Trade 'solid' as William Hill signs with Playtech

Leisure Report, Nov, 2008

Updating the stock market on trading for the 15 weeks ended 14 October 2008, William Hill (WMH), the UK bookmaker, said total gross win across its business increased by 9%, representing "a good performance albeit against weak comparatives in the prior year". For the year to date, cumulative gross win increased by 5%.

The performance was led by the interactive division, where gross win rose 21% over the comparative period, with sportsbook and gaming recording increases of 27% and 19% respectively. The firm said its online sportsbook "has demonstrated an encouraging return to growth benefiting from the initiatives taken earlier this year to reinvigorate this business such as improved site content, better value pricing and more active management of the client base as well as favourable sporting results".

The project to implement the new ORBIS online sportsbook software platform remains on schedule for launch at the end of November.

Internet gaming continued to grow strongly, although the pace of growth has slowed since the first half of the year, reflecting the expected lower levels of customer activity over the holiday season. In product terms, games and bingo have continued to deliver the strongest growth.

However, the firm warned that: "In a challenging competitive environment poker has suffered from weak player liquidity. The performance of both poker and casino have been impacted by William Hill Interactive being a predominantly UK-focused business built on sports betting with limited online gaming expertise."

Retail gross win grew by 10% in the period with over-the-counter gross wins increasing by 7% mainly reflecting favourable sporting results. Gaming machines' gross win grew by 14% against prior year comparatives that were affected by the introduction of the smoking ban in England.

Telephone gross win fell by 30% in the period, largely due to high roller losses. The entire telephone business contributes only around 4% of total group gross win.

WMH said its international joint venture operation in Spain continues to develop, with 23 units now trading in Madrid, and plans to begin trading in the Basque Region in November. Initial trading from the first outlets has been encouraging, it said.

Operating expenses rose by 5%, reflecting cost control measures.

As at 30 September 2008, the group's net debt was 1.032bn [pounds sterling], a reduction of 27.4m [pounds sterling] from the position at 1 July 2008. The firm said it "continues to operate comfortably within its banking covenants". The group's borrowing facilities have over 16 months to run until maturity and the company said it continues to maintain a regular dialogue with its banks.

Ralph Topping, chief executive, said: "This is a solid operational performance since the half year, demonstrating the resilience of the business against a challenging economic environment. To date we see little evidence that our business has been impacted by the economic downturn."

Separately, the firm announced the acquisition of certain affiliates of Playtech and related assets, and the entering into a software agreement with Playtech for a minimum of five years for poker and casino, with an option to move into other product areas.

The company said it believes the transaction, creating an enlarged William Hill Online, is a "transformational step for William Hill in line with its strategy to increase online gaming and international earnings, generating significant shareholder value and enhanced growth prospects while requiring only limited upfront cash".

Playtech is to supply William Hill Online with casino, poker and other gaming software products on a phased basis, commencing in January 2009 and culminating in an exclusive relationship for casino and poker from 1 January 2010. The licence will run for a minimum of five years.

Under the terms of the deal, Playtech is to acquire certain online gaming marketing assets, businesses and contracts from affiliates and other third parties for a total consideration of up to $250m (144.5m [pounds sterling]) in cash, from existing resources. Playtech will immediately sell the majority of the purchased assets to WMH for a 29% interest in its enlarged online operation. Playtech's interest in William Hill Online can increase to 32%, depending on certain conditions relating to the integration. WMH retains a right to buy out Playtech's interests in the venture on an independent fair value basis.

Mor Weizer, chief executive of Playtech, said: "This is the first in a number of other potentially significant earnings enhancing affiliate acquisition opportunities."

Following these announcements, shares in William Hill rose 10% to 184p, valuing the business at 579m [pounds sterling].