities and GBP1.6m within non-current
liabilities.
Other property
The Group has property provisions relating to costs for LBOs
that have ceased to trade as part of normal trading activities
outside of the specific Triennial Review mitigation restructuring
programme.
Other restructuring costs
As part of the transformation programme (note 3), the Group had
previously recognised certain provisions for staff severance.
Indirect tax provision
As part of the acquisition of Mr Green & Co AB, the Group
acquired a provision relating to a gaming tax liability in Austria,
where the Austrian tax authority believes that foreign gaming
companies should be liable to pay gaming taxes in Austria.
Post-acquisition, the Group has continued to provide for the gaming
taxes, including interest, assessed by the Austrian tax authority
until this matter is resolved.
Legal provision
At the time of our acquisition of Mr Green & Co AB, the UK
facing gaming business was subject to an investigation arising from
systemic compliance failings following a corporate evaluation
undertaken by the Gambling Commission in summer 2018. Since we
completed our acquisition we have implemented enhanced policies and
processes designed to ensure that the business meets all requisite
compliance standards. The provision corresponds to a fine from the
Gambling Commission relating to the failings identified and we
expect to conclude a regulatory settlement with the Gambling
Commission in line with the provision imminently.
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.
ARPU
Average net revenue per user.
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 gambling yield (GGY)
This is an industry term that represents total stakes less
prizes or winnings.
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.
PASPA
Professional and Amateur Sports Protection Act 1992.
PBIT
Profit before interest and tax.
RGD
Remote Gaming Duty, which is charged by the UK Government at 21%
of gross win on sports and gaming.
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
the US.
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 FIFEIFLIRFII
(END) Dow Jones Newswires
February 26, 2020 02:00 ET (07:00 GMT)
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