William Hill announces strong 2010 results

(PRESS RELEASE) -- William Hill PLC announces its final results for the 52 weeks ended 28 December 2010 (the period). The comparator period is the 52 weeks ended 29 December 2009.

Key points:

• 2010 out-turn at the top end of market expectations
• Strong William Hill Online results underpinned by outstanding Sportsbook growth
• In-play amounts wagered more than doubled with expansion of offering
• Improvements in trading approach deliver growth in William Hill Sportsbook & Racebook and in-play gross win margin
• Successful roll-out of new "Storm"
• gaming machines drives Retail net revenue growth
• Further balance sheet strengthening with debt reduction and extension of debt maturities

Ralph Topping, Chief Executive of William Hill, commented: "This is a strong performance and I am delighted that, in particular, our Online business and the gaming machines in our shops have performed very well in the year. Our continuing investments in technology in what is a fast-changing industry have underpinned growth and the more than doubling of the amounts wagered from in-play this year demonstrates that customers welcome these innovations.

"We are continuing to expand our product offering to enhance the customer experience, particularly in Online. We are using our trading capability to deliver differentiating pricing and offers, and increasing the profile of our brand through continuing marketing investment. The combination of our fast-growing Online business and appealing Retail offering, together with the expertise of our employees and our attractive product range, give the Board great confidence as we pursue an agenda of innovation and international development."

William Hill is one of the UK's leading betting and gaming companies and employs more than 16,000 people. It is the UK's largest bookmaker by number of licensed betting offices (LBOs) and also operates in Ireland. The Group has over 2,350 LBOs that provide betting opportunities on a wide range of sporting and non-sporting events and, in the UK, offer gaming machines. The Group's online business, William Hill Online, is one of the leading European online betting and gaming businesses by profitability, providing sports betting, casino games, poker, bingo, numbers betting and skill games.

Cautionary note regarding forward-looking statements

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 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.

Overview

With outstanding growth from William Hill Online and a positive performance from the Retail channel, the Group has delivered a strong result in 2010 against a backdrop of challenging economic conditions for our customers. Group net revenue grew 7% to £1,071.8m (2009: £997.9m) and operating profit1 was at the top end of market expectations at £276.8m (2009: £258.5m).

In its second year of operation, William Hill Online achieved strong year-on-year net revenue growth of 24% to £251.5m (2009: £203.5m) and operating profit1 22% higher at £91.1m (£2009: £74.4m). It particularly benefitted from our efforts to expand and enhance our sports-betting and in-play offering. The Group has also seen a strong performance from machines and football betting in Retail, reflecting the continued diversification of that channel and the benefit of a good World Cup result. This led to growth in Retail of 8% in amounts wagered, 3% net revenue growth and operating profit1 slightly ahead of the prior year at £204.5m (2009: £202.7m). The previously announced restructuring of our Telephone channel, which achieved a small operating profit1 of £0.9m (2009: loss of £1.8m), has now been successfully implemented.

We further strengthened our balance sheet during the year, replacing our existing bank debt facility with a new five-year £550m revolving credit facility. The Group continues to deliver good cash generation, with net cash inflow from operating activities of £223.9m (2009: £170.4m), enabling us to reduce net debt to below £500m. The Board has declared a final dividend of 5.8p per share (2009: 5.0p per share), giving a full-year dividend of 8.3p per share (2009: 7.5p per share), an increase of 11% over the prior year.

Looking forward, while we recognise that the economic environment will continue to be challenging in 2011 for all consumers, as is reflected in market expectations, we are confident our customer-focused, multi-channel approach, extensive product offering and our exploitation of technological advances ensure we are well-placed.

We are continuing to expand our product offering and to invest in technology to enhance the customer experience, particularly in Online. We are also using our trading capability to deliver differentiating pricing and offers, and increasing the profile of our brand through continuing marketing investment. In Online, we will build on the very encouraging developments in mobile betting and in-play, and will launch sites for some international targets in the coming months. In Retail, we are focused on delivering an attractive and competitive product range, particularly in football and gaming, allied to superior customer service. We continue to invest in the Retail estate with opportunities to deliver good returns on expansionary capital and are confident of the appeal of this channel and its diversified product range to a wide group of customers.

The combination of our fast-growing Online business and appealing Retail offering, together with the expertise of our employees and our attractive product range, give the Board great confidence as we pursue an agenda of innovation and international development.

William Hill Online

William Hill Online delivered an outstanding performance in 2010, recording strong revenue and operating profit1 growth. We have strengthened our competitive position by expanding the breadth and depth of our sports-betting product range and by further enhancing our gaming experience.

This result is underpinned by a strong Sportsbook performance. Amounts wagered increased 57% year-on-year, including 114% growth in in-play betting with increased advertising of our in-play offering. Sportsbook gross win margin increased to 8.0% (2009: 6.6%), benefiting from structural improvements in our trading approach to in-play and from favourable football results, including during the World Cup. As a result, Sportsbook net revenue grew 95%.

Gaming net revenue grew 5%. Underlying growth in William Hill Casino Club was good, particularly benefiting from an enhanced Flash-based product range. However, our decision to withdraw from France in June (due to the introduction of an unfavourable tax and regulatory regime for online gambling) resulted in a flat year-on-year Casino net revenue result. This was partly offset by a continuation of strong growth in Bingo and an improved Poker performance from the second quarter onwards following the anniversary of the migration to Playtech?s i-Poker network.

Innovation in the Sportsbook and gaming product ranges has been complemented by the launch of the first of a series of apps for the iPhone and Android platforms. This includes Sportsbook and Casino apps available via our website, and Match Predictor and Shake-a-Bet apps in the App Store. In addition, we have launched an exclusive fixed-odds financial betting product, Day Trader.

Online costs increased 36%, reflecting the full-year effect of the operational expansion undertaken in 2009 to support future growth, increased employee compensation and our increased marketing investment.

Operating profit, at £91.1m, was 22% higher than in the prior year (2009: £74.4m). This resulted in a non-controlling interest for Playtech of £26.3m (2009: £20.1m).