WILLIAM HILL PLC
17 May 2018
Update on Triennial Review
William Hill PLC (LSE: WMH) (William Hill or the Group) notes the announcement today by the Department for Digital, Culture, Media and Sport (DCMS) on the Triennial Review.
DCMS is reducing the maximum stake on B2 games from £100 to £2. Given the Government has specified its intended outcome, William Hill is providing preliminary guidance on the potential impact in order to help investors and analysts with their own modelling. However, a regulatory change of this nature is unprecedented and its impact on customer behaviour will not be fully known until some years after implementation. The initial guidance provided, therefore, is necessarily based upon a series of assumptions based on William Hill's knowledge at the time of writing. We will update the market as appropriate during and after implementation.
· In the first four months of the current financial year, c70% of our total gaming machine net revenue was generated by stakes in excess of the proposed £2 threshold.
· After making a number of assumptions on revenue substitution back into gaming machines and other products, and capture of revenue from other shops closing across the industry, we estimate that the annualised impact of a £2 staking limit could be a reduction in total gaming net revenue of 35-45%.
· At this point, preliminary estimates suggest that the stake limit could result in c900 William Hill shops (c38% of our existing Retail estate) becoming loss-making. A proportion of these would be at risk of being closed within a relatively short time of the proposed staking change being implemented and, for the remainder of the estate, we will monitor the actual impact on the estate and performance over the medium and long term.
· We currently estimate that this could reduce William Hill Retail's annualised adjusted operating profit1 following mitigation measures by c£70-100m. We have assumed a degree of mitigation but will continue to look at further ways to reduce the longer term impact on profitability.
Notwithstanding this change, the Board's current intention is to retain the existing dividend policy to pay out approximately 50% of underlying earnings. The Group's balance sheet remains strong with net debt to EBITDA currently c0.5 times following the receipt of proceeds from the Australia and NYX transactions.
Philip Bowcock, Chief Executive Officer, said:
"William Hill has a long and proud heritage as part of the UK high street and we know how important betting shops are to our customers and their local economies. The Government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing. We will continue to evolve our Retail business in order to adapt to this change and we will support our colleagues as best we can. Despite the challenges presented by this decision, our teams will compete hard and offer great service to William Hill customers."
OAM: Inside Information
William Hill LEI: 213800 MDW41W5UZQ1X82
1. Adjusted operating profit is defined as profit before interest and tax, excluding exceptional items and other defined adjustments.
Lyndsay Wright, Director of Strategy, Brand and IR
Tel: +44 (0) 20 7612 3143
Tom Randell, Head of IR
Tel: +44 (0) 20 7612 3246
Ciaran O'Brien, Group Communications Director
Tel: +44 (0) 20 7612 3077
Andrew Porter / Chris Buscombe
Tel: +44 (0) 20 7404 5959
About William Hill PLC
William Hill, The Home of Betting, is one of the world's leading betting and gaming companies, employing around 16,000 people. Founded in 1934, it is the one of the UK's largest bookmakers with around 2,340 licensed betting offices that provide betting opportunities on a wide range of sporting and non-sporting events, and gaming on machines, providing customers with the opportunity to access William Hill's products online, through their smartphone or tablet. William Hill US was established in June 2012 and provides land-based and mobile sports betting services in Nevada, and is the exclusive risk manager for the State of Delaware's sports lottery. William Hill PLC is listed on the London Stock Exchange and is a member of both the FTSE 250 and FTSE4Good Indices.
Cautionary note regarding forward-looking statements
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
These results include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout these results and the information incorporated by reference into these results and include statements regarding the intentions, beliefs or current expectations of the directors, William Hill or the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and dividend policy of William Hill and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond William Hill's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition, liquidity, dividend policy and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in these results and/or the information incorporated by reference into these results. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group and the development of the industry in which it operates, are consistent with the forward-looking statements contained in these results and/or the information incorporated by reference into these results, those results or developments may not be indicative of results or developments in subsequent periods. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation (596/2014), the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules), William Hill does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.