2nd Aug 2007 07:01
William Hill PLC02 August 2007 Thursday, 2nd August 2007 WILLIAM HILL PLC ANNOUNCEMENT OF INTERIM RESULTS William Hill PLC (the 'Group') today announces its results for the 26 weeksended 26 June 2007 ('the period'). Highlights include the following: • Gross win up 4.2% to £498.2m (2006: £478.3m) • Profit on ordinary activities before finance charges and exceptional items up £1.2m at £161.2m (2006: £160.0m) • Cash generated from operations before tax and interest at £189.7m (2006: £193.9m), which represents 117.7% of operating profit • Adjusted basic earnings per share (EPS) pre exceptionals up 12.2% to 28.6 pence (2006: 25.5 pence) and basic EPS post exceptionals up 16.5% on the comparative period • Interim dividend up 6.9% to 7.75 pence per share (2006: 7.25 pence per share) payable on 5 December 2007 to shareholders on the register on 26 October 2007 • The Group intends to resume its share buy-back programme • Good progress in establishing businesses in Spain and Italy in conjunction with our partner, Codere • In the four weeks to 24 July 2007, the Group's gross win fell by 1% in line with management expectations as the comparative period included the completion of the World Cup. Excluding the effects of the World Cup, gross win increased by 4% despite the impact of 18% of racing fixtures being cancelled in this period. For the year as a whole, the Board remains comfortable with consensus expectations. Commenting on the results, Charles Scott, Chairman, said: "We are pleased that the Group has seen profit growth in the period,notwithstanding the absence of a major football tournament and the incrementalcosts of AMLD incurred this year compared to the first half of 2006. Profitbefore finance charges and exceptional items was £1.2m higher than last year andearnings per share excluding exceptional items increased by 12%. We continue to be confident of the Group's future prospects and remain committedto delivering value to shareholders. The Board has decided to increase theinterim dividend by 7% to 7.75 pence per share and additionally announces thatit will resume its share buy-back programme." Enquiries: David Harding, Chief Executive Tel: 0208 918 3910 Simon Lane, Group Finance Director Tel: 0208 918 3910 James 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 541 076. The presentation will berecorded and will be available for a period of one week by dialling +44 (0) 1452550 000 and using the replay access number 11161606#. The slide presentation will be available on the Investor Relations section ofthe website: www.williamhillplc.co.uk. CHIEF EXECUTIVE'S REVIEW The Group has produced a good profit performance in the first half of 2007,showing a £1.2m increase in profit before exceptional items and finance chargesdespite the absence of a major football tournament and the incremental cost ofAmusement Machine Licence Duty (AMLD). We estimate that these items in total hadan impact on the Group of approximately £10m in comparison with the first halfof 2006. FOBTs have continued to grow strongly and OTC growth has been encouraging, whileoperating expenses have been kept under tight control. Consequently, profit onordinary activities before net finance costs, taxation and exceptional items wasup £1.2m to £161.2m (2006: £160.0m) and earnings per share before exceptionalitems were 28.6p, a rise of 12% compared to the first half of 2006, althoughthis is largely due to tax movements. In recognition of these results and our continued confidence for the future, theBoard is recommending an interim dividend of 7.75 pence per share, an increaseof 7% on last year. Retail channel The Retail channel grew gross win by 8% to £403.1m and operating profitincreased by 1% to £124.8m. This performance was achieved having allowed for theimposition of AMLD in August 2006, which impacted the current year, and alsolast year's comparatives including incremental gross win associated with theWorld Cup. Gross win from over the counter (OTC) increased by 4% while FOBT/AWP (machines)gross win was up 16%. The impact of results on OTC gross win year-on-year wasbroadly neutral as the effects of favourable football results in the earlierpart of the year and a good Royal Ascot horseracing meeting were largely offsetby more predictable horseracing results in the rest of the period. The average number of machines in the estate increased to 8,357 (FY 2006: 8,218)in the period. The average net contribution per FOBT per week was £493 (FY 2006:£471). The improvement includes the imposition of Amusement Machine Licence Dutyin August 2006, which has adversely affected average weekly profitability ofeach terminal by £38 and total group profitability by £7.7m. Costs in the channel were up 8%, driven by increases in rent and rates due togreater LBO numbers and rent reviews; higher energy costs reflecting generalmarket conditions and greater LBO numbers; and higher depreciation andmaintenance charges as a result of increased development activity and ongoinginvestment in text and EPOS systems. There were minimal increases in staff costswith the normal inflationary pay award largely offset by continuing productivityimprovements resulting from the investment in EPOS. We completed 66 development and LBO refurbishment projects in the first half of2007 including 12 new licences, 19 extensions and resites and 35 LBO fittings.Overall, we spent £16.4m on estate development in the first half of 2007. 2007 has also seen the acquisition and speedy integration of two small chains ofLBOs, TH Jennings (Harlow Pools) Limited comprising a total of 22 LBOs for£21.3m total consideration and Eclipse Bookmakers Limited comprising a total of7 LBOs for a total consideration of £3.2m. Both chains have tradedsatisfactorily since their respective acquisitions. At 26 June 2007, we had 2,208 LBOs in the United Kingdom, 9 in the ChannelIslands, 2 in the Isle of Man and 48 in the Republic of Ireland; a total of2,267 and an increase of 3% on the average in the first half of 2006. Telephone channel Telephone gross win fell by 2% to £29.2m but operating profit increased by 53%to £9.8m. This result was achieved notwithstanding the World Cup benefiting thecomparative figures and lower high roller activity in the period. We ended the half-year with 153,000 active telephone customers (26 December2006: 160,000). Costs incurred by the channel were down 20% principally due to lower marketingspend around the World Cup and rationalisation of staff costs. Interactive channel Interactive gross win fell by £8.7m to £62.0m and operating profit fell by £7.8mto £28.1m. Although these results are disappointing, they demonstrate astabilisation of the decline experienced in the second half of last year withgross win showing an increase of 4% when compared to that period. Interactive sportsbook gross win continued to be impacted by the relativeinflexibility of our current technology configuration, ahead of the introductionof our NextGen technology programme, which commences in the second half of theyear. The first part of this programme has just delivered a relaunched web siteand we remain optimistic as to its positive effects on this business. Despite the limitations of our current systems, we continued to increase ourrange of in-running betting opportunities on our sportsbook and we launched 5new arcade games during the period that expanded our offering to 25 games. Wealso introduced internet based bingo and skill games in the period and earlyresults have been encouraging, particularly for the bingo product. Poker and Casino have also had a difficult trading period. Casino has sufferedfrom a reduction in high roller activity and by a cannibalisation of revenue toarcade games. Poker has had a difficult period but the introduction of a closedloop (which means that poker winnings should be recycled amongst our clientswithin the Cryptologic poker room) and lower limit tables has seen an average10% increase in rake taken in the last few weeks of the period. Total active accounts increased to 415,000 as at 26 June 2007 (26 December 2006:405,000). Costs in the channel increased 3% with the effects of lower marketing costs, asa result of no World Cup, largely offset by higher depreciation associated withincreased investment in systems. Operating expenses Half-year expenses (net of operating income) for the Group were £229.0m, anincrease of 4%. Staff costs (which represented roughly half of our total costs) increased byonly 2% over the comparable period, with productivity gains partly offsetting the effects of a 3% general pay award being granted and the greater average number of LBOs trading. Property costs, which represented 18% of our total costs, were up 16% over the comparable period reflecting higher energy costs and increases in rent and rates, in part driven by an increase in average LBO size and a greater number of LBOs. Depreciation costs increased 18% with the full year effects of the rollout ofEPOS and text systems along with the supporting technology, although this waspartly offset by staff costs savings. The cost of providing pictures and data toour LBOs was up 1% over the comparable period due to the increased size of theestate. Advertising and marketing costs were down 16% over the comparable periodmainly due to the World Cup campaign being included in last year's comparatives.Approximately £2.0m was incurred in the period in preparation for the regulatorychanges to be enforced later this year. Regulatory development The Group is well prepared for the implementation of the detailed regulations,conditions, standards and guidance established by the Gambling Commission and the DCMS under the Gambling Act 2005 when these become enforceable on 1 September 2007. A significant training programme has been established to informall of our staff of the requirements of the Act and their responsibilities underthe new regime. We continue to look forward to the proposed deregulation that the Gambling Actenables, such as extended betting shop opening hours and the installation ofhigher payout gaming machines, both of which will be permitted from 1 September. Cost of content The first half of 2007 has seen the continued efforts of certain racecourses tosubstantially increase the price of content paid by bookmakers for UKhorseracing pictures. A joint venture has been formed between Racecourse MediaServices Limited and Alphameric PLC, which currently has exclusive rights topictures from 6 UK tracks and is offering bookmakers the pictures from thesetracks under the trade name Turf TV. So far a relatively small number of UK LBOsincluding, most notably, the Tote have signed up for this service. Only circa10% of our LBOs trade directly against competitors who have Turf TV andconsequently its introduction has had a negligible impact on trade to date. From the beginning of 2008, Turf TV will be offering exclusive pictures from afurther 25 UK tracks. The Group will review its position in respect of theservice offered by Turf TV in the light of this and other developments over thenext few months. These developments will include discussions, which will takeplace in October, around the funding of UK horseracing via the Statutory Levyscheme. Other sports right holders have also launched an initiative to seek a voluntarycontribution from bookmakers to fund the costs of managing the integrity oftheir sports. At the request of DCMS, an initial meeting was held withrepresentatives of these sports, which largely focused on the scale of bettingon each and the limited historical integrity issues, which have arisen in thepast. No conclusions were reached but we committed to review our charitabledonations policy in the light of the concerns raised. International activities 2007 has seen further progress in developing our operations in Spain and Italyin conjunction with our joint venture partner, Codere. Codere is a companydedicated to the private gaming sector in Europe and Latin America. With morethan 25 years experience, it operates slot machines, bingo halls, sports bettingoutlets, racetracks and casinos in Spain, Italy, Central and South America. In Spain, the joint venture has launched its Spanish brand - Victoria Apuestasand has developed the infrastructure needed to control the joint ventureoperations, submitted its licence application for the Madrid region andsubmitted its tender for a licence in the Basque region. Additionally in Madrid,it has acquired leases on a number of premises. We expect the joint venture tobe one of the first operators to be granted a licence in Madrid and we are planning to start trading there later this year. Additionally, should it be successful in its licence application, operations should commence in the Basque region in 2008. We await news of deregulation in other regions of Spain. In December 2006, as part of a process of deregulating betting within Italy,William Hill and Codere were jointly awarded 20 concessions to operatehorseracing betting shops, 7 concessions to operate sports betting shops and 28concessions relating to sports betting points. Remote licences relating tohorseracing and sports betting were also applied for and granted. Progress hasbeen made in the first half of 2007 in identifying and acquiring locations toexploit these concessions and trading in the remote business is planned tocommence there before the end of the year, with retail commencing during thecourse of 2008. William Hill and Codere have targetted €40m in total to fund thejoint venture's expansion in Italy in the next 18-24 months and the joint venture is evaluating a number of possible opportunities to develop its presencethere. Taxation The main taxation change in the period was the reduction from 30% to 28% in theheadline corporation tax rate, which will be effective as at 1 April 2008. Asthe Group has significant non-cash deferred tax liabilities associated with itsacquired betting licences, the rate change has led to a one-off reduction in thetax charge of £11.7m, as these liabilities are restated based on the reducedcorporation tax rate. The accounting standards determine that this reductionshould be recognised in the first half of the year as the relevant Finance Actwas substantially enacted by the period end. Due to the distorting effects ofthis one-off change, the first half of the year bears an artificially lowcorporation tax rate of 22.9%. However, we expect that the full year tax ratefor 2007 will be circa 27% as the effects of this reduction are diluted over afull year. Dividends and capital structure The Company will pay an interim dividend of 7.75 pence per share (2006: 7.25pence per share) on 5 December 2007 to shareholders on the register on 26October 2007. The 7% increase in the proposed interim dividend reflects thepositive trading in the first half of 2007 and our confidence about the Group'sfuture prospects. The Board intends to continue its policy of maintaining an efficient andflexible capital structure and will achieve these objectives by targeting aratio of net debt to earnings before exceptional items, interest, tax,depreciation and amortisation (EBITDA) of approximately 3.5 times to be achievedover the medium term. Since June 2002, the date of its initial public offering,the Group has bought back a total of 17% of its issued share capital (inclusiveof shares bought back into treasury) returning £402.5m to shareholders by thismeans alone. Due to our investment commitments in the early part of 2007, associated with theestablishment of our joint ventures with Codere and in respect of the Jenningsand Eclipse acquisitions, we suspended our rolling share buyback programme.However, we remain committed to returning surplus capital to shareholders andour buyback programme has been and will be kept under regular review. Our netdebt to EBITDA ratio at 26 June 2007 was 3.2 times and accordingly there is nowscope for the buy-back programme to resume. Board changes During the period, the Board announced that it has appointed Ian Spearing and Ralph Topping, two of its most experienced senior executives, as executive directors. Ian Spearing was appointed to the Board as Group Director, Corporate Strategy and Business Development with particular responsibility for the Group'snew international ventures in Spain and Italy. Ralph Topping was appointed to the Board as Group Director, Operations with responsibility for all of the Group's UK based operations and supporting marketing and IT functions. These moves reflected the substantial increase in size and complexity of William Hill and the increasing importance of regulatory issues, both in the UK as a result of the Gambling Commission and as William Hill develops internationally. Towards the end of the period, I also announced my intention to step down as Chief Executive. I continue to have full confidence in the prospects of the Group but having spent seven years helping to build the Company into the UK's leading bookmaker, I felt the time was right to move on and I am looking forwardto a new challenge outside of bookmaking. The Board has put in place a process to appoint my successor and will update the market on this issue at the appropriate time. Reconciliation of gross win to revenue Due to the requirements of accounting standards, the Group discloses a differenttop line measure of activity (revenue) in its accounts from gross win. Thedifference between the two measures is the VAT payable on machine income and thefollowing is a reconciliation for the periods presented between gross win andrevenue as disclosed in the attached financial statements: 26 weeks to 26 26 weeks to 27 52 weeks to 26 June 2007 June 2006 Dec 2006 £m £m £m Gross win 498.2 478.3 931.3VAT on AWPs and FOBTs (20.9) (18.1) (37.1) -------- -------- --------Revenue 477.3 460.2 894.2 -------- -------- -------- Current trading In the four weeks to 24 July 2007, the Group's gross win fell by 1% in line withmanagement expectations as the comparative period included the completion of theWorld Cup. Excluding the effects of the World Cup, gross win increased by 4%despite the impact of 18% of racing fixtures being cancelled in this period. Thesecond half should see the benefits of extended hours and the introduction ofJackpot machines into the estate from 1 September but there remains someuncertainty as to the full impacts of the smoking ban on the business. For theyear as a whole, the Board remains comfortable with current consensusexpectations. FINANCIAL INFORMATION Consolidated Income Statementfor 26 weeks ended 26 June 2007 Unaudited Unaudited 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 Notes £m £m £m---------------------------- ------ --------- --------- --------- Amounts wagered 2 7,255.9 6,561.0 13,235.9---------------------------- ------ --------- --------- --------- Revenue 2 477.3 460.2 894.2Cost of sales (88.8) (80.7) (160.3)---------------------------- ------ --------- --------- ---------Gross profit 2 388.5 379.5 733.9Other operating income 5.7 3.8 6.3Other operating expenses (234.7) (225.0) (451.6)Share of results of associate and joint ventures 1.7 1.7 3.6---------------------------- ------ --------- --------- ---------Operating profit 2 161.2 160.0 292.2Exceptional profit on sale and leaseback of properties 3 3.9 - -Investment income 4 10.2 6.6 13.0Finance costs 5 (41.1) (33.1) (69.8)---------------------------- ------ --------- --------- ---------Profit before tax 2 134.2 133.5 235.4Tax 6 (29.4) (38.1) (68.6)---------------------------- ------ --------- --------- ---------Profit for the period 104.8 95.4 166.8---------------------------- ------ --------- --------- --------- Earnings per share (pence)Basic 8 29.7 25.5 45.5Diluted 8 29.4 25.1 44.9---------------------------- ------ --------- --------- --------- All amounts relate to continuing operations for the current financial period. Consolidated Statement of Recognised Income and Expensefor the 26 weeks ended 26 June 2007 Unaudited Unaudited 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m---------------------------- --------- --------- --------- Gain on cash flow hedges 19.7 9.5 14.3Actuarial gain on definedbenefit pension scheme 27.7 9.0 16.7Tax on items taken directlyto equity (12.9) (5.8) (9.5)Change in associate netassets due to sharerepurchase - (1.6) (1.7)---------------------------- --------- --------- ---------Net income recogniseddirectly in equity 34.5 11.1 19.8Transferred to incomestatement on cash flowhedges (2.2) 0.6 0.7Profit for the period 104.8 95.4 166.8---------------------------- --------- --------- ---------Total recognised income andexpense for the period 137.1 107.1 187.3---------------------------- --------- --------- --------- Consolidated Balance Sheetas at 26 June 2007 Unaudited Unaudited 26 June 27 June 26 December 2007 2006 2006 Notes £m £m £m--------------------------- ----- --------- --------- --------- Non-current assetsIntangible assets 1,366.2 1,337.6 1,342.7Property, plant and equipment 214.8 190.6 207.0Interest in associate and jointventures 12.4 3.5 5.3Deferred tax assets 1.0 14.0 8.5Retirement benefit surplus 2.3 - ----------------------------- ----- --------- --------- --------- 1,596.7 1,545.7 1,563.5---------------------------- ----- --------- --------- ---------Current assetsInventories 0.5 0.7 0.5Trade and other receivables 23.8 25.9 30.4Cash and cash equivalents 85.6 87.6 98.7Derivative financial instruments 31.8 8.5 14.4----------------------------- ----- --------- --------- --------- 141.7 122.7 144.0----------------------------- ----- --------- --------- --------- Total assets 2 1,738.4 1,668.4 1,707.5----------------------------- ----- --------- --------- --------- Current liabilitiesTrade and other payables (113.6) (100.3) (108.6)Tax liabilities (71.9) (80.6) (66.3)Borrowings (1.3) (0.8) (0.9)Derivative financial instruments (2.5) (8.3) (5.6)----------------------------- ----- --------- --------- --------- (189.3) (190.0) (181.4)----------------------------- ----- --------- --------- --------- Non-current liabilitiesBorrowings (1,097.0) (1,048.2) (1,141.2)Retirement benefit obligations - (41.2) (25.1)Long-term provisions - (1.7) -Deferred tax liabilities (173.5) (163.9) (169.3)----------------------------- ----- --------- --------- --------- (1,270.5) (1,255.0) (1,335.6)----------------------------- ----- --------- --------- --------- Total liabilities 2 (1,459.8) (1,445.0) (1,517.0)----------------------------- ----- --------- --------- --------- Net assets 278.6 223.4 190.5----------------------------- ----- --------- --------- --------- EquityCalled-up share capital 9 36.2 37.6 36.2Share premium account 9 - 311.3 311.3Capital redemption reserve 9 6.0 4.6 6.0Merger reserve 9 (26.1) (26.1) (26.1)Own shares held 9 (45.8) (51.4) (46.9)Hedging and translation reserves 9 22.5 6.0 9.4Retained earnings 9 285.8 (58.6) (99.4)----------------------------- ----- --------- --------- ---------Total equity 9 278.6 223.4 190.5----------------------------- ----- --------- --------- --------- Consolidated Cash Flow Statementfor the 26 weeks ended 26 June 2007 Unaudited Unaudited 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 Notes £m £m £m------------------------ ----- --------- --------- --------- Net cash from operatingactivities 10 122.0 145.2 204.6----------------------- ---- --------- --------- --------- Investing activitiesInterest received 3.9 1.4 2.9Proceeds on disposal ofproperty, plant andequipment 5.1 2.3 5.9Proceeds on sale ofinterest in associate 1.8 - -Proceeds fromexceptional sale offreehold properties 6.0 - -Purchases of property,plant and equipment (24.8) (30.2) (55.2)Purchases of bettinglicences - (1.1) (1.9)Expenditure on computersoftware - (4.8) (10.8)Acquisition ofsubsidiaries 11 (24.4) - -Investment in jointventures (5.0) - ------------------------ ---- --------- --------- ---------Net cash used ininvesting activities (37.4) (32.4) (59.1)----------------------- ---- --------- --------- --------- Financing activitiesPurchase of own shares (2.0) (88.9) (178.4)SAYE share optionredemptions - 0.1 1.0Dividends paid 7 (51.2) (45.4) (70.9)Repayments of borrowings (44.9) - (125.0)New finance leases andbank loans raised 0.4 32.4 252.1New facility debt issuecosts - - (2.2)----------------------- ---- --------- --------- ---------Net cash used infinancing activities (97.7) (101.8) (123.4)----------------------- ---- --------- --------- --------- Net (decrease)/increasein cash and cashequivalents in theperiod (13.1) 11.0 22.1Cash and cashequivalents at start ofperiod 98.7 76.6 76.6----------------------- ---- --------- --------- ---------Cash and cashequivalents at end ofperiod 85.6 87.6 98.7--------------------- ---- --------- --------- --------- Notes to the Financial Informationfor the 26 weeks ended 26 June 2007 1. Basis of accounting William Hill PLC is a Company incorporated in the United Kingdom under theCompanies Act 1985. The address of the registered office is Greenside House, 50Station Road, London N22 7TP. The interim financial information for the 26 weeksended 26 June 2007, which has been approved by a committee of the board ofdirectors on 1 August 2007, has been prepared on the basis of the accountingpolicies set out in the Group's 2006 Annual Report and Accounts on pages 47 to52, which can be found on the Group's website www.williamhillplc.co.uk. Thisinterim report should therefore be read in conjunction with the 2006information. The accounting policies, used in the preparation of the interimfinancial information, have been consistently applied to all periods presented.The Group has not adopted all of the provisions of IAS 34 'Interim FinancialReporting' in this interim financial information. The interim financial information for the 26 weeks ended 26 June 2007 isunaudited and does not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985, but has been reviewed by the auditors andtheir report is disclosed at the end of this interim financial information. The results for the 52 week period ended 26 December 2006 shown in this reportdoes not constitute the Company's statutory accounts for that period but has been extracted from those accounts which have been filed with the Registrar of Companies. The auditors have reported on those accounts. Their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The directors consider that the 'adjusted' earnings per share measure, asdisclosed in note 8, provides additional useful information for shareholders onthe underlying performance of the business. It is not a recognised measure under'IFRS' and may not be directly comparable with 'adjusted' measures used by othercompanies. 2. Segment information For management purposes, the Group is currently organised into three principaloperating divisions - retail, telephone and interactive. These divisions are thebasis on which the Group reports its primary segment information. Business segment information for the 26 weeks ended 26 June 2007: Retail Telephone Interactive Other Corporate Group £m £m £m £m £m £m------------------ ------- ------- ------- ------- ------- ------- Amounts wagered 6,417.9 286.3 538.5 13.2 - 7,255.9Payout (6,035.7) (257.1) (476.5) (9.3) - (6,778.6)------------------ ------- ------- ------- ------- ------- -------Revenue 382.2 29.2 62.0 3.9 - 477.3GPT, duty,levies andother cost ofsales (69.4) (6.7) (12.2) (0.5) - (88.8)------------------ ------- ------- ------- ------- ------- -------Gross profit 312.8 22.5 49.8 3.4 - 388.5Depreciation (12.9) (0.1) (3.1) (0.2) (0.4) (16.7)Otheradministrativeexpenses (175.1) (12.6) (18.6) (2.8) (3.2) (212.3)Share of resultof associate - - - - 1.7 1.7------------------ ------- ------- ------- ------- ------- -------Operatingprofit/(loss) 124.8 9.8 28.1 0.4 (1.9) 161.2Exceptionalprofit on saleand leasebackof properties - - - - 3.9 3.9Investmentincome - - - - 10.2 10.2Finance costs - - - - (41.1) (41.1)------------------ ------- ------- ------- ------- ------- -------Profit/(loss)before tax 124.8 9.8 28.1 0.4 (28.9) 134.2------------------ ------- ------- ------- ------- ------- ------- Balance sheet information Total assets 1,390.8 97.1 127.4 18.3 104.8 1,738.4Totalliabilities (52.1) (4.0) (23.2) (0.5) (1,380.0) (1,459.8)Interest inassociate andjoint ventures - - - - 12.4 12.4Capitaladditions 45.7 - 3.9 - 1.0 50.6------------------ ------- ------- ------- ------- ------- ------- Business segment information for the 26 weeks ended 27 June 2006: Retail Telephone Interactive Other Corporate Group £m £m £m £m £m £m------------------ ------- ------- ------- ------- ------- ------- Amounts wagered 5,695.8 324.4 526.9 13.9 - 6,561.0Payout (5,339.5) (294.5) (456.2) (10.6) - (6,100.8)------------------ ------- ------- ------- ------- ------- -------Revenue 356.3 29.9 70.7 3.3 - 460.2GPT, duty,levies andother cost ofsales (58.9) (7.6) (13.8) (0.4) - (80.7)------------------ ------- ------- ------- ------- ------- -------Gross profit 297.4 22.3 56.9 2.9 - 379.5Depreciation (11.8) (0.7) (1.1) (0.1) (0.5) (14.2)Otheradministrativeexpenses (161.5) (15.2) (19.9) (3.8) (6.6) (207.0)Share of resultof associate - - - - 1.7 1.7------------------ ------- ------- ------- ------- ------- -------Operatingprofit/(loss) 124.1 6.4 35.9 (1.0) (5.4) 160.0Investmentincome - - - - 6.6 6.6Finance costs - - - - (33.1) (33.1)------------------ ------- ------- ------- ------- ------- -------Profit/(loss)before tax 124.1 6.4 35.9 (1.0) (31.9) 133.5------------------ ------- ------- ------- ------- ------- ------- Balance sheet information Total assets 1,339.4 88.4 123.6 12.3 104.7 1,668.4Totalliabilities (63.8) (6.6) (25.5) (0.5) (1,348.6) (1,445.0)Interest inassociate - - - - 3.5 3.5Capitaladditions 26.3 0.3 7.8 - 1.1 35.5------------------ ------- ------- ------- ------- ------- ------- Business segment information for the 52 weeks ended 26 December 2006: Retail Telephone Interactive Other Corporate Group £m £m £m £m £m £m------------------ ------- ------- ------- ------- ------- ------- Amounts wagered 11,486.0 659.9 1,060.3 29.7 - 13,235.9Payout (10,787.1) (602.4) (929.8) (22.4) - (12,341.7)------------------ ------- ------- ------- ------- ------- -------Revenue 698.9 57.5 130.5 7.3 - 894.2GPT, duty,levies andother cost ofsales (120.5) (12.9) (26.0) (0.9) - (160.3)------------------ ------- ------- ------- ------- ------- -------Gross profit 578.4 44.6 104.5 6.4 - 733.9Depreciation (23.5) (0.7) (4.9) (0.2) (0.5) (29.8)Otheradministrativeexpenses (329.0) (27.2) (38.1) (6.8) (14.4) (415.5)Share of resultof associate - - - - 3.6 3.6------------------ ------- ------- ------- ------- ------- -------Operatingprofit/(loss) 225.9 16.7 61.5 (0.6) (11.3) 292.2Investmentincome - - - - 13.0 13.0Finance costs - - - - (69.8) (69.8)------------------ ------- ------- ------- ------- ------- -------Profit/(loss)before tax 225.9 16.7 61.5 (0.6) (68.1) 235.4------------------ ------- ------- ------- ------- ------- -------Balance sheet informationTotal assets 1,360.9 95.8 127.1 18.9 104.8 1,707.5Totalliabilities (54.7) (4.4) (26.6) (0.5) (1,430.8) (1,517.0)Interest inassociate - - - - 5.3 5.3Capitaladditions 52.5 9.1 9.1 - 1.0 71.7------------------ ------- ------- ------- ------- ------- ------- The Retail distribution channel comprises all activity undertaken in LBOsincluding AWPs and FOBTs. Other activities include on-course betting andgreyhound stadia operations. Net assets/(liabilities) have been allocated by segment where assets andliabilities can be identified with a particular channel. Corporate net assetsinclude corporation and deferred tax, net borrowings and pension liability aswell as any assets and liabilities that cannot be allocated to a particularchannel other than on an arbitrary basis. Included within total assets bysegment are £687.6m, £80.4m, £97.2m and £7.1m (27 June 2006 - £681.0m, £80.4m,£97.2m and £7.1m; 26 December 2006 - £681.0m, £80.4m, £97.2m and £7.1m), whichrelates to goodwill allocated to the retail, telephone, interactive and stadiaoperations respectively. There are no inter-segmental sales within the Group. In accordance with IAS 14 'Segment Reporting', segmental information bygeographical location is not presented as the Group's revenue and profits ariseprimarily from customers in the United Kingdom with significantly less than 10%(the minimum required by IAS 14 to necessitate disclosure) of revenue andprofits generated from customers outside of this jurisdiction. Similarly, only asmall portion of the Group's net assets is located outside of the UnitedKingdom. 3. Exceptional profit on sale and leaseback of properties Exceptional items are those items the Group considers relevant to anunderstanding of the Group's financial performance. Exceptional profit on sale and leaseback of properties: 26 weeks ended 26 weeks ended 52 weeks ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m--------------------------- --------- --------- --------- Sale and leaseback of LBOproperties 3.9 - ---------------------------- --------- --------- --------- The exceptional profit relates to the sale of 15 LBO freehold properties, and isshown net of costs of disposal. 4. Investment income 26 weeks ended 26 weeks ended 52 weeks ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m------------------------ --------- --------- --------- Interest on bank deposits 3.9 1.4 2.9Expected return on pensionscheme assets 6.3 5.2 10.1------------------------ --------- --------- --------- 10.2 6.6 13.0------------------------ --------- --------- --------- 5. Finance costs 26 weeks ended 26 weeks ended 52 weeks ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m------------------------ --------- --------- --------- Interest on bank loans andoverdrafts 34.5 27.2 57.8Amortisation of financecosts 0.7 0.5 1.3------------------------ --------- --------- --------- 35.2 27.7 59.1Interest on pension schemeliabilities 5.9 5.4 10.7------------------------ --------- --------- --------- 41.1 33.1 69.8------------------------ --------- --------- --------- 6. Tax on profit on ordinary activities The expected effective rate in respect of ordinary activities before exceptionalitems and excluding associate and joint venture income is 32.0% (26 weeks ended27 June 2006 - 28.9%; 52 weeks ended 26 December 2006 - 29.6%). The tax chargeon ordinary activities after taxation has been calculated by applying this rateto the interim profit (excluding exceptional items, associate and joint venture income) of £128.6m, giving £41.1m. This is higher than the statutory rate of 30%due to adjustments in respect of disallowable expenses. The tax charge has been reduced by a credit of £11.7m, reflecting the reduction in net deferred tax liabilities associated with the recently substantially enacted fall in the corporation tax rate from 30% to 28%. The tax credit has been applied in full, giving a total tax charge for the period of £29.4m. The effective rate (excluding exceptional items, associate and joint venture income) for the periodafter this adjustment has been made is 22.9%. 7. Dividends proposed and paid 26 June 27 June 26 December 26 June 27 June 26 December 2007 2006 2006 2007 2006 2006 Per share Per share Per share £m £m £m------------- -------- -------- -------- -------- ------- -------- Equity shares:- current year interim dividend paid - - 7.25p - - 25.6- prior year final dividend paid 14.5p 12.2p 12.20p 51.2 45.4 45.3------------- -------- -------- -------- -------- ------- -------- 14.5p 12.2p 19.45p 51.2 45.4 70.9------------- -------- -------- -------- -------- ------- -------- Proposed dividend 7.75p 7.25p 14.5p 27.4 26.2 51.2------------- -------- -------- -------- -------- ------- -------- The proposed interim dividend was approved by a committee of the board ofdirectors 1 August 2007 and has not been included as a liability in thisfinancial information. The proposed interim dividend of 7.75p will be paid on 5December 2007 to all shareholders on the register on 26 October 2007. Under an agreement signed in November 2002, The William Hill Holdings 2001Employee Benefit Trust agreed to waive all dividends. As at 26 June 2007, thetrust held 0.04m ordinary shares. In addition, the Company does not paydividends on the 8.6m shares held in Treasury. The Company estimates that 353.0mshares will qualify for the interim dividend. 8. Earnings per share The earnings per share figures for the respective periods are as follows: 26 weeks ended 26 weeks ended 52 weeks ended 26 June 27 June 26 December 2007 2006 2006 Pence Pence Pence------------------------ --------- --------- --------- Basic - adjusted 28.6 25.5 45.5Basic 29.7 25.5 45.5Diluted 29.4 25.1 44.9------------------------ --------- --------- --------- The basic and diluted earnings per share are calculated based on the followingdata: 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m------------------------ --------- --------- --------- Profit after tax for thefinancial period 104.8 95.4 166.8Exceptional profit onsale and leaseback ofproperties (3.9) - ------------------------- --------- --------- ---------Profit after tax for thefinancial period beforeexceptional items 100.9 95.4 166.8------------------------ --------- --------- --------- 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 Number (m) Number (m) Number (m)------------------------ --------- --------- --------- Basic weighted averagenumber of shares 353.1 374.8 366.7Dilutive potentialordinary shares:Employee share awardsand options 3.9 5.6 4.7------------------------ --------- --------- ---------Dilutive weightedaverage number of shares 357.0 380.4 371.4------------------------ --------- --------- --------- The basic weighted average number of shares excludes shares held by The WilliamHill Holdings 2001 Employee Benefit Trust and those shares held in treasury assuch shares do not qualify for dividends. The effect of this is to reduce theaverage number of shares in the 26 weeks ended 26 June 2007 by 8.9m (26 weeksended 27 June 2006 - 11.2m; 52 weeks ended 26 December 2006 - 10.4m). An adjusted earnings per share based on profit for the financial period beforeexceptional items has been presented in order to highlight the underlyingperformance of the Group. 9. Reserves Hedging Called- Capital and up Share redemp- Own trans- share premium tion Merger shares lation Retined capital account reserve reserve held reserves earnings Total £m £m £m £m £m £m £m £m ---------------- ------ ------ ------ ------ ------ ------ ------ ------ At 27 December2005 39.1 311.3 3.1 (26.1) (57.5) (1.1) (20.2) 248.6Profit for thefinancial period - - - - - - 166.8 166.8Dividends paid(note 7) - - - - - - (70.9) (70.9)Items taken directly to statement ofrecognised income andexpense - - - - - 9.8 10.0 19.8Expense recognised inrespect of shareremuneration - - - - - - 3.0 3.0Treasury sharespurchased and cancelled (2.9) - 2.9 - - - (178.4) (178.4)Transfer to income - - - - - 0.7 - 0.7Transfer of own shares to recipients - - - - 10.6 - (9.7) 0.9---------------- ------ ------ ------ ------ ------ ------ ------ ------At 26 December2006 36.2 311.3 6.0 (26.1) (46.9) 9.4 (99.4) 190.5Profit for the financialperiod - - - - - - 104.8 104.8Dividends (note 7) - - - - - - (51.2) (51.2)Items taken directly to statement ofrecognised income andexpense - - - - - 12.8 19.5 32.3Transfer of sharepremium to retainedearnings - (311.3) - - - - 311.3 -Foreign exchangerevaluation - - - - - 0.3 - 0.3Expense recognised in respect ofshare remuneration - - - - - - 1.9 1.9Transfer ofown shares torecipients - - - - 1.1 - (1.1) ----------------- ------ ------ ------ ------ ------ ------ ------ ------At 26 June 2007 36.2 - 6.0 (26.1) (45.8) 22.5 285.8 278.6---------------- ------ ------ ------ ------ ------ ------ ------ ------ On 20 June 2007, the High Court of Justice confirmed the reduction of the sharepremium account of the Company by £311.3m, allowing its transfer to retainedearnings. Own shares held at 26 June 2007 amounting to £45.77m comprise 8.60m shares(nominal value - £0.86m) held in treasury purchased for £45.73m and 0.03m shares(nominal value - £0.003m) held in The William Hill Holdings 2001 EmployeeBenefit Trust purchased for £0.04m. The shares held in treasury were purchasedat a weighted average price of £5.32. At 26 June 2007 the total market value ofown shares held was £52.49m. 10. Notes to the cash flow statement 26 weeks 26 weeks 52 weeks ended ended ended 26 June 27 June 26 December 2007 2006 2006 £m £m £m--------------------------- --------- --------- --------- Operating profit 161.2 160.0 292.2 Adjustments for:Share of result ofassociate and jointventures (1.7) (1.7) (3.6)Depreciation of property,plant and equipment 12.8 13.2 27.1Depreciation of computersoftware 3.9 1.0 2.7Gain on disposal ofproperty, plant andequipment (4.7) (3.5) (4.5)Gain on disposal ofassociate (1.7) - -Cost charged in respect ofshare remuneration 1.9 2.0 3.0Defined benefit pensioncost less cashcontributions 0.7 0.7 (8.1)Foreign exchange 0.3 - -Movement in provisions - (5.9) (7.5)--------------------------- --------- --------- ---------Operating cash flows beforemovements in working capital 172.7 165.8 301.3 Increase in inventories - (0.3) (0.1)Decrease/(increase) inreceivables 8.8 (2.4) (11.0)Increase in payables 8.2 30.8 23.7--------------------------- --------- --------- ---------Cash generated byoperations 189.7 193.9 313.9Income taxes paid (32.8) (21.5) (53.9)Interest paid (34.9) (27.2) (55.4)--------------------------- --------- --------- ---------Net cash from operatingactivities 122.0 145.2 204.6--------------------------- --------- --------- --------- Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity date of three months or less. Analysis and reconciliation of net debt: Other 27 December non-cash 26 June 2006 Cash flow items 2007 £m £m £m £m---------------------- -------- -------- -------- -------- Analysis of net debtCash and cash equivalents atbank and in hand 98.7 (13.1) - 85.6Debt due within one year (0.9) (0.4) - (1.3)Debts due after more than oneyear (1,141.2) 44.9 (0.7) (1,097.0)---------------------- -------- -------- -------- --------Total (1,043.4) 31.4 (0.7) (1,012.7)---------------------- -------- -------- -------- -------- Other non-cash items of £0.7m comprise written off and amortised debt issuecosts. 11. Acquisitions During the period the Group acquired 2 small chains of bookmakers, details ofwhich are given below: T.H Jennings (Harlow Pools) Limited On 10 January 2007, the Group acquired all of the issued share capital of T.HJennings (Harlow Pools) Limited ('Jennings') for total cash consideration of£21.3m including costs of £0.1m. The capitalised goodwill on this transactionwas £5.6m. Jennings contributed £2.7m revenue and £0.4m to the Group's profitbefore taxation for the period between 11 January 2007 and 26 June 2007. Eclipse Bookmakers Limited On 25 January 2007, the Group acquired all of the issued share capital ofEclipse Bookmakers Limited ('Eclipse') for total cash consideration of £3.2mincluding costs of £0.1m. The capitalised goodwill on this transaction was£1.0m. Eclipse contributed £0.5m revenue and £nil to the Group's profit beforetaxation for the period between 26 January 2007 and 26 June 2007. Both transactions have been accounted for by the purchase method of accounting.The goodwill arising on these transactions is subject to an annual impairmentreview in accordance with IAS 36 'Impairment of assets'. The following tablesets out the book values of the identifiable assets and liabilities acquiredduring the period and their fair value to the Group: Book values ---------------------- Fair value Fair value Jennings Eclipse Total adjustments to Group £m £m £m £m £m----------------- -------- -------- -------- -------- -------- Non-current assetsIntangible assets 0.3 - 0.3 23.4 23.7Property, plant &equipment 0.5 0.1 0.6 (0.1) 0.5Deferred tax assets 0.2 - 0.2 - 0.2Current assetsTrade and otherreceivables 2.8 0.1 2.9 - 2.9Cash 0.1 - 0.1 - 0.1----------------- -------- -------- -------- -------- --------Total assets 3.9 0.2 4.1 23.3 27.4----------------- -------- -------- -------- -------- --------Current liabilitiesTrade and other payables (2.6) (0.3) (2.9) - (2.9)Non-current liabilitiesDeferred tax liabilities - - - (6.6) (6.6)----------------- -------- -------- -------- -------- --------Total liabilities (2.6) (0.3) (2.9) (6.6) (9.5)----------------- -------- -------- -------- -------- -------- Net assets acquired 1.3 (0.1) 1.2 16.7 17.9 -------- -------- -------- -------- Goodwill arising 6.6 --------Total consideration 24.5 --------Satisfied by:Cash consideration 22.8Retention creditor 1.7 --------Total consideration 24.5 -------- Net cash outflows in respect of these acquisitions comprised:Cash consideration (22.8)Bank loans, cash at bank and in hand acquired (1.6) --------- (24.4) --------INDEPENDENT REVIEW REPORT TO WILLIAM HILL PLC Introduction We have been instructed by the Company to review the financial information forthe 26 week period ended 26 June 2007 which comprises the consolidated incomestatement, the consolidated statement of recognised income and expense, theconsolidated balance sheet, the consolidated cash flow statement and relatednotes 1 to 11. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 26 weeks ended26 June 2007. Deloitte & Touche LLPChartered AccountantsLondon2 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WMH.L