5th Sep 2005 07:00
William Hill PLC05 September 2005 Monday, 5th September 2005 WILLIAM HILL PLC ANNOUNCEMENT OF INTERIM RESULTS William Hill PLC (the 'Group') today announces its results prepared under UKgenerally accepted accounting practice for the 26 weeks ended 28 June 2005. Highlights include the following: • Turnover up 30% to £5,054.5 million (2004: £3,886.6 million) and gross win up 0.3% to £383.4million (2004: £382.1million) • Profit on ordinary activities before finance charges and exceptional charges down 6% at £123.9 million (2004: £132.5 million) • Net cash inflow from operating activities fell 6% to £133.6 million (2004: £142.1 million), which represents 108% of operating profit before exceptional charges • Basic adjusted earnings per share down 6% to 19.2 pence (2004: 20.4 pence) • Interim dividend up 11% to 6.1 pence per share (2004: 5.5 pence per share) payable on 5 December 2005 to shareholders on the register on 4 November 2005 • Intention to return £200 million - £300 million to shareholders over the next 18 months via on market share buybacks • The acquisition of Stanley Leisure plc's retail bookmaking operations ("Stanley Retail") was completed on 18 June 2005. Subject to the disposal of approximately 50 licensed betting offices ("LBO's") (in addition to 28 already sold to the Tote) to address competition concerns, the Office of Fair Trading ("OFT") has decided not to refer the acquisition to the Competition Commission. The integration of Stanley Retail into the Group is underway (save for those LBOs to be divested) and is on track to achieve the expected synergies. • In the nine weeks ended 30 August 2005, gross win for the Group (excluding Stanley Retail) was up 5.5% as sporting results improved relative to those seen in the first five months of the year, and costs increased 2.5% Commenting on the results, Charles Scott, Chairman, said: "In common with other bookmakers, the Group's results in the period wereadversely affected by sporting results compared to generally more favourableresults and the Euro 2004 football tournament in the first half of 2004. We continue to invest in technology across our operations and in our retailestate. Our programme to install electronic point of sale tills and newaudiovisual text systems is proceeding in accordance with our expectations andis approaching two thirds completion. The acquisition of Stanley Leisure's retail operations substantially enhancesour market position and following OFT clearance we have started to integrate thebusiness and are planning the development work required over the medium term toimprove the quality and profitability of the Stanley Retail estate. We remain confident about the Group's future prospects and are committed toreturning value to shareholders. The Board has resolved to increase the interimdividend by 11% to 6.1p per share and intends to return a further £200 millionto £300 million to shareholders via share buybacks over the next 18 months". Enquiries: David Harding, Chief Executive Tel: 0208 918 3910Tom Singer, Chief Operating Officer Tel: 0208 918 3910James Bradley, Deborah Spencer, Brunswick Tel: 0207 404 5959 There will be a presentation to analysts at 9.00 am today at the Lincoln Centre,18 Lincoln's Inn Field, London WC2. Alternatively, it is possible to listen tothe presentation by dialling +44 (0)1452 56 12 63. The presentation will berecorded and will be available for a period of one week by dialling 0800 9531533 (from the UK) and +44 (0)1452 55 00 00 (from outside the UK) and using thereplay access number 8860331#. The slide presentation will be available on theInvestor Relations section of the website: www.williamhillplc.co.uk. CHIEF EXECUTIVE'S REVIEW Despite unfavourable sporting results for bookmakers for the first five monthsof the period and the tough comparative that included more favourable resultsand Euro 2004, the Group has achieved a creditable result in the first half of2005. Retail gross win fell slightly with a reduction in over the counter grosswin and amusement with prizes ('AWP') gross win largely offset by an increase infixed odds betting terminal ('FOBT') gross win; telephone gross win fell due tothe unfavourable sporting results; and interactive gross win increased primarilydue to the growth of poker. In the absence of income growth, tight cost controllimited the fall in operating profit. It should be noted that the results include a contribution of ten days tradingfrom Stanley Retail. TRADING PERFORMANCE Retail Channel Retail gross win fell 0.5% (1.3% excluding Stanley Retail) compared to thecomparative period, with over the counter down by 10.9% (11.6% excluding StanleyRetail) and total gross win from FOBTs and AWPs increasing 35.2% (33.7%excluding Stanley Retail). There is likely to have been some substitutionbetween over the counter business and FOBTs although the level of substitutioncannot be quantified. The over the counter business suffered from disappointing horse racing andfootball results in the period, whereas the comparative period included morefavourable sporting results and the Euro 2004 football championship. Howevertheoretical margins on horseracing appear to have stabilised and since May 2005there are signs that results have started to improve. The Group continues toincrease the number of betting opportunities available to its customers and hasextended trading hours by a further half an hour per day in the winter months. The average number of FOBTs in the William Hill estate increased to 5,710 duringthe period (first half 2004: 3,658) and following the acquisition of StanleyRetail which had 1,494 FOBTs at the time of acquisition we expect to have around7500 FOBTS by the year-end. The average net profit per terminal per week in theWilliam Hill estate was £400 for the period (first half 2004: £396). The averagenumber of AWPs in the William Hill estate during the period has fallen to 468(first half 2004: 2,020) and following the acquisition of Stanley Retail whichhad 524 AWPs at the time of acquisition, we are targeting just over 550 by theyear-end. These targets equate to FOBT and AWP densities of 3.5 per shop and 0.3per shop, respectively, in those jurisdictions where FOBTs and AWPs are allowed. Costs in the combined estate in the period increased by 4.7% (2.9% excludingStanley). Staff costs increased due to an inflation related pay award, propertycosts increased due to rent reviews and pictures and data costs increased due toa combination of additional meetings and an increase in SIS charges per fixture.Equipment hire costs fell due to new FOBT supplier terms effective from May anda reduced number of AWPs. Seventy two development and shop fitting projects were completed in the periodincluding 15 new licences and we are targeting a similar number of projects inthe second half in the combined estate. We are expecting that this will increasesignificantly in 2006 as we start to improve the quality of the Stanley Retailestate. At the end of the period, we had 2,182 LBOs in the United Kingdom, 52 in theRepublic of Ireland, 9 in the Channel Islands and 2 in the Isle of Man. We havesince sold 28 LBOs to the Tote and as noted below we expect to sell around afurther 50 LBOs to meet OFT competition concerns. Our plans for introducing new technology into the LBOs are progressing well withthe the installation of an electronic point of sale (EPOS) system and areplacement text system into existing William Hill shops expected to becompleted by the end of 2005 and the upgrading of the Stanley Retail estate onto the same technology platform expected by Spring 2006. The total cashinvestment in respect of these projects is estimated at £54 million. To date wehave installed text systems in 1,150 LBOs and EPOS in 950 LBOs. Telephone Channel Telephone gross win fell 17.3% against the comparative period due to adversesporting results coupled with the relative inability to stimulate recyclingamongst higher staking telephone clientele. Total active accounts remained flatat 184,000 as at 28 June 2005 (29 December 2004: 184,000). Costs in the channel were up 6.5% over the comparative period due to increasesin bank charges and a higher allocation of central technology costs. Interactive Channel The Interactive channel grew gross win by 17.0% over the comparative periodprimarily due to a 151% increase in income from poker, growth in arcade games,the introduction of William Hill TV, and a solid performance from our casinooffering. Sportsbook gross win was flat compared to the comparative period. We expanded our range of in-running betting opportunities and launched a livebetting console on our Sportsbook which enables the rapid update of in runningbetting prices. We enhanced our single account proposition and our internet andtelephone customers can now bet on sports, poker, casino and arcade from asingle account. Our Arcade offering expanded to 8 games by the end of period,and has since increased to 10 games, and our mobile service is supported by 12handsets. William Hill TV was launched in late 2004 and now broadcasts Australianhorseracing, greyhound racing, Brazilian football, Major League baseball, aweekly poker show and virtual racing. We are planning to trial William Hill TVin the shop environment later this year. We upgraded our poker product with the addition of lower limit tables, sharedguaranteed tournament prize pools of £1 million per month and re-branded oursoftware. Thirty William Hill clients qualified for the World Series of Pokerfinals in Las Vegas. We also announced our own William Hill Grand PrixTournament with a guaranteed prize pool of £450,000. The finals of the WilliamHill Grand Prix will be screened on William Hill TV in December 2005. We added 19 new games to our download casinos, including 5 new games on our BossMedia European language casinos, and now offer in total over 130 games. We havepaid out over £600,000 in shared progressive jackpots in the year to date. Total active accounts increased to 316,000 as at 28 June 2004 (29 December 2004:292,000). Costs in the channel increased 12.1% over the comparative period due toincreased marketing activities to support the growth of our poker business andto fund the costs of William Hill TV production and content. Cost Control Total Group costs were £183.1 million representing a 10.3% increase over thecomparative period. Stripping out exceptional charges and those costsattributable to Stanley Retail, costs increased by 4.6% against the comparativeperiod. Exceptional Costs Exceptional costs before tax of £9.5 million are reported in the period of which£2.7 million relates to the installation of EPOS and new text systems, £1.7million relates to professional fees on due diligence for the acquisition ofStanley Retail, £2.8 million relates to the costs of the return of capitalexercise aborted earlier in the year, and £2.3 million relates to unamortisedfinance fees written off on early repayment of borrowings. By the year end, the Group expects to incur a further £15 million of exceptionalcosts in respect of the integration of Stanley Retail (excluding non cash assetwrite offs) and roll out of new technology in the William Hill estate. STANLEY RETAIL ACQUISITION The acquisition of Stanley Retail was completed on 18 June 2005 adding 624 LBOsto the existing William Hill estate. Subject to William Hill providing satisfactory undertakings, the OFT has decidednot to refer the acquisition to the Competition Commission. The undertakingswill relate to the disposal of approximately 50 further LBOs in addition to the28 LBOs that have already been sold to the Tote. The headline price of the acquisition was £504 million, which after a workingcapital adjustment, professional fees and stamp duty resulted in total cashconsideration of £508.3 million. The book value of assets acquired of £252.1 million has been fair valued to£51.5 million. This primarily reflects the requirement of the relevantaccounting standard to assess the fair value of the assets and liabilities ofStanley Retail using the Group's accounting policies and in particular toreflect in intangible assets, rather than tangible assets, the value of bettingshop licences in accordance with the Group's accounting policies. In addition,28 LBOs sold to the Tote for a total net consideration of £14.5 million areincluded as assets held for resale and their earnings are not included in theseresults. The future sale of a possible further 50 LBO's (which may include someWilliam Hill LBOs) is not treated in the same manner and their results areconsolidated as the specific LBOs to be sold have not yet been identified. Onthis basis, the goodwill arising on acquisition is £456.8 million and may besubject to amendment at the year end in respect of the expected sale ofadditional LBOs and other minor changes. A dedicated multi-disciplinary team has been established to take control ofStanley Retail and set about the task of integrating the operation into theenlarged William Hill Group. In June and July 2005, the team's efforts weredirected at taking control of the acquired business, managing the sale of 28shops to the Tote and preparing a detailed integration plan that could be putinto effect once the OFT cleared the transaction. Post OFT clearance, the Group has started to integrate the two businesses (savein respect of those Stanley Retail LBOs to be divested). Key tasks include theharmonisation of products, prices, and betting rules; progressive re-branding ofthe shops; installation of the same version of electronic point of sale andaudiovisual text systems currently being deployed in the William Hill estate;re-negotiation of contracts with key suppliers; and wind down of the StanleyRetail head office. The integration is expected to be substantially complete bythe end of March 2006. We remain confident of achieving the £13 million ofannual synergies that we expected to realise at the time of the acquisition. COST OF CONTENT In July 2005 the Court of Appeal agreed with the European Court of Justice("ECJ") interpretation of the Database Directive which had previously beenreferred to the ECJ by the Court of Appeal in relation to the dispute with theBritish Horseracing Board (BHB) on the use of certain racing data. Thisjudgement supported the Group's position. Subsequently, the BHB has decided notto challenge this judgement thus bringing to an end a dispute that commenced in2001. Had the BHB been successful, their database would have been the basis of acommercial deal between racing and betting that would have allowed the statutorylevy scheme to end. As a result of the decision, the government has extended theLevy until 2009 and appointed a committee, under the chairmanship of LordDonoghue, to find an alternative basis for a commercial arrangement. It isanticipated that this committee will report back to the government in late 2005. The betting industry has contractual arrangements in place with 58 of thecountry's 59 race tracks for the supply of horseracing pictures into LBOs. Thesecontracts expire between Spring 2007 and Summer 2009. With regard to football, the Retail division continues to make a payment (£300 +VAT per LBO per annum) to the football authorities as part of an ongoingagreement. It should be noted that at the same time as delivering its judgementon the interpretation of the Database Directive in relation to horseracing, theECJ took a similar line on three football related cases. REGULATORY DEVELOPMENT In April 2005 the new Gambling Act was enacted. We are advised that it isunlikely to be fully implemented before Autumn 2007 pending the setting up ofthe Gambling Commission. Proposed deregulation including extended betting shop opening hours, theinstallation of higher payout gaming machines and the removal of the demandcriteria will impact our estate. The new Act also opens up the possibility of aUK based remote gaming industry and over the next two years the government aimsto establish both regulation and taxation regimes to enable this to occur. Wewill continue to work with our trade associations to assist the GamblingCommission to develop appropriate regulation. DIVIDENDS AND CAPITAL STRUCTURE The Company will pay an interim dividend of 6.1 pence per share (2004: 5.5 penceper share) on 5 December 2005 to shareholders on the register on 4 November2005. The Board is proposing an 11% increase in the dividend notwithstanding theadverse impact of unfavourable sporting results on earnings in the period as itremains confident about the Group's future prospects. Subsequent to receiving clearance from the OFT, the Board has given furtherconsideration to the appropriate financing arrangements for the enlarged Groupthat achieves an efficient capital structure and preserves the flexibility todeal with the possibility of adverse developments in regulation and/or tax, or adownturn in trading. The Board will target a ratio of net debt to earningsbefore interest, depreciation and amortisation (EBITDA) of approximately 3.5times to be achieved over the medium term. As a result, in addition to itsprogressive dividend policy, the Group expects to be able to return £200 million- £300 million to shareholders over the next 18 months. The Board thereforeintends to continue with the on market share buy back programme and willperiodically update the market on progress and its future plans. ADOPTION OF IFRS The Group is well advanced in its plans to formally adopt InternationalFinancial Reporting Standards (IFRS). The Group has prepared its financial statements for the 26 week period ended 28June 2005 in accordance with UK generally accepted accounting practice (UK GAAP)and will adopt IFRS as the primary basis for reporting for the 52 week periodending 26 December 2006.The Group does not expect the adoption of IFRS to have a material impact on thereporting of financial performance as compared to results prepared in accordancewith UK GAAP. Furthermore, it expects no adverse impact on its tax affairs orbanking arrangements resulting from the transition to reporting in accordancewith IFRS.An interim report for the 26 weeks ended 28 June 2005 prepared in accordancewith IFRS will shortly be available on the Group's corporate web sitewww.williamhillplc.co.uk. CURRENT TRADING In the nine weeks ended 30 August 2005, gross win for the Group (excludingStanley Retail) was up 5.5% with growth in all three channels and costs were up2.5% against the comparative period. This announcement contains certain statements that are or may be forward-lookingregarding the Group's financial position and results, business strategy, plansand objectives. Such statements involve risk and uncertainty because they relateto future events and circumstances and there are accordingly a number of factorswhich might cause actual results and performance to differ materially from thoseexpressed or implied by such statements. William Hill PLCConsolidated Profit and Loss Accountfor the 26 weeks ended 28 June 2005 26 weeks ended 26 weeks ended 52 weeks ended Before Exceptional 28 June 29 June 28 December exceptional items 2005 2004 2004 items (note 3) Total (restated) (restated) Notes £m £m £m £m £m_______________________________________________________________________________________________________________________ Turnover 2 5,054.5 - 5,054.5 3,886.6 8,287.7Cost of sales (4,756.7) - (4,756.7) (3,589.7) (7,726.3)_______________________________________________________________________________________________________________________Gross profit 2 297.8 - 297.8 296.9 561.4Net operating expenses (175.9) (7.2) (183.1) (166.0) (330.4)_______________________________________________________________________________________________________________________Operating profit 2 121.9 (7.2) 114.7 130.9 231.0Share of associate's operating profit 2.0 - 2.0 1.6 3.1_______________________________________________________________________________________________________________________Profit on ordinary activities before finance charges 123.9 (7.2) 116.7 132.5 234.1Net interest payable 4 (14.0) (2.3) (16.3) (11.9) (25.2)Other finance charges (0.7) - (0.7) (0.9) (1.5) _______________________________________________________________________________________________________________________Profit on ordinary activities before tax 109.2 (9.5) 99.7 119.7 207.4Tax on profit on ordinary activities 5 (33.9) 1.8 (32.1) (34.5) (57.6)_______________________________________________________________________________________________________________________Profit on ordinary activities after tax for the financial period 75.3 (7.7) 67.6 85.2 149.8Dividends proposed and paid 6 (23.8) - (23.8) (22.4) (65.1)_______________________________________________________________________________________________________________________Retained profit for the financial period 51.5 (7.7) 43.8 62.8 84.7_______________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________Earnings per share (pence)Basic - adjusted 7 19.2 20.4 36.5Basic 7 17.2 20.4 36.5Diluted 7 16.9 20.0 35.9_______________________________________________________________________________________________________________________ All amounts relate to continuing operations for the current and precedingfinancial periods. Consolidated Statement of Total Recognised Gains and Lossesfor the 26 weeks ended 28 June 2005 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 (restated) (restated) Notes £m £m £m_____________________________________________________________________________________________________________________ Profit for the financial period 67.6 85.2 149.8Actuarial loss recognised in the pension scheme (5.7) (0.6) (10.7)Deferred tax attributable to actuarial loss 1.7 0.2 3.2Currency translation differences on foreign currency net investments (0.1) (0.1) -_____________________________________________________________________________________________________________________Total recognised gains and losses relating to the period 63.5 84.7 142.3 _________________________Prior period adjustment 1 (0.6)_______________________________________________________________________________________Total recognised gains and losses since last annual report 62.9_______________________________________________________________________________________ William Hill PLCConsolidated Balance Sheetas at 28 June 2005 28 June 29 June 28 December 2005 2004 2004 (restated) (restated) Notes £m £m £m_____________________________________________________________________________________________________________Fixed assetsIntangible assets - goodwill 13 1,193.9 732.3 736.2Tangible assets 178.3 100.7 119.0Investments 4.3 1.8 2.9_____________________________________________________________________________________________________________ 1,376.5 834.8 858.1_____________________________________________________________________________________________________________Current assetsStocks 0.3 0.3 0.3Debtors: amounts recoverable within one year 19.2 18.1 15.4Debtors: amounts recoverable after one year 1.6 5.3 5.9Assets held for resale 13 14.5 - -Cash at bank and in hand 160.1 60.0 60.5_____________________________________________________________________________________________________________ 195.7 83.7 82.1Creditors: amounts falling due within one year (162.2) (199.6) (203.6)_____________________________________________________________________________________________________________Net current assets/(liabilities) 33.5 (115.9) (121.5)_____________________________________________________________________________________________________________ Total assets less current liabilities 1,410.0 718.9 736.6Creditors: amounts falling due after more than one year (1,075.6) (342.3) (447.7)_____________________________________________________________________________________________________________Net assets excluding pension liability 334.4 376.6 288.9Pension liability (43.4) (30.5) (38.5)_____________________________________________________________________________________________________________Net assets including pension liability 2 291.0 346.1 250.4_____________________________________________________________________________________________________________ Capital and reservesCalled-up share capital 8 40.5 42.2 40.5Share premium account 8 311.3 311.3 311.3Capital redemption reserve 8 1.7 - 1.7Merger reserve 8 (26.1) (26.1) (26.1)Own shares held 8 (59.3) (37.0) (59.3)Profit and loss account 8 22.9 55.7 (17.7)_____________________________________________________________________________________________________________Equity shareholders' funds 8,9 291.0 346.1 250.4_____________________________________________________________________________________________________________ William Hill PLCConsolidated Cash Flow Statementfor the 26 weeks ended 28 June 2005 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 Notes £m £m £m____________________________________________________________________________________________________________________Net cash inflow from operating activities 10 133.6 142.1 247.3Returns on investments and servicing of finance 11 (13.9) (11.9) (23.3)Taxation (26.6) (27.9) (57.4)Capital expenditure and financial investment 11 (24.7) (7.2) (27.3)Acquisitions 11 (501.1) - (3.8)Equity dividend paid (43.1) (37.7) (59.6)____________________________________________________________________________________________________________________Net cash (outflow)/inflow before financing (475.8) 57.4 75.9Financing 11 575.4 (43.8) (61.8)____________________________________________________________________________________________________________________Increase in cash in the period 12 99.6 13.6 14.1____________________________________________________________________________________________________________________ William Hill PLC Notes to the accounts for the 26 weeks ended 28 June 2005 1 Basis of preparation The interim report comprises the unaudited results for the 26 weeks to 28 June 2005, comparative unaudited results for the 26 weeks ended 29 June 2004 and the audited results for the 52 weeks to 28 December 2004. The interim report has been prepared by the directors under the historical cost convention and on a basis consistent with applicable UK accounting standards. The interim report has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the 52 weeks ended 28 December 2004 with the exception of the change in policy outlined below. The interim report should therefore be read in conjunction with the 2004 report and accounts. The comparative results for the 52 weeks ended 28 December 2004 do not constitute statutory accounts. As encouraged by the Accounting Standards Board, the Group has adopted FRS 20 'Share-based payment' in the 26 weeks to 28 June 2005, although it is not mandatory in this period. FRS 20 changes the basis of charging the profit and loss account for share-based remuneration. Under the provisions of FRS 20, options granted are valued and charged to the profit and loss account on the basis of fair values as calculated by an option pricing model rather than on the basis of the intrinsic value of the share on which the option was granted, as was the case previously. In addition the costs of SAYE schemes are chargeable under FRS 20 whereas formerly they were exempt. The transitional arrangements of FRS 20 also mean that all options granted before 7 November 2002 do not attract a charge. The effect of these changes is that in the 26 weeks ended 28 June 2005 the charge under FRS 20 is £0.5m less than the charge that would have been reported under UK GAAP prior to the introduction of FRS 20 (26 weeks ended 28 June 2004 - £1.3m; 52 weeks ended 28 December 2004 - £2.1m). In addition, there is a related increase in the tax charge and a reduction of deferred tax asset of £0.2m in the 26 weeks ended 28 June 2005 (26 weeks ended 28 June 2004 - £0.4m; 52 weeks ended 28 December 2004 - £0.6m). As the deferred tax adjustment is the only one that affects cumulative reserves, £0.6m is shown as the prior period adjustment in the statement of total recognised gains and losses. The interim report for the 26 weeks ended 28 June 2005, which was approved by a committee of the board of directors on 4 September 2005, does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The results for the 52 week period ended 28 December 2004 were extracted from the full accounts for William Hill PLC for the 52 weeks ended 28 December 2004, which have been filed with the Registrar of Companies. The auditors' report contained therein, was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2 Segmental information The Group's turnover, profits and operating net assets primarily arise from customers in the United Kingdom and therefore segmental information by geographical location is not presented. Segmental information by distribution channel is shown below: 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 (restated) (restated) £m £m £m __________________________________________________________________________ Turnover - Retail 4,298.7 3,266.1 7,020.7 - Telephone 331.8 274.5 540.8 - Interactive 409.7 331.4 696.3 - Other activities 14.3 14.6 29.9 __________________________________________________________________________ 5,054.5 3,886.6 8,287.7 __________________________________________________________________________ Gross win - Retail 289.4 290.8 548.1 - Telephone 28.6 34.6 60.3 - Interactive 61.9 52.9 106.1 - Other activities 3.5 3.8 7.6 __________________________________________________________________________ 383.4 382.1 722.1 __________________________________________________________________________ Operating profit - Retail 89.0 97.6 165.5 - Telephone 7.8 14.0 22.1 - Interactive 31.7 24.4 51.7 - Other activities (0.3) 0.2 (0.3) - Central costs (6.3) (5.3) (8.0) __________________________________________________________________________ 121.9 130.9 231.0 Exceptional costs (note 3) (7.2) - - __________________________________________________________________________ 114.7 130.9 231.0 __________________________________________________________________________ Net assets/(liabilities) - Retail 128.1 55.3 73.4 - Telephone (1.9) (2.0) 0.7 - Interactive 5.7 (1.0) 2.7 - Other activities 7.7 7.2 7.1 - Corporate 151.4 286.6 166.5 __________________________________________________________________________ 291.0 346.1 250.4 __________________________________________________________________________ The retail distribution channel comprises all activity undertaken in LBOs including AWPs and FOBTs. Other activities include on-course betting and greyhound stadia operations. The directors believe that gross win and operating profit are more important performance metrics than turnover. Net assets/(liabilities) have been allocated by segment where assets and liabilities can be identified with a particular channel. Corporate net assets include goodwill, corporation and deferred tax, borrowings net of cash balances, pension liability and dividends payable as well as any assets and liabilities that cannot be allocated to a particular channel other than on a relatively arbitrary basis. 2 Segmental information (continued) Turnover of £65.0m and an operating loss of £0.4m have been consolidated into these results in respect of the Stanley Racing acquisition completed by the Group on 18 June 2005 as detailed in note 13. The segmental analysis of gross win set out above is shown before deducting GPT, duty, levies, VAT and other cost of sales to arrive at gross profit. A reconciliation from gross win to gross profit as presented in the profit and loss account is set out below: 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________ Gross win 383.4 382.1 722.1 GPT, duty, levies, VAT and other cost of sales (85.6) (85.2) (160.7) __________________________________________________________________________ Gross profit 297.8 296.9 561.4 __________________________________________________________________________ 3 Exceptional costs Exceptional operating costs are as follows: 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________ Costs of implementation of EPOS and text systems 1 2.7 - - Costs of integration of Stanley acquisition 2 1.7 - - Costs of aborted return of capital scheme 3 2.8 - - __________________________________________________________________________ 7.2 - - __________________________________________________________________________ 1. These costs arose from the roll out of electronic point of sale and text systems across the LBO network and primarily encompass training and consultancy costs. 2. These costs arose from the due diligence on and the integration of Stanley Racing's LBOs and comprise primarily external consultancy costs. 3. These costs represent professional fees incurred in respect of an aborted return of capital scheme. Exceptional interest costs are as follows: 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________ Write off of previously capitalised bank facility fee 2.2 - - Breakage fee 0.1 - - __________________________________________________________________________ 2.3 - - __________________________________________________________________________ Following the negotiation of new banking arrangements and the consequent repayment of the old bank facility, the unamortised costs of £2.2m associated with the old facility were written off. A tax credit of £1.8m was recognised in respect of the exceptional operating costs and interest costs in the 26 weeks ended 28 June 2005. This represented the reduction in corporation tax payable, which the Group expects to be able to make in respect of these exceptional items. 4 Net interest payable 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________________________ Interest receivable: Interest receivable 1.4 0.7 1.9 Interest payable and similar charges: Interest on bank loans and overdrafts (15.0) (11.7) (25.6) Interest on guaranteed unsecured loan notes 2005 - (0.1) (0.2) Share of associate's net interest payable - (0.1) - Amortisation of finance costs (0.4) (0.7) (1.3) __________________________________________________________________________________________ (14.0) (11.9) (25.2) Exceptional interest (note 3) (2.3) - - __________________________________________________________________________________________ Net interest payable (16.3) (11.9) (25.2) __________________________________________________________________________________________ 5 Tax on profit on ordinary activities The expected effective rate in respect of ordinary activities before exceptional costs is 31.0% (26 weeks ended 28 June 2004 - 28.8%; 52 weeks ended 28 December 2004 - 27.8%). The tax charge on ordinary activities after exceptional items has been calculated using an expected effective rate for the full year of 32.2%. This is higher than the statutory rate of 30% due to expenditure incurred for which the Group will not get tax relief. The prior periods' comparative tax rates were impacted by the utilisation of certain tax losses in those periods. 6. Dividends proposed and paid 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________________________ Equity shares: - interim dividend proposed/paid 23.8 22.4 22.0 - final dividend paid - - 43.1 __________________________________________________________________________________________ 23.8 22.4 65.1 __________________________________________________________________________________________ Dividend per ordinary share (pence) 6.1 5.5 16.5 __________________________________________________________________________________________ The interim dividend of 6.1p (26 weeks ended 28 June 2004 - 5.5p) will be paid on 5 December 2005 to all shareholders on the register on 4 November 2005. Under an agreement signed in November 2002, The William Hill Holdings 2001 Employee Benefit Trust agreed to waive all dividends. As at 28 June 2005, the trust held 2.8m ordinary shares. In addition, the Company has not provided for dividends on the 10.5m shares held in Treasury. The Company estimates that 390.5m shares will qualify for the interim dividend. 7. Earnings per share The basic and diluted earnings per share are calculated based on the following data: 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m ______________________________________________________________________________________________________________ Profit after tax for the financial period 67.6 85.2 149.8 Exceptional items - operating expenses 7.2 - - Exceptional items - interest 2.3 - - Exceptional items - tax credit (1.8) - - ______________________________________________________________________________________________________________ Profit after tax for the financial period before exceptional items 75.3 85.2 149.8 ______________________________________________________________________________________________________________ Number (m) Number (m) Number (m) ______________________________________________________________________________________________________________ Basic weighted average number of shares 392.1 418.4 410.1 Dilutive potential ordinary shares: Employee share awards and options 7.1 7.5 7.4 ______________________________________________________________________________________________________________ Dilutive weighted average number of shares 399.2 425.9 417.5 ______________________________________________________________________________________________________________ The basic weighted average number of shares excludes shares held by The William Hill Holdings 2001 Employee Benefit Trust and those held in treasury as such shares do not qualify for dividends. The effect of this is to reduce the average number of shares in the 26 weeks ended 28 June 2005 by 13.3m (26 weeks ended 28 June 2004 - 4.5m; 52 weeks ended 28 December 2004 - 8.7m). An adjusted earnings per share based on profit for the financial period before exceptional items has been presented in order to highlight the underlying performance of the Group. 8. Reserves Share Capital Profit Share premium redemp-tion Merger Own shares and loss capital account reserve reserve held account Total £m £m £m £m £m £m £m ___________________________________________________________________________________________________________________ At 28 December 2004 (as previously reported) 40.5 311.3 1.7 (26.1) (59.3) (17.1) 251.0 Prior period adjustment (note 1) - - - - - (0.6) (0.6) ___________________________________________________________________________________________________________________ As restated 40.5 311.3 1.7 (26.1) (59.3) (17.7) 250.4 Retained profit for the financial period - - - - - 43.8 43.8 Actuarial loss recognised in the pension scheme - - - - - (5.7) (5.7) Deferred tax arising thereon - - - - - 1.7 1.7 Expense recognised in respect of share remuneration - - - - - 0.9 0.9 Currency translation differences - - - - - (0.1) (0.1) ___________________________________________________________________________________________________________________ At 28 June 2005 40.5 311.3 1.7 (26.1) (59.3) 22.9 291.0 ___________________________________________________________________________________________________________________ 8 Reserves (continued) Own shares held at 28 June 2005 amounting to £59.3m comprise 10.5m shares (nominal value - £1.1m) held in treasury purchased for £56.1m and 2.8m shares (nominal value - £0.3m) held in The William Hill Holdings 2001 Employee Benefit Trust purchased for £3.2m. The shares held in treasury were purchased at a weighted average price of £5.32. At 28 June 2005 the total market value of own shares held was £70.9m. 9. Reconciliation of movements in equity shareholders' funds 28 June 29 June 28 December 2005 2004 2004 (restated) (restated) £m £m £m ________________________________________________________________________________________________________ Profit for the financial period 67.6 85.2 149.8 ________________________________________________________________________________________________________ Other recognised gains and losses relating to the period (net) (4.1) (0.5) (7.5) ________________________________________________________________________________________________________ 63.5 84.7 142.3 Dividends (23.8) (22.4) (65.1) Own shares purchased during period - (34.0) (145.4) Expense recognised in respect of share remuneration 0.9 0.4 1.2 ________________________________________________________________________________________________________ Net addition to equity shareholders' funds 40.6 28.7 (67.0) ________________________________________________________________________________________________________ Opening shareholders funds (as previously reported) 251.0 317.4 317.4 Change in accounting policy (0.6) - - ________________________________________________________________________________________________________ As restated 250.4 317.4 317.4 ________________________________________________________________________________________________________ Closing equity shareholders' funds 291.0 346.1 250.4 ________________________________________________________________________________________________________ 10. Reconciliation of operating profit to net cash inflow from operating activities 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m ___________________________________________________________________________________________________________________ Operating profit 114.7 130.9 231.0 Depreciation 9.3 7.9 16.2 Profit on sale of fixed assets (0.3) (0.4) (0.6) Expense recognised in respect of share remuneration 0.9 0.4 1.2 (Increase)/decrease in debtors (0.3) (2.3) 0.5 Increase in creditors 8.7 8.8 1.6 Cash contributions less than/(greater than) defined benefit pension cost 0.6 (3.2) (2.6) ___________________________________________________________________________________________________________________ Net cash inflow from operating activities 133.6 142.1 247.3 ___________________________________________________________________________________________________________________ 11. Analysis of cash flows 26 weeks ended 26 weeks ended 52 weeks ended 28 June 29 June 28 December 2005 2004 2004 £m £m £m __________________________________________________________________________________________________________________ Returns on investments and servicing of finance: Interest received 1.4 0.7 1.9 Interest paid (15.3) (12.6) (25.2) __________________________________________________________________________________________________________________ Net cash outflow (13.9) (11.9) (23.3) __________________________________________________________________________________________________________________ Capital expenditure and financial investment: Purchase of fixed assets (25.1) (7.8) (28.2) Sale of tangible fixed assets 0.4 0.6 0.9 __________________________________________________________________________________________________________________ Net cash outflow (24.7) (7.2) (27.3) __________________________________________________________________________________________________________________ Acquisitions Purchase of subsidiary undertaking (509.2) - (3.9) Net cash acquired with subsidiary undertaking 8.1 - 0.1Related Shares:
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