Online Operations Continue To Boost William Hill Plc


24th February, 2012 at 03:17:44

After tax profits across the group decline, but online operations turn in another stellar performance

The major UK online and land gambling group William Hill plc released its annual results Friday, again showcasing a stellar performance from its online operations.

Whilst overall revenues across the group were up 6% year-on-year at 1136.7 million, group profit after tax declined 6% to 146.5 million, thanks mainly to a 9 million increase in VAT and the lack of a major international event like the World Cup football in 2011. The company has also made significant investment in future technology and operations.

Highlights of the 52 weeks ended December 27th 2011 included:

* Positive performance with Group net revenue up 6% and pre-exceptional profit before tax up 9 percent

* Basic, adjusted earnings per share in growth by 12% and dividend per share by 16 percent

* William Hill Online delivered a second consecutive year of +20% net revenue growth and mobile innovations increased sportsbook bets by c500 percent

* Online operations generated net revenues of 321.3 million, 28% up on 2010.

* International expansion progressed with the launch of an Italian website and impending land-based sports betting acquisitions in the US

* Net debt for covenant purposes reduced by 83 million to 416 million

William Hill Online delivered a particularly strong performance, recording net revenue 28% higher than in the preceding year and operating profit up 17 percent, reflecting additional marketing investment.

Online sportsbook performance delivered significant year-on-year growth with amounts wagered increasing by 51 percent, and a 75% growth in in-play betting, helped by increased advertising. Pre-match betting online advanced by 38 percent, with football betting up 54% despite the lack of a major international tournament.

Online sportsbook gross win margin was 7.0% (2010: 8.0 percent), in line with expectations and reflecting a weaker performance from football and horseracing.

Sportsbook net revenue grew 36 percent, whilst online gaming net revenue advanced by 24% in total. Within gaming, all verticals grew net revenue, with Playtech Casino up 8 percent, Vegas Casino games up 54 percent, Bingo up 19% and Poker 7% higher.

Management report that innovation continues to be a key driver for online operations. In 2011, William Hill Online launched a new text betting service, introduced a new mobile Sportsbook and expanded its horseracing product, which helped in driving 46% growth in horseracing wagers.

The company also improved existing algorithmic models, thereby creating a greater variety of bet types and improving margins. As an example, Online's new basketball algorithm delivered a 66% increase in wagering in total and a 149% increase in in-play betting together with a 1.3 percentage point increase in the gross win margin.

Online costs were up 31 percent, primarily as a result of a step-up in marketing investment as well as increased employee costs, particularly in IT, Marketing and Operations teams. Marketing investment was equivalent to 27% of net revenue.

The Tel Aviv and Sofia operations, which saw some personnel disruption in October (see previous reports), are now functioning normally, Management reports. Key leadership appointments have been made and the majority of vacant positions have been filled through both internal promotions and external recruitment.

Operating profit, at 106.8 million, was 17% higher than in the prior year (2010: 91.1 million). This resulted in a non-controlling interest for the year for Playtech of 31.3 million (2010: 26.3 million).

The online section of the report notes that the regulation of online betting and gaming has continued to develop across the world during the last year and Management expects further changes to come during 2012.

"In the UK, DCMS has indicated that it will be moving to regulate online operators on a 'point-of-consumption' basis by means of a limited online gambling bill. DCMS are currently bidding for a legislative slot and it is likely that timescales will be announced in the Queen's speech, potentially in May 2012. Following this, a Gambling Commission consultation process is expected to take place, with implementation in 2013 the most likely outcome," Management reports.

"Following this announcement, HM Treasury instigated a review of taxation of operators servicing UK-based online customers. An initial pre-consultation closed last year and the outcome of that review is awaited. We have sought to highlight to HM Treasury the issues that must be considered in implementing such a change by providing detailed economic modelling and legal and regulatory analysis generated for William Hill by Deloitte and Gambling Compliance."

Substantial investment of around 56 million by the group has seen the Online division benefit in product development and business infrastructure. This has enabled WHO to build on the momentum and success of 2010 by further expanding its online offerings through new mobile and text-betting channels, maximising customer reach.

Commenting on the group's operations as a whole, chief executive Ralph Topping said:

"This is a very positive performance, particularly in a year without a significant international football tournament and with a c 9 million increase in VAT payments as a result of the rate change. It reflects the underlying strength of the business and benefits from our innovations and investments.

"Our strategic focus continues to be on developing our products to enhance the customer experience, on broadening and strengthening our channels to maximize our customer reach and on developing the business internationally. In the last year, we have built on the momentum and success of 2010 by further expanding our Online offering through new mobile and text-betting channels and are continuing to invest in innovations to enhance the customer experience across all channels.

"We have great confidence that, as a multi-channel gambling company with a strong management team, we are well placed to leverage the advantages of the William Hill brand. We believe there are more opportunities to grow in our core market in the UK and also for the business to expand internationally beyond our traditional roots as more governments open up their regulated gambling markets.

"We will, therefore, seek to invest selectively in taking our brand and our capabilities beyond the UK over the coming years."

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