THE HOME OF BETTING William Hill PLC corporate presentation September 2016
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THE HOME OF BETTING William Hill PLC corporate presentation September 2016 William Hill, the official betting partner of the Australian Open, is the first bookmaker to sponsor a Grand Slam tennis tournament. 1 The image shows Andy Murray in the final against the tournament’s ultimate winner, Novak Djokovic.
Disclaimer This presentation has been prepared by William Hill PLC (“William Hill”). This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "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 this presentation and the information incorporated by reference into this presentation, 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 and hence may prove to be erroneous. 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 this presentation and/or the information incorporated by reference into this presentation. 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 this presentation and/or the information incorporated by reference into this presentation, 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 Listing Rules, the Disclosure 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. 2
2015 overview
• Good progress on strategic priorities
– Proprietary SSBT in-shop, preparing for EURO 2016 roll-out
– Online Trafalgar mobile front-end is live, platform for rapid innovation
– Australian business exited 2015 with encouraging growth after brand launch
• Operating profit of £291.4m, +2% excluding c£87m of additional UK gambling duties
• Strong cash generation: operating cash flow £300.9m, net debt for covenant
purposes down to £488.2m
• Dividend payout ratio increased to c50% of adjusted EPS, full-year dividend +2.5%
• Up to £200m capital return via share buyback to shareholders
3 Numbers are presented on a pre-exceptional basis.
Definitions are provided in the glossary at the back of the presentation.
William Hill at a glance
• One of the world’s leading multi-channel betting and gaming companies
• Scale operation with highly cash generative Retail business funding growth investment
• c16,000 employees in nine countries
• A balanced business: 53% betting and 47% gaming
• Successful multi-channel model: 59% land-based and 41% digital
• UK-focused with increasing international reach: 85% UK and 15% international
Revenue by geography Revenue by business segment Revenue by product type
2%
2% 1%
3%4% 6%
6%
47%
53%
35%
56%
85%
Retail Online Betting Gaming
UK Australia
US Italy and Spain Telephone William Hill Australia
Other William Hill US
4 Note: Pie charts show 2015 full-year positionOur strategic priorities
• Expansion of total betting population
– 6.49 million in 20101
– 8.12 million in Q1 20152
OMNI-CHANNEL
• Structural trends in multi-channel usage
– 24% increase in number of Retail’s regular customers using online since
Q3 2014
– 70% of spend is by Retail customers with online operators
– Omni-channel customers spend, on average, 1.8 times what a single
channel customer spends
INTERNATIONAL
William Hill Retail’s regular customers
Q3 14 23% 77%
Q3 15 28% 72%
TECHNOLOGY
13%
William Hill Retail +
William Hill Online
Sources:
1. TGI 2009 (April 2009 – March 2010), TGI 2010 (January 2010 – December 2010)
5 2. Kantar Market Sizing tracker Q1’14– Q1’ 15 , (16.7% of UK adult population 18+ of 47,800,000)Our strategic priorities
Top ten gambling markets by gross win (2013, £bn)1
OMNI-CHANNEL • Leverage existing capabilities in other markets
• Focus on five regulated markets
• Flexible enough to exploit opportunities
• Consider complementary gambling skill sets
INTERNATIONAL
TECHNOLOGY
215 32 142 226 180 449 106 116 212 153
Gross win per capita (£)
6 1. H2GC Global Gambling Data (February 2014); population data (Wikipedia)Our strategic priorities
• Blend of in-house / bespoke platforms and third-party expertise
OMNI-CHANNEL • Strong product differentiation through Trading and gaming
platforms
• Rapid innovation by controlling front-end (Trafalgar)
• Ten-year agreement with OpenBet focused on new back-end
platform within three years, £80m investment in NYX / OpenBet
INTERNATIONAL
William Hill is the only operator to have
developed a proprietary SSBT. This
gives us a leading product range and
increased flexibility without paying a
revenue share
TECHNOLOGY
Through Project Trafalgar, we have
taken control of our ‘front-end’ customer
interfaces (desktop, mobile web, iOS
and Android apps). This enables daily
releases and rapid innovation.
7UK Retail
• Largest business segment, representing 56% of revenue
• Market leader with 2,371 LBOs1, equivalent to 26% market share2
• 48% betting (OTC) and 52% gaming (machine)
• £889.5m net revenue and £171.4m operating profit in 2015
• Resilient, cash-generative business
Delivering revenue growth against
challenging economic backdrop Leader in UK retail bookmaking Evolving product mix (gross win)
907.0 911.4
889.5
Other, 46% 52%
837.9 12% William
Hill, 4%
3%
10% 5%
Betfred, 26% 4%
12% 8%
783.1 789.7 16% 11%
25% 20%
Ladbrokes,
Coral, 2010 2015
25%
21%
Horse racing Football
Greyhounds Virtual
2010 2011 2012 2013 2014 2015
Other Gaming
1. Licensed betting offices
8 2. Gambling Commission Industry Statistics April 2010-March 2015Online
• c1,300 employees across seven countries, 35% of Group revenue
• Market leader with 15% market share by revenue in the UK1
• 48% betting (Sportsbook) and 52% gaming (casino, bingo, poker)
• £550.7m net revenue and £126.5m operating profit in 2015
• Well-positioned under UK Point of Consumption Tax change
UK betting market share UK gaming market share Net revenue growth
12%
15%
3% 22% 550.7
527.4
9%
446.3
7% 35% 406.7
321.3
8% 8%
18% 251.5
11% 7%
4%
6%
18% 4% 4% 4%
2%
4%
Bet365 Betfair William Hill Gala Coral 2010 2011 2012 2013 2014 2015
SkyBet 888
William Hill Paddy Power Paddy Power Rank
SkyBet Ladbrokes Ladbrokes Betfair
Gala Coral Non-reporting operators Bwin.Party 32Red
Bet365 Non-reporting operators
9 1. Gambling Compliance Industry Statistics, April 2010-March 2015. Note this market share data
was published in October 2015, prior to the merger of Paddy Power Betfair in 2016Italy and Spain
• Mobile already generating 47% of net revenue
• Strengthening brand awareness: No. 2 in both Italy and Spain
• Strong market share gains
• Italy profitable at end 2015, Spain to follow thereafter
Italy online sports market share by turnover2 Spain online sports market share by turnover3
Others 9%
Paddy Power 6% Other
7%
Bwin Group Sportium
5% 8%
Snai 5%
Bet365 47% Bet365
William Hill 46%
Sisal 5%
19%
Lottomatica
6% Eurobet
8% Bwin
20%
William Hill 9%
1. Agimeg and AAMS, July 2015
2. DGOJ, company estimates
10William Hill Australia
• Attractive growth market with high per capita spend on gambling
• Online betting projected to grow at 14% CAGR over next few years
• Structural growth drivers in core areas of expertise – fixed odds, sports betting, mobile
• Established through acquisition of Sportingbet, Centrebet, tomwaterhouse.com
• Rebranding as William Hill
• A$198.4m net revenue and A$26.6m operating profit in 2015
• Potential for long-term regulatory expansion in gaming and further development in
online in-play
Online is growing as a
proportion of overall betting1 The market is consolidating Clear strategy for a competitive market
100% 9% Trading
25%
80% 18% 34% 34%
14% 21% External User
60% 10% 14% strategy experience
13% 21%
40% 19%
59% 6% 6%
20% 43% 27%
26%
0% People Brand
2006/07 2012/13 2011 2013
TAB On course Telephone Internet Tabcorp Tatts Sportsbet William Hill Other
11 1. NSW and Victoria thoroughbred turnover, Australian Racing Board Fact BookWilliam Hill US
• Land-based sports books and mobile offering in Nevada, with B2B opportunities
• Exclusive risk manager for Delaware state lottery
• Full gaming licence, well-positioned to exploit growth opportunities
• Strong performance since integration
• $50.9m net revenue and $14.0m operating profit in 2015
Nevada sports handle1 growth Nevada sports book market share
$4bn
18%
$3bn 54%
$2bn
82%
46%
$1bn
$0bn No. of books Market handle (turnover)
2003 2005 2007 2009 2011 2013 Other William Hill
1. Handle is defined as the total amounts wagered. Data from UNLV Center for Gaming Research March 2013
12Strong free cash flow and solid balance sheet
Strong cash generation (£m) Diversified sources of debt funding (£m)
2020 375 350
2019 540 375 350
189.4 2018 540 375 350
131.9 95.2 125.0
2017 540 375 350
99.4
21.6
107.2 2016 540 375 300 350
38.5
74.6 67.5
116.8 31.0 82.8
2015 540 375 300
27.0 65.0
53.9
17.4 34.6
104.0 108.4 2014 540 375 300
35.1 71.1 87.1
52.3 60.9
17.5 0 500 1000 1500
2009 2010 2011 2012 2013 2014 2015 Revolving credit facility 4.25% bond
Dividends Capex Non controlling interests Deleverage 7.125% bond 4.875% bond
Around 2.5x dividend cover Net debt/EBITDA 1.3x vs covenant of 3.5x
13 1. Capital expenditure net of disposalsRegulatory update
Responsible Gambling • £50 journey implemented, algorithms applied to identify
possible harmful behaviour, national self-exclusion trial
UK: gaming machines • Triennial Review expected to start in the autumn
UK: funding for horseracing • 55th Levy Scheme: 10.75% rolled forward for Retail
• Government policy to introduce ‘racing right’
UK: Scotland Bill • Scotland Bill at report stage. Grants powers to Scottish
Government to regulate machine numbers for new LBOs
UK: 4th Money Laundering • Passed by European Parliament in June, may bring LBOs
Directive under its auspices for the first time. Impact on LBOs to be
finalised during 2016
• Gambling Commission consultation on LCCP measures
Russia • Proposed legislation for payment blocking of online gambling
companies without a land-based licence
Australia • Review of Interactive Gambling Act: report submitted to
Government on 18 Dec 2015, awaiting Government response
US • En Banc in New Jersey case heard on 17 Feb 2016
14Compelling investment proposition
Market leading UK multi-channel betting and gaming business
Capitalising on fast-growing digital opportunity
Further diversification through international expansion
Strong free cash flow and balance sheet
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