William Hill : 2020 Final results

William Hill PLC

Final results 2020

4 March 2021

Strong finish to a challenging year which we met head-on

Relentless focus on Customer, Team, Execution delivered solid results as technology and product improvements gained traction, alongside our continuing commitment to player safety

William Hill PLC (LSE: WMH) ('William Hill' or the 'Group') announces its final results for the 52 weeks ended 29 December 2020 (the 'period' or '2020'). Comparatives relate to the 52 weeks ended 31 December 2019.

Statutory results1

Adjusted results1

Strategic and operational highlights

• • Strong finish to a challenging year with convincing momentum across our digital businesses

  • • Strategic focus on Customer, Team, Execution materially improving competitiveness

  • • Global diversification increased: 36% Group net revenue originated outside the UK (2019: 24%)

  • • Net revenue fell 16%: Covid-19 pandemic led to disruption of live sporting events, closures and restrictions to Retail and casinos, partially offset by growth in online gaming

  • • Online delivered 9% net revenue growth:

    • ▪ International grew net revenue 16% and expanded into new territories

    • ▪ Platform and product launches for UK Online benefitted the second half, generating record net revenue for the year of £503.2m

  • • Retail responded to pandemic restrictions with agility and resilience; net revenue fell 51%, -30% on a like-for-like5 basis

  • • US expanded nationwide presence through market-leading partnerships, maintaining a robust market position and grew net revenue 32%

  • • Adjusted operating profit2 £57.3m fell 61%: impacted by disruption to sporting calendars, Retail and casino closures, partially offset by strong performance from digital channels

  • • Statutory profit before tax of £51.0m: benefitted from the VAT receipt of £208.3m, more than offsetting the Retail non-cash impairment of £125.7m and costs of £70.4m associated with the cash offer from Caesars Entertainment, Inc. (Caesars)

• • Balance sheet strengthened through actions to raise capital and preserve liquidity

  • • Thoughtful cash preservation: final dividend and employee bonuses cancelled; covenants waived; disciplined cost management

  • • Net debt/EBITDA6 0.8x: below the 1-2x target following an equity placing raising £218.6m net proceeds and successful VAT refund claim

• • Regulation and customer protection

  • • Regulatory risk remains ever-present in Europe and the UK; engaging stakeholders to promote fair and balanced regulatory ecosystems

  • • Substantially enhanced player protection with increased guardrails and rapid digital compliance

• • Recommended cash offer of 272p per share by Caesars (the 'Acquisition')

  • • Reflects the attractive position of the William Hill brand and significant progress made by the Group over the last 18 months, together with its long-term growth opportunities

  • • Valuing William Hill equity at c.£2.9 billion recognises the investment required to maximise the US opportunity, the possibility of regulatory disruption in the UK and Europe, and the uncertainty related to the longer-term impact of the Covid-19 pandemic

Ulrik Bengtsson, Chief Executive Officer, commented: "We began the year well and finished the year even stronger, highlighting the traction generated by our strategic focus on Customer, Team, Execution. In what was an extraordinary year I am immensely proud of how the Group has responded and the resilience we have seen in our performance. We prioritised the protection and safety of both our colleagues and our customers, and our employees went above and beyond for which I thank them.

"In 2020 we put our strategic plans firmly into action, diversifying our geographical footprint, expanding our team's capabilities and rebuilding our technology. We are embedding proprietary components across the platform architecture and are delivering a constant flow of new features including faster product experience, improved navigation and greater protection to our customers around the world.

"The performance in the second half is clear testimony that our strategy is bearing fruit. In the UK, the competitive position of our online offerings for both gaming and sports has been materially strengthened, and our omni-channel product is delivering encouraging early results. Retail has undergone regional disruption although where stores did re-open, they quickly traded towards pre-Covid levels.

"We are delighted with our International Online performance, where our investment in our product and technology is producing clear benefits, particularly in light of the regulatory headwinds in Germany and temporary restrictions elsewhere. We will continue to benefit from our agile marketing engine, and the recent agreement to acquire Alfabet S.A.S. in Colombia and our licence in Argentina both offer further promising growth opportunities in Latin America.

"The US traded well into the year-end, concluding the year with 19% market share and delivering a profitable return. Our partnerships have ensured that brand awareness has risen, our product offering has expanded, and our end-to-end proprietary tech is facilitating rapid new state openings.

"As William Hill embarks on a new chapter, we will continue to prioritise the protection of our customers. The UK Government has commenced the gambling review and we will engage with the relevant stakeholders to encourage evidence-led legislation that finds the right balance to keep our customers safe within a well-regulated ecosystem, to secure the tax base and to secure the industry. The William Hill brand remains highly regarded and is well-positioned for its future under new ownership. I am indebted to my colleagues and employees, who have made this happen and realised such value for our shareholders."

Notes:

• 1. Both the statutory and adjusted results include the performance of Mr Green since the acquisition completed in January 2019.

• 2. Adjusted operating profit/loss is defined as profit/loss from continuing operations before interest and tax, excluding exceptional items and other defined adjustments. Further detail on adjusted measures is provided in note 3 to the financial statements.

• 3. Basic EPS is based on an average of 967.4 million shares for 2020 and an average of 873.0 million shares for 2019 after an equity placing in June 2020 led to the issue of 174.9 million shares. Adjusted EPS is based upon adjusted profits after tax.

• 4. The final 2019 dividend was cancelled in 2020.

• 5. Where like-for-like (LFL) results are stated, this compares the trading performance of the shops that were open and trading in

  2020 (subject to Covid-19 restrictions) to their 2019 performance. During 2020 when the full estate was closed due to Covid-19 the 2019 comparator was included. As shops re-opened on a phased basis from week 24 the comparator was only included from the first full week of trade (daily for weeks 24 to 26).

• 6. Net debt for covenant purposes and EBITDA for covenant purposes are non-statutory measures. The basis of the calculation is

• as described in note 25 to the financial statements within our Annual Report and Accounts 2020.

• 7. When referring to states this includes Washington D.C.

• 8. Where US staking or wagering are cited, it is based on total US$ amounts wagered through both direct and indirect channels.

• 9. Where pro-forma results are stated, this assumes Mr Green was consolidated into the Group at the start of January 2019, in order to provide a more meaningful comparator period.

• 10. We now report the combined US Existing and US Expansion business as William Hill US.

• 11. PwC 2021: Review of unlicensed online gambling in the UK.

• 12. European Gaming and Betting Association and H2 Gambling Capital,www.h2gc.com.

13. Caesars Entertainment, Inc. scheme documenthttps://investor.caesars.com/static-files/69f966f5-ff04-4dcb-a87f-971ab920a09d

OAM: Additional Regulated Information

William Hill LEI: 213800MDW 41W5UZQIX82

Enquiries

About William Hill

William Hill PLC is one of the world's leading betting and gaming companies, employing c12,000 people. Its origins are in the UK where it was founded in 1934, and where it is listed on the London Stock Exchange. Approximately two-thirds of its £1.3bn annual revenues are derived from the UK, where it has a national presence of licensed betting offices and is one of the leading online betting and gaming services. William Hill's European Online business is headquartered in Gibraltar and Malta and is licensed online in 13 countries following the acquisition of Mr Green & Co AB in January 2019. In 2012, it established William Hill US with a focus on in-person and mobile operations in Nevada and became the largest sports betting business in the US. Following the ruling in May 2018 by the Supreme Court that the federal ban on state sponsored sports betting was unconstitutional, William Hill US has grown and continues to expand as new states regulate sports betting. It is now operating in 15 states: Colorado, Delaware, Illinois, Indiana, Iowa, Michigan, Mississippi, Nevada, New Mexico, New Jersey, Pennsylvania, Rhode Island, Virginia, Washington D.C. and West Virginia. Caesars Entertainment, Inc. currently owns shares representing 20% of the share capital of William Hill US Holdco, Inc., the holding company of William Hill US.

Cautionary note regarding forward-looking statements

This announcement 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 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 a guarantee 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 and expressly disclaims any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

A year like no other

In order to deliver on our ambition to be internationally diverse and digitally led, we committed to advance the long-term competitiveness of William Hill. To do that, we have focused on three key strategic priorities which culturally we refer to as Customer, Team, Execution:

• • Win with the customer

• • Build the right capabilities across our teams and increase engagement and collaboration

• • Execute on our commitments evidenced through leveraging our global platform components, finding operational efficiencies and start to deliver sustainable and profitable revenue growth

Our strategic focus on Customer, Team, Execution has served us well during 2020 and we have made significant progress, increasing our digital capability and, as a consequence, accelerating the velocity of product launches. We have expanded our international footprint with 36% of Group net revenue now generated outside the UK (2019: 24%) and over two-thirds of our total net revenue now comes from digital channels.

The Covid-19 pandemic has impacted almost every aspect of our business and our lives in 2020 and we are now living and working in a world where offering a digitally accessible product, and being able to work remotely and remain productive, are more important than ever.

We anticipate that the systemic and structural change in our customers' behaviour will outlive the pandemic as they conduct more business and access more leisure activities online, and thus expanding our opportunities. Our product lends itself to be digitally delivered and, by increasing the velocity of product development and by continuously strengthening our capabilities, William Hill is positioned for success.

Delivering real progress

This year, William Hill saw real progress, showing encouraging growth Online and in the US and clearly benefitting from the changes we have been making. The Group adapted swiftly to the Covid-19 pandemic, demonstrating innovation and resilience to generate £57.3m adjusted operating profit2 (2019: £147.0m) and secured an offer for the Company of c.£2.9bn.

We continued developing our proprietary technology platform, deploying a steady stream of product improvements and this year's UK Online customer Net Promoter Scores (NPS) reached levels not seen since enhanced customer due diligence measures were introduced in 2018. Our International customer NPS for both William Hill and Mr Green brands maintained its high rating. Retail increased customer NPS by 12%, driven by customer service and the quality of our retail product, particularly our proprietary Self-Service Betting Terminals (SSBTs) which took 26% of Retail sports staking (2019: 19%).

International Online performed strongly throughout the year to grow net revenue 16%, setting an all-time high, with strong contributions from Sweden, Denmark and Italy. There were temporary regulations applied in a number of markets to protect players during pandemic related lockdowns, extending to deposit limits and advertising restrictions. Germany implemented a transitional regulatory regime on 15 October 2020, applying a number of changes including deposit limits and we anticipate these new regulations will reduce EBITDA by c.£10m after mitigations in 2021.

International continued to pursue expansion opportunities. We extended our operations into Latin America by acquiring a majority stake in Alfabet S.A.S., a licenced Colombia operator branded as BetAlfa.co, in December 2020. We also received a licence in the province of Buenos Aires, Argentina in January 2021.

UK Online net revenue was up 5% despite limited live sport during the second quarter, benefitting from favourable gross win margins when live sport was available. Continuous platform and product enhancements enabled a better product experience and greater marketing efficiencies, leading to gaming net revenue growth gaining momentum in the fourth quarter.

Our decisive action in 2019 to remodel the UK retail estate enabled us to respond swiftly to the national and regional lockdowns. Consequently, Retail net revenue was down 30% on a like-for-like5 (LFL) basis. Driven by our expectation of a systemic change in our customers' playing behaviour, 119 shops remained closed following the first UK lockdown.

We made substantial progress on our ambitions to build scale in the US as more states regulated sports betting and iCasino. We opened in five new states7 during 2020 and accelerated the development and roll-out of our proprietary technology platform, enabling us to expand our mobile presence and launch iCasino in New Jersey. Handle (staking) grew 28% online8 and, although casinos experienced a variety of Covid-19

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