26th Feb 2020 14:00
William Hill PLC
2019 Annual Report and Accounts
26 February 2020
The Company will today publish on its website www.williamhillplc.com the Annual Report and Accounts for the period ended 31 December 2019 (the 2019 Annual Report).
For those shareholders who have elected to receive paper communications, copies of the 2019 Annual Report will be posted to shareholders on 11 March 2020, together with the Notice of 2020 Annual General Meeting and proxy forms.
Shareholders who have not elected to receive paper communications will be notified of the availability of the 2019 Annual Report on the Company's website.
In accordance with Listing Rule 9.6.1 of the UK Financial Conduct Authority (FCA), a copy of the 2019 Annual Report will be submitted to the UK Listing Authority and will be available for public inspection at the National Storage Mechanism (NSM) www.morningstar.co.uk/uk/NSM.
The information included in the final results announcement released on 26 February 2020, together with the information in the Appendices to this announcement which is extracted from the 2019 Annual Report, constitute the materials required by the FCA's Disclosure Guidance and Transparency Rule 6.3.5R. This announcement is not a substitute for reading the 2019 Annual Report in full. Page and note references in the Appendices below refer to page and note references in the 2019 Annual Report.
Balbir Kelly-BislaCompany Secretary
26 February 2020
OAM: Annual financial and audit reportsWilliam Hill LEI: 213800MDW41W5UZQIX82
Cautionary statement regarding forward-looking statements
William Hill PLC (William Hill) cautions investors that any forward-looking statements or projections made by William Hill including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Such factors include, but are not limited to those set out in Appendix A of this announcement.
APPENDIX A
Managing our Risks
A STRONG RISK MANAGEMENT APPROACH
We continue to take a pragmatic and commercial approach to managing risk which is carefully balanced with commercial realities, allowing us to acknowledge an increased appetite for risk where significant opportunity exists. First and foremost, we put our regulatory requirements and the protection of our customers as key priorities when setting our risk appetite. We have invested in our governance and control environments to ensure this approach to regulation and player safety is understood and executed consistently.
No system of control or governance can practically seek to guarantee all risk is mitigated. It is the aim of the Group risk management process to highlight risks, ensure management are aware of the ongoing position, support their decision making so that they can take appropriate steps within a wider framework of risk management, and to deliver in line with the Board's risk appetite.
Our approach
The Board is responsible for oversight and approval of appropriate responses to potentially significant risks in pursuit of the Group's strategic objectives. During the year, the Board re-affirmed the existing risk appetite as being appropriate. The Board confirms the assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity was robust.
Each business unit has fully considered their own risk profile, which has been appraised, challenged and approved by the Executive, with a consolidated view presented to the Board.
The Group Executive are charged with managing risk, and undertake these duties through regular review of the business unit risk registers, by monitoring key risk indicators, and formally considering risk as part of the investment appraisal process, Group and regional capital expenditure and project appraisals, review of key changes and a thorough discussion with the Board as part of Group strategy days.
We set out on the following pages the principal risks facing the business, as approved by the Board, as well as commentary providing examples of how we mitigate these risks. As explained, this list is not exhaustive, but represents the Board and management's assessment of those risks which require our considered response at this time.
Brexit
We previously set out our position on Brexit within the 2018 Annual Report and Accounts, which has required careful monitoring and action by management. The key challenges to the business are access to licensed markets, availability of staff and impacts on data handling. Our acquisition of the Mr Green business, and the associated licences in Malta held by our international business mitigates the licence issue. We have appropriate business continuity arrangements in place for short term border disruptions affecting the movement of our people, and are not otherwise over exposed to the impact of Brexit in this area. Finally appropriate data sharing arrangements are in place to allow us to continue to fulfil our data handling obligations.
Given these mitigations, Brexit is not assessed as a Strategic level risk, but is being handled in individual business unit risk registers.
EMERGING RISKS
Our risk management processes include consideration of emerging risks, which are reviewed by Executive Management. We engage in such horizon scanning to allow management to take timely steps to intervene as appropriate. Methods to identify emerging risks include reviews with both internal and external subject matter experts, use of key risk indicators from management information and reports, and consultation papers and publications from within and outside the industry.
The ever-changing regulatory landscape is a risk to the business, and throughout the year some risks have emerged which have been monitored by management, and action was taken when these started to crystallise. Emerging risks (including opportunity risks) continue to develop, for example, live debates in the UK market regarding caps on online gaming stakes, media speculation across European markets on advertising restrictions, moves to further responsible gambling regulation, and possible increases to taxation rates. We continue to monitor these emerging areas and others to assess where action is required.
International opportunities continue to arise, which represent risk in decision-making on strategic opportunities, or our position in key markets changing as others make strategic moves. There is clear risk in the regulatory complexity and the ability to operate effectively in new markets as they develop. We have experience in opening new markets, enhanced by the Mr Green acquisition, which helps our mitigation as these opportunities develop.
Risk category | Strategicarea | Management and mitigation examples | Net riskmovement |
Regulatory, political and legal risk | | | |
Risks arise from breaches and/or changes to regulation, regulatory policy and interpretation, and applicable laws. Our continuing international expansion, and the opening up of newly licenced markets, brings further complexity to our multi-jurisdictional regulatory position, and the additional requirements internally to ensure we are fulfilling our obligations. Our industry exists in varying political regimes, with the sentiment towards gambling varying depending on the regime. The attitude towards gambling in these landscapes, and the relationship with political agendas, tends to be driving political decisions based on the maturity of those markets. Further, given our presence in multiple jurisdictions and as a large, listed, and regulated employer of scale we have clear legal obligations to manage and monitor our regulatory requirements. | 1 2 3 4 | We seek to work with our peers and key groups within the industry and through direct engagement with key stakeholders, to provide input to the approach to regulation, both internationally and particularly at this time in relation to the UK Online market. As we increasingly diversify our revenues across multiple regulated markets we become less sensitive to changes in any one individual market. Our depth of experience in the US market through an established, compliant business in Nevada provides a sound platform from which to extend our US compliance processes and teams to meet regulation in new and emerging US states. Throughout the year, we have strengthened our Compliance functions significantly, investing in growth areas, aligning our regulatory teams to the new business structures internationally, and addressing historic issues highlighted within the 2018 regulatory settlement. We revised the structure of our compliance teams, providing local accountability aligned with central oversight and assurance. Group management receive appropriate comfort that compliance obligations are being addressed consistently and proportionately across the Group. In the year we completed a major project, which clarified the organisational accountabilities for key areas of compliance along a three lines of defence model. This provided additional oversight and control of key regulatory matters whilst also ensuring that management were directly accountable for embedding compliance activities throughout the Group. Given the increasing complexity driven through the number of regulated markets, and our continuing growth ambitions, the gross risk is assessed as increasing which results in an increase to the overall net risk as some of these factors are not directly controllable. Where we are able to influence or control risks internally in order to mitigate them we have taken appropriate action. | Increasing |
Strategic risk | | | |
Our core strategy is based on a set of key assumptions, and in some cases those assumptions contain informed views around how the risk landscape will develop and also where this will present opportunity. Within our industry this strategic risk includes the disruption of the competitive landscape as others engage in new business combinations, new products and new routes into additional markets. We have already seen some of the assumptions underpinning our strategic risks begin to crystallise. For example, 'early mover' states have opened up following the repeal of PASPA, and we have seen further mergers and changes across the industry during the year. Neither of these matters represent a conclusion to the movement of the risk landscape as further changes are probable in both instances. | 1 2 3 4 | The US remains our most significant near-term opportunity. As we continue to hold leading positions in existing states, and work to launch in newly accessible states, the complexity of our US business increases. States have varying models depending on local regulations and each business must be suitably tailored to each states' requirements. The PLC Board actively reviews our US growth strategy, and adequate governance and oversight is in place to monitor progress. Our new relationship with Eldorado, and further the Eldorado relationship with Caesars, increases our footprint and provides access to an increased number of properties, licences and customers. We continue to assess opportunities in the US, such as the recent deal relating to Cantor. Budgets are available for resourcing support functions and rapidly maturing the support environment for new state launches from our core base in Nevada, and locally as required. The industry continues to see innovation and disruption. We recognise the need to constantly evolve our offering to remain credible in the market. The ongoing integration of Mr Green, and the access to products, markets, licences and skills this provides is a key step in ensuring that we continue to be an operator of choice for our customers. By aligning our new capabilities in Mr Green with our existing areas of strength, such as the development capabilities of the Grand Parade business in Krakow, we are able to continually refresh our product. Further alignment of technology and product under one leadership role helps drive continual innovation, and ensure our development efforts are fully focused on enhancing our interactions with our customers. Our strength in the US market, and the partnerships we have entered into allows us to respond in line with market evolution. Our increasing strengths and offerings ensure that we are well placed to excel in continually evolving markets elsewhere. For these reasons we assess this risk as stable. | Stable |
Market/financial risk | | | |
Our growth plans, expansion into new territories and continuous improvement programmes across the organisation mean we need to maintain clear focus on liquidity and funding. As with all businesses, there is a need to balance ambition with strong fiscal management to ensure funds are available and funding requirements are met. | 1 2 3
| We proactively engage with lenders and rating agencies, loan facilities are kept under review, and we actively monitor cash flow forecasts across the Group. We have adequate governance in place to understand the implications of our liquidity and funding position and appropriately prioritise how we invest our resources to manage our existing operations whilst taking advantage of growth opportunities. Investment opportunities are assessed on a Group basis, and significant investments are actively managed through clear delegated authority limits across the Group. This ensures that significant programmes of work, or individual projects are approved at a Group level, ensuring management are able to assess investments across business units and ensure funds are being invested in the most appropriate way. Overall our assessment is that this risk remains significant, but stable. | Stable |
Operational risk | | | |
As with all businesses, we face risks that our operational processes, procedures and controls do not work efficiently and effectively if they are not correctly implemented and managed. A business of our size, complexity and geographical footprint must ensure appropriate systems and controls are in place to manage operations locally, and provide Group management with sufficient information to align operations across the Group. | 1 2 3
| Historically William Hill has operated a wide range of legacy systems, which presents challenges to ensure our platforms are stable and available at key times. Significant investment has been made in this area including a projectto move land-based data centres into the cloud. Reliance on older legacy platforms is reducing. Technology has been brought together with product under one function, reporting to a single member of the Executive Management team. This will align priorities and should lead to better prioritisation and allocation of resource. Significant investments have been made in addressing legacy issues in recent years and the record of unplanned issues has declined significantly. We continue to invest in our cyber security response for both prevention of issues and reaction to threats. We work closely with leading-edge partnersto access external solutions to protect against significant application and network denial-of-service attacks. We also invest heavily in our own internal protections and monitoring. Attracting, developing and retaining key talent is a continual risk, particularly in competitive areas such as technology development, and in expanding markets such as the US. Failure to secure the right talent in the right location could undermine our opportunity to deliver strategic goals. Our HR functions play active roles in the benchmarking, retention and development of talent pools. The risk is particularly acute in specific high-demand skill areas and we continue to benchmark packages and roles actively to ensure we are well placed in such markets. Succession planning is embedded for key roles and actively updated and reviewed by senior management. Due to the proactive stance we take in managing our operational risks, and the continual monitoring undertaken by management to ensure corrective actions are undertaken and completed, our overall assessment is that the level of risk is stable relative to prior years. | Stable |
Tax changes | | | |
Our continued expansion internationally brings added complexity to our tax positions, which requires careful management to ensure that we are fulfilling our requirements. Changing regulations could affect our bottom line. | 1 3 | We have dedicated tax experts within the business supported by legal experts. Regular meetings are held with government representatives in the UK and Gibraltar and in international markets to maintain our compliant position and to engage actively in horizon monitoring. Tax changes have been raised by regulators in some international markets, and our continued expansion across the US and into emerging markets increases the complexity of our tax requirements. | Increasing |
Key | Strategic area | Net risk movement |
1 2 3 4 | Driving digital growth in the UK and Internationally Remodelling Retail Growing a business of scale in the US Nobody Harmed | Stable Increasing Decreasing |
APPENDIX B
Related party transactions
Associates
During the period, the Group made purchases of £74.5m (53 weeks ended 1 January 2019: £73.3m) from Sports Information Services Limited, a subsidiary of the Group's associated undertaking, Sports Information Services (Holdings) Limited. At 31 December 2019, the amount receivable from and payable to Sports Information Services Limited by the Group was £nil (1 January 2019: £nil). The Group made purchases of £4.5m from its associated undertaking, NeoGames. At 31 December 2019, £nil was payable to NeoGames in respect of purchases (1 January 2019: £nil). The Group made available a $15m loan facility to NeoGames in 2018. At 31 December 2019, $12.5m of the drawn down amount along with $0.4m associated interest was receivable from NeoGames (1 January 2019: $6m drawn down with $0.2m interest). This loan is considered to be low credit risk as Neogames have a low risk of default and a strong capacity to meet its contractual cash flow obligations in the near term.
During the period, the Group made purchases of £13k from Green Jade Games Ltd. At 31 December 2019, the amount payable by the Group was £5k.
All transactions with associates were made on market terms.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.
APPENDIX C
Directors' statement of responsibilities
The directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation. They have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 'Reduced Disclosure Framework'. Under company law, the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing the parent company financial statements, the directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgements and accounting estimates that are reasonable and prudent;
- State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
- Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that directors:
- Properly select and apply accounting policies;
- Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
- Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
- Make an assessment of the Company's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Company, and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
- The 2019 Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;
- The Group Financial Statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and Article 4 of the IAS Regulation (in the case of the consolidated financial statements) and United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101) (in the case of the parent company financial statements), give a true and fair view of the assets, liabilities, financial position and loss of the Group and the undertakings included in the consolidation taken as a whole; and
- The Strategic Report and risk sections of the 2019 Annual Report, which represent the management report, include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Name | Function |
Roger Devlin | Independent Non-Executive Chairman |
Ulrik Bengtsson | Chief Executive Officer |
Ruth Prior | Chief Financial Officer |
Mark Brooker | Senior Independent Non-Executive Director |
Jane Hanson | Independent Non-Executive Director |
Robin Terrell | Independent Non-Executive Director |
Lynne Weedall | Independent Non-Executive Director |
Gordon Wilson | Independent Non-Executive Director |
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. The majority of its £1.6bn annual revenues are still derived from the UK, where it has a national presence of licensed betting offices and 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 10 countries following the acquisition of Mr Green & Co AB in January 2019. In 2012, it established William Hill US with a focus on retail 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 expanded and continues to expand as new states regulate sports betting. It is now operating in nine states: Delaware, Indiana, Iowa, Mississippi, Nevada, New Mexico, New Jersey, Rhode Island and West Virginia in addition to Washington DC. Eldorado Resorts, Inc. currently owns shares representing 20% of the share capital of William Hill US Holdco, Inc., the holding company of William Hill US.
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