Interim Results

William Hill PLC 2 August 2013

Significant strategic progress and continued momentum as Online delivers double-digit operating profit growth

William Hill PLC (LSE: WMH) (William Hill or the Group) announces its interim results for the 26 weeks ended 2 July 2013 (H1 2013 or the period). The comparator period is the 26 weeks ended 26 June 2012 (H1 2012).

(1) Group and Retail net revenue performance numbers are flattered by the transition from VAT and Amusement Machine Licence Duty to Machine Games Duty (MGD) on 1 February 2013. Underlying numbers are provided in the narrative.

(2) Operating profit is defined as pre-exceptional profit before interest and tax, before the amortisation of specifically identified intangible assets recognised on acquisitions, amounting to £5.4m in 2013 (2012: £1.8m).

(3) Basic EPS and dividend per share are based on an average of 836.7 million shares for 2013 and an average of 756.0 million shares for 2012, including an adjustment to reflect the impact of the rights issue completed on 5 April 2013.

(4) Adjusted EPS is stated before exceptional items and amortisation of specifically identified intangible assets recognised on acquisitions.

Significant strategic progress:

Continued momentum:

Ralph Topping, Chief Executive of William Hill, commented:

"I am pleased with the extent of the strategic progress we have made in the last six months. Australia is a very attractive proposition and, since we assumed ownership, we are excited by the opportunity we see to develop William Hill Australia by improving our digital offer and targeting the recreational customer. Taking control of Online is giving us more freedom both to invest and to use that expertise across the Group, including in Australia, where we have a team from Online helping to develop the proposition to compete more effectively. That work is ongoing and will be completed in early 2014.

"At the same time, we have continued the momentum in Online, particularly in mobile Sportsbook. The shift to mobile gaming is an important development and we have invested significant resources in getting the business fully prepared to accelerate this important opportunity. With almost 200% growth in mobile gaming net revenue in the first half, this decision is clearly justified.

"While online and mobile gambling have grown substantially, Retail has continued to prove resilient, with net revenue growing, driven by both betting and gaming. Profits have held up well even without a major football tournament and with the business being hit by additional tax. As the UK economy improves and consumers generally feel more confident, we remain confident Retail will continue to prosper.

"Looking forward, we are continuing to innovate and to invest, developing mobile gaming, rolling out the next generation gaming machine in the shops and with a clear plan for maximising the value of our acquisitions for the long-term benefit of the business."

A separate conference call will be held at 11.00 am BST for debt analysts and investors. Dial-in details are:

UK telephone: 0800 368 0649

International telephone: +44 (0) 20 3059 8125

Password: William Hill debt investor call

Archive of the debt call:

Telephone: +44 (0) 121 260 4861

Passcode: 6199119#

Notes to editors

William Hill, The Home of Betting, is one of the world's leading betting and gaming companies, employing more than 17,000 people. Founded in 1934, it is now the UK's largest bookmaker with around 2,400 licensed betting offices that provide betting opportunities on a wide range of sporting and non-sporting events, gaming on machines and numbers-based products including lotteries. The Group's Online business (www.williamhill.com) is one of Europe's leading online betting and gaming businesses, providing customers with the opportunity to access William Hill's products online, through their mobile, by telephone and by text services. William Hill US was established in June 2012 and provides land-based and mobile sports betting services in Nevada, and is the exclusive risk manager for the State of Delaware's sports lottery. The Group acquired the Sportingbet Australia business in March 2013, which is one of the leading online corporate bookmakers in Australia, offering sports betting products online, by telephone and via mobile devices. William Hill PLC is listed on the London Stock Exchange and became part of the FTSE100 in May 2013. The Group generates revenues of over £1.2bn a year.

Cautionary note regarding forward-looking statements

These results include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout these results and the information incorporated by reference into these results and include statements regarding the intentions, beliefs or current expectations of the directors, William Hill or the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and dividend policy of William Hill and the industry in which it operates.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond William Hill's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition, liquidity, dividend policy and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in these results and/or the information incorporated by reference into these results. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group and the development of the industry in which it operates, are consistent with the forward-looking statements contained in these results and/or the information incorporated by reference into these results, those results or developments may not be indicative of results or developments in subsequent periods.

Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules), William Hill does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview

The Group's momentum has continued in the first half of 2013 with our Online division achieving 18% growth in net revenue and 16% growth in Operating profit2, led by a strong Sportsbook performance, underpinned by mobile wagering growth. Online and William Hill Australia accounted for 46% of Group Operating profit2 in the period5. Retail net revenue grew 11%, underlying net revenue1 grew 3% and Operating profit2 declined by 2% or £2.2m impacted, amongst other things, by a £5m increase in indirect taxation following the change to Machine Games Duty (MGD) on 1 February 2013.

Group net revenue increased by 20% to £751.6m (+14% on an underlying basis1) (H1 2012: £627.8m). Excluding recent acquisitions and adjusting for the change to MGD in Retail, Group net revenue grew 8%. Group Operating profit2 grew by 8% to £181.4m (H1 2012: £167.8m) or, excluding acquisitions, by 6%.

The first half of 2013 was busy in terms of corporate activity. We acquired Sportingbet Australia and took a call option over the Spanish Miapuesta business on 19 March. On 15 April, we acquired Playtech's 29% stake in the William Hill Online joint venture. We were pleased to be supported by shareholders in funding that acquisition through a £373m rights issue (net of expenses).

We also continue to invest to develop the business organically. Cash capital expenditure increased to £34.7m (2012: £30.2m), with continuous investment in the development of the Retail estate. Product development and IT infrastructure in Online are other major areas of focus.

The Group generated net cash inflow from operating activities of £134.1m (2012: £168.7m). As a result of the transactions highlighted above, net debt for covenant purposes increased to £821m (2 January 2013: £339m) and the Group's net debt over EBITDA ratio now stands at 1.9 times. In June, we issued a seven-year £375m corporate bond with a coupon of 4.25% to replace the short-term bridge loan taken on to part-fund the transactions. Whilst our absolute debt levels have risen, our credit ratings remain as before: Ba1 with Moody's and BB+ with Standard & Poor's.

The Board has declared an interim dividend of 3.7pper share (2012: 3.2p per share after rights issue adjustment), an increase of 16%over the prior year, reflecting the positive results delivered in the first half of 2013 and the Board's confidence in William Hill's future.

Strategy update

As our results show, we have continued to deliver on our strategy to expand the business through:

(a) a wider product range;

(b) greater multi-channel usage; and

(c) international expansion.

Wider product range

We continue to innovate with our sports betting product. We have expanded our feeds to add further tennis and basketball matches and launched a new cricket model to increase our pre-match and in-play offering this summer, having the market-leading in-play offering for the start of the Ashes series. Our NFL and NCAA football models are ready for the start of the American football season later this year and we will expand the newly established Australian business's product offering by supplying soccer feeds from Online for the start of the UK soccer season in August. We are the only pure fixed-odds bookmaker to offer a 'Cash In My Bet' facility, which we are extending to further products, to mobile and to other territories.

Gaming accounted for 44% of the Group's net revenue in the period. Innovations in both Retail gaming machines and mobile gaming online are a key area of focus. We launched our marketing and rewards 'Bonus Club' across the Retail estate in June, offering rewards to machine gaming customers through a chip-and-pin card without the requirement to supply personal data as we recognise many Retail customers value anonymity. In the third quarter, we will start the roll-out of the next generation gaming machine, Eclipse, which incorporates four screens to improve marketing and customer interaction. The roll-out of almost 4,900 machines will be to the half of the estate covering the south of England and is scheduled to be completed in the first quarter of 2014.

Online gaming has seen 67 new games rolled in the first half of the year. Twenty-five games were launched to support our fast-growing mobile online gaming revenues. In July, 12 of our 13 new desktop games were dual-launched on mobile.

Greater multi-channel usage

Mobile has been and continues to be a high priority for the Group. Mobile Sportsbook is continuing to perform very strongly, with amounts wagered up 112% and the app now downloaded more than one million times since it was launched in the Apple App Store in February 2012. It accounted for 38% of Sportsbook amounts wagered in the first half and 40% in the second quarter, and averaged above £21m turnover per week during the relatively quiet month of June. According to a report published by Onavo, a mobile data company, William Hill's is the most popular sports betting app, actively used by 38% of iPhone-owning sports gamblers.

Following the success of our mobile betting product, mobile gaming has become a key priority. Mobile gaming net revenue grew by 198% and accounted for 14% of Online gaming net revenue in the first half. We are excited by the growth opportunities we see in mobile gaming and aim to generate 40% of gaming net revenue from mobile devices by mid-2015. During the past 12 months, we have focused on establishing the right platforms to support mobile gaming growth. We have increased mobile payment systems, launched key products such as Casino and Vegas, and migrated existing desktop content onto mobile.

Having enhanced our marketing and rewards capability for gaming in the shops, we will be increasing cross-channel promotions between Retail, Online and Mobile, with a strong focus on gaming.

Given the high proportion of UK active gamblers who already have a William Hill account, we are also investing in our Customer Relationship Management capability. In 2012, we established a new data collection and storage system that gives us a single customer view, collated from multiple product databases, and enables better customer segmentation, targeting and customer services. In February 2013, we introduced a new campaign management system, using increased automation around the targeting, delivery and measurement of marketing campaigns.

We completed the acquisition of the 29% outstanding stake in Online on 15 April 2013 for £424m. This was the first opportunity to take full ownership of this strongly growing business and gives the Group increased strategic and operational flexibility. Taking control of Online is giving us more freedom both to invest and to use that expertise across the Group. Free from previous constraints, Online colleagues are now lending their digital expertise to the development of our new Australian business and are working closely with Retail management on opportunities to exploit our multi-channel offering to customers. As previously guided, we have also increased our planned capital investment in Online by 50% from the previous £20m cap to £30m this year. This will also enable us to launch mobile offerings in Italy and Spain in the second half of 2013.

International expansion

Selective international expansion is a core part of the Group's strategy, enabling us to diversify our revenues by accessing other locally licensed international territories.

We launched Online in Italy in 2011 and in Spain in 2012. We continue to enhance the product range in each country and have just launched Poker in Italy. The Spanish Online market is predominantly a sports betting market but the Italian market requires a strong focus on gaming as well as sports betting. Our performance in Italy, for instance, improved significantly following the launch of our slots offering in December 2012. We are one of the leading non-Italian operators in the Italian market, with 3.3% market share. In the Spanish sports betting market, William Hill holds the fourth largest market share with 10.7% and Miapuesta, over which we have a call option under the Sportingbet transaction, is the third largest operator with 12.5% market share.

On 19 March 2013, we completed the acquisition of Sportingbet's Australian online business and were granted a call option over its licensed Spanish business, Miapuesta, for a total cash consideration of £459.4m. This acquisition is in line with our strategy to develop the Group's online operations, to increase our exposure to attractive regulated markets and to achieve geographic diversification. The regulated Australian online betting market is one of the largest in the world and has demonstrated high growth rates. Sportingbet's Australian business is already a leading online corporate bookmaker in Australia, with significant potential to expand. The proposed acquisition of the Miapuesta business would allow us to achieve critical mass more quickly in the regulated Spanish market.

Having owned the business for 15 weeks, we are excited by the opportunity we see to develop William Hill Australia by improving our digital offer and targeting the recreational customer. We have been delighted with the quality of the existing Australian workforce and those we have subsequently attracted into the business, which augurs well for the future. We are also pleased to have confirmed our assessment of the strength of its customer relationship management, its proprietary technology and its leading position in the market. Equally, we see opportunities to enhance the business under William Hill ownership, for instance by expanding the product range, improving the website user experience and applying our established and proven online marketing expertise. A team from Online is working in Australia to help develop the digital capability of the business and, in doing so, to improve the rate of customer acquisition and to reduce the cost per acquisition. That work is ongoing and will be completed in early 2014. We are making careful and considered changes to the business, and we remain confident of the potential of this business.

Operating review

Summary of financial results

Online

Online continued to perform strongly in the first half of 2013. Net revenue was 18% higher and Operating profit2 was up 16%, underpinned by the continued strong growth of Sportsbook, including mobile. During the period, 81% of Online revenues came from our core markets (UK, Spain, Italy) (H1 2012: 78% from core markets).

Sportsbook net revenue grew 44% to £116.0m, benefitting from the combination of growth in both staking and margin. Amounts wagered increased by 26% despite the presence of the bulk of Euro 2012 in the prior year. Favourable sporting results in football and racing, including an exceptional Grand National, drove a gross win margin of 9.0% for the half (H1 2012: 7.8%), c2 percentage points higher than the normal expected level of c7%. In-play margin was 5.4% (H1 2012: 4.9%) and pre-match margin was 11.6% (H1 2012: 9.8%). Mobile Sportsbook gross win margin was 10.7% versus the overall Sportsbook figure of 9.0%. We continue to innovate our products and services to improve customer engagement, with our latest innovation, Cash in My Bet, being used by more than 100,000 customers since launch.

A shift to mobile gaming is discernible and, in the period we have invested time and resources in getting the business ready to accelerate this trend. Impacted by the closure of certain markets in 2012, gaming net revenue was flat at £117.9m (H1 2012: £118.1m). Casino was up 2%, Bingo was down 2% and Poker was down 14%. Total Operating profit2 contribution from the closed markets in H1 2012 was £2.3m.

Online cost of sales was 13% higher. This included increased gambling taxes in certain markets and increased mobile Sportsbook royalty payments, both linked to the growth of these net revenues. The 2012 position also benefitted from £2m of prior year accrual releases relating to Greece. Operating costs were 20% higher, with an 18% increase in marketing investment and with other costs up 21%. Marketing investment for the half was equivalent to 28% of net revenue, in line with the full-year guidance.

Operating profit2 was 16% higher against H1 2012 at £80.2m (H1 2012: £68.9m). The non-controlling interest for Playtech up to 14 April which was the completion date of the acquisition of its 29% holding in William Hill Online was £15.3m (H1 2012: £18.7m).

Retail

Retail net revenue was 11% higher or 3% higher on an underlying basis1.

OTC net revenue was up 5%, benefitting from favourable football and racing results, including a record Grand National result. This led to an unusually high gross win margin of 19.7% (2012: 17.8%). Such a high margin inevitably lowers staking by reducing recycling. As we also rolled over the first three weeks of Euro 2012 in June and saw a relatively less attractive football programme in the second quarter, amounts wagered were 5% lower in the half as a whole, despite growth in both horse racing and greyhound staking in the second quarter.

Gaming machine net revenue increased by 18% in the first half, or +1% after adjusting for the MGD effect1. Gross win per machine per week was £910 (H1 2012: £924). The average number of gaming machines increased by 3% to 9,384 following the change to MGD at a density of 3.92 per shop. We completed the introduction of marketing and rewards functionality across the estate in the second quarter and plan to roll-out a next generation gaming machine, Eclipse, to around half of the estate by the end of Q1 2014.

We continue to invest in expanding and enhancing the estate, increasing the Retail estate by a net six shops to 2,398 in the first half, opening 16 new licences and closing 10 during the period. Our target remains to increase the estate by a net c1% per annum. A further seven shops were re-sited. There was an average of 2,392 shops in the period, around 1% higher than the prior year. We have installed c700 self-service betting terminals across the estate to date and aim to double the number of video walls from around 100 by the end of the year.

Cost of sales and operating costs were 47% and 7% higher, respectively, in part reflecting the change to MGD from VAT and Amusement Machine Licence Duty in February. Adjusting for this, cost of sales was 2% higher, and operating costs were up 4%. Additional operating costs included £3m of one-off repair and maintenance costs, higher content costs and higher staff costs from increased shop opening hours. This was partially mitigated by around £3m savings in Retail staff incentives as well as central cost recharge reductions. Looking ahead, our guidance on operating costs remains unchanged at around +6% on a headline basis or +3% excluding the effect of MGD.

The Retail business delivered £107.6m of Operating profit2 in the first half, only £2.2m down on the prior year despite incurring an additional c£5m in taxation following the change to MGD on 1 February 2013 and without the benefit of a major football tournament in June.

William Hill Australia

William Hill Australia was formed in March 2013 following the completion of the acquisition of Sportingbet plc's Australian assets, including Sportingbet Australia and Centrebet.

In the 15 weeks from completion to the end of the period, William Hill Australia generated £30.8m net revenue, from amounts wagered of £422.3m at a gross win margin of 7.8%. Gross profit was impacted by higher product fees following changes to state betting taxes. With costs of £20.4m, the division recorded an Operating profit2 of £3.7m. In Australian dollars, wagering fell 6% on the same period in 2012, net revenue grew 36% and Operating profit2 grew 46%.

Although still early, activities to develop and enhance the business are our priority. These will continue throughout the second half and into the first quarter of 2014, and are progressing well. Though there will be some operational changes as we integrate and strengthen the business, we remain confident of the attractiveness of this opportunity to establish William Hill in another major licensed market.

William Hill US

William Hill US has performed well against internal expectations, delivering amounts wagered of £127.7m and net revenue of £9.6m, with a gross win margin of 7.5%. The division made a modest £0.6m profit in the period largely ahead of the peak trading season which runs from September through January. We continue to enhance our product offering in the US, adding more markets for the core sports of professional and college football and basketball. Mobile continues to perform well, with handle increasing c130% over the prior period.

The State of Nevada passed an alteration to its existing gambling bill in May, banning betting kiosks from bars, taverns and other establishments that hold a restricted gaming licence, effective from 1 July 2013. Around 69 of the 86 William Hill US kiosks were affected and are no longer able to be used to place bets. However, as these are useful deposit points for customers funding their mobile betting accounts, we expect to retain the kiosks in the majority of these locations. The financial impact is not expected to be material.

From a regulatory perspective, a number of states are reviewing their gambling frameworks. In our view, such changes are likely to favour land-based incumbents and we are positioning ourselves to exploit our strengths in sports betting and as a licensed Nevada operator as opportunities become available. For instance, in May, we signed a long-term partnership agreement with Monmouth Park Racetrack in New Jersey to provide exclusive sports betting facility to the racetrack should legislation allow and additionally, to sponsor the Haskell Invitational, one of the most prestigious horse races in the US.

Telephone

Amounts wagered in the Telephone channel were 9% lower, impacted in part by reduced recycling resulting from the strong gross win margin of 7.9%, 1.9 percentage points higher than in the first half of 2012. This drove net revenue up 20% to £10.1m. Through good cost control, with operating costs 19% lower, this translated into £1.9m Operating profit2 against £0.7m in the comparable period which included a c£3.4m benefit from the release of accruals in cost of sales.

Financial review

Operating profit2 grew by 8% in the first half of 2013 on the comparable period, from £167.8m in 2012 to £181.4m in 2013. Excluding the Group's recently acquired Australian and US businesses, which were not present in the prior period, Operating profit2 grew by 6% from £167.8m to £177.1m.

Pre-exceptional profit after tax for the year was £145.9m, up 17% on the prior year (H1 2012: £124.3m). After deducting exceptional items net of tax, profit after tax for the period grew by 13% to £133.7m (H1 2012: £117.9m). Included in this total was £15.3m (H1 2012: £18.7m) relating to the non-controlling interest in William Hill Online up to 14 April 2013, which was the date immediately prior to the acquisition of this minority interest.

Basic adjusted earnings per share grew by 16% from 14.0p in H1 2012 to 16.2p in H1 2013, with both prior year comparatives and earnings for the 2013 period prior to the rights issue rebased for the effect of the rights issue completed on 5 April. This growth reflects the profit growth in the period and the benefit of a reduction in the effective tax rate. The adjustments made to the basic earnings per share metric relate to exceptional items and to the amortisation of acquired intangible assets: adjustments which reflect the key business metric of Operating profit2 and give a better sense of underlying business progress. Basic earnings per share was up 8% to 14.2p (H1 2012: 13.1p), adjusted for the rights issue as above.

Pre-exceptional Income Statement

The Group saw net revenue growth of 20% against the prior period, to £751.6m versus £627.8m in H1 2012. Retail net revenue saw growth of 11% on the same basis, though this was flattered by the transition from VAT and AMLD to MGD; on an underlying basis it grew 3%. William Hill Online delivered 18% net revenue growth, powered largely by a 44% increase in Sportsbook net revenue.

Cost of sales for the Group was £129.6m, up 53% on the prior year (H1 2012: £84.7m). The key components of this growth were increased gaming machine-related gaming duty following the introduction of MGD in February, increased gaming duty in certain Online territories, and higher royalty payments relating to the increased proportion of Sportsbook revenues derived from mobile. The Group also saw one-off accrual releases of c£5m in the 2012 comparative relating both to Online and Telephone, which exacerbated the relative growth in this cost line in 2013, and increased UK gross profits tax payments in 2013. Adjusting for the change to MGD, cost of sales was up 13%. Cost of sales in the William Hill Australia business, comprising Goods and Services Tax as well as racing and other sports levies, was £6.7m from completion to the end of the period.

Pre-exceptional net operating expenses, which includes other operating income but excludes amortisation of acquired intangibles, grew 17% from £376.8m in H1 2012 to £441.9m in H1 2013. Online saw 20% growth in net operating expenses, driven by an 18% increase in marketing costs and a 21% increase in other costs. The main driver of other cost growth was staff, with a 42% increase. Retail net operating expenses grew 7%, or 4% after adjusting for the increase in MGD. In absolute terms, the primary increases came from staff costs, with an increase of 3%, property costs, up 8%, and content costs, up 12%. The newly acquired Australian business saw £20.4m net operating expenses from completion of the Sportingbet acquisition to the end of the period. William Hill US and Telephone incurred £8.1m and £8.2m net operating expenses, respectively. Net corporate expenses grew by 5% to £14.0m, impacted by a reduction in central charges to Retail. Prior to recharges, gross corporate costs were flat, benefitting from reduced staff incentive provisions. Other operating income was £3.3m (H1 2012: £1.8m). 

The Group had a contribution of £1.3m from its associate, SIS (H1 2012: £1.5m).

The Group saw £5.4m of amortisation in H1 2013 relating to acquired intangibles, of which £1.8m arose in Online (H1 2012: £1.8m), £1.3m arose following the US acquisitions, and £2.3m related to the Sportingbet acquisition. The Group expects full year amortisation to be c£12m. After amortisation, Group pre-exceptional EBIT was up 6% to £176.0m (H1 2012: £166.0m).

Pre-exceptional net finance costs rose from £15.7m in H1 2012 to £19.8m in H1 2013 as the Group saw net debt increase following the acquisitions undertaken in H1 2013.

Pre-exceptional pre-tax profit for the first half was £156.2m (H1 2012: £150.3m).

Exceptional costsThe Group recorded £12.6m of pre-tax exceptional costs in the first half (H1 2012: £7.0m), comprising £10.9m of exceptional operating costs relating to the Sportingbet acquisition and the write-off of £1.7m of unamortised arrangement fees relating to the early termination of the short-term bridge facility put in place for the acquisitions carried out in the first half. Together with the £4.6m incurred in 2012, total exceptional costs for the Sportingbet transaction were £15.5m. The Group continues to expect around £16m in total exceptional costs linked to this transaction.

Taxation

Pre-exceptional tax on profit was £10.3m (H1 2012: £26.0m) at an effective tax rate of 6.6% (H1 2012: 17.3%). This benefitted from a deferred tax credit arising from the reduction in UK corporation tax rate to 20% in 2015, which was substantively enacted during the period. The Group expects the effective tax rate will revert to c18% in the second half, achieving 12% on a full-year basis in 2013. The effective income statement tax rate expectation for 2014 remains 17%. Tax on exceptional items was a £0.4m credit (H1 2012: £0.6m credit), making the total tax for the Group for the first half £9.9m (H1 2012: £25.4m).

The Group expects the cash tax rate for 2013 to remain in line with previous guidance of 20%, with cash tax guidance for 2014 now expected to be 18%.

Cash flow and balance sheet

The Group continued to generate substantial levels of cash from operating activities, with £134.1m of net cash inflow (H1 2012: £168.7m), with growth in Operating profit2 contributing positively to this improvement, offset by an adverse working capital movement.

The Group invested £34.7m in cash capital expenditure in the period (H1 2012: £30.2m) and it continues to expect full-year capital expenditure to be in the range of £80-90m, including an estimated £30m investment in William Hill Online and £5m in Group IT infrastructure. Other cash outflows in the first half included £55.0m in dividend payments and £21.6m in distributions made to non-controlling interests.

During the period, the Group completed two acquisitions: certain assets acquired from Sportingbet plc and the acquisition of the 29% minority interest held by the Playtech Group in William Hill Online. These were financed by a combination of borrowings under the Group's existing revolving credit facility (RCF), a short-term bridge loan and the proceeds of a £373m (net) 2-for-9 rights issue completed on 5 April. To maintain an appropriate capital structure and further diversify its debt profile, the Group issued a seven-year bond at a coupon rate of 4.25% to raise £375m on 5 June. The proceeds of the bond issue were used to repay the bridge loan and part of the borrowings drawn under the RCF. As at 2 July 2013, the Group had drawn borrowings of £905m and net debt for covenant purposes increased to £821m (2 January 2013: £339m) as a result of the two acquisitions. This reflects a net debt over EBITDA ratio of 1.9 times.

The Group saw its net assets move up by £6m, reflecting the £134m increase in retained earnings, and the additional £373m net share capital issued by the Company, offset by a £413m decrease in reserves following the acquisition of the minority interest and a net £88m of other outflows, including £55m of dividend payments and £22m of other distributions.

The Group's accounting pension deficit increased slightly over the period to £22.3m as a result of deficit repair contributions being offset by actuarial losses and ongoing service costs.

Fiscal and regulatory update

In the UK, submissions have been made to the Department of Culture, Media and Sport (DCMS) on its consultation on gaming machine stakes and prizes. Publication of the submissions and the Department's response is expected in due course but no timeline has been specified.

In May, the UK Government confirmed in the Queen's Speech its intention to regulate online gambling on a 'Point of Consumption' basis and has published draft legislation. Any proposals on the introduction of a Point of Consumption tax and the tax rate are expected to be addressed in the Chancellor's budget speech in due course. The Group's view remains that there is no demonstrable need for the proposed Point of Consumption regulation based on consumer protection, which is the Government's justification, and that rigorous enforcement would be required to mitigate the significant market distortion that will result from introduction of taxation.

In Australia, the Department of Broadband, Communications and the Digital Economy published its final report of the Review of the Interactive Gambling Act 2011. The Federal Government is seeking to work with the states and territories to implement a national harm minimisation and consumer protection standard for all licensed gambling activities, before giving consideration to the Review's recommended changes relating to the trial of in-play sports betting and online tournament poker. In addition, measures were announced by the Federal Government to restrict gambling advertisements before, during and after live games and to ban the promotion of live odds on television and radio networks. The Australian Wagering Council, of which we are a member, accepted the proposed changes and is working with the broadcast industry to implement them.

In the US, we continue to track potential changes to regulation where a variety of state governments are reviewing gambling regulation.

Dividend

The Board has approved an interim dividend of 3.7p per share (H1 2012: 3.2p per share after rights issue adjustment). It is payable on 6 December 2013, the ex-dividend date is 23 October 2013 and the record date is 25 October 2013. The Group estimates that approximately 866 million shares will qualify for the final dividend.

Principal risks and uncertainties

The key risks areas for 2013, which are discussed in our 2012 Annual Report, are identified as:

- UK and overseas taxation and duties;

- UK and overseas regulation;

- key supplier relationships;

- business continuity and disaster recovery preparedness;

- UK and international growth opportunities;

- the economic climate;

- data protection and technology risk; and

- regulatory compliance.

Directors' responsibility statement

We confirm that to the best of our knowledge:

·; the unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting"; and

·; the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R and Disclosure and Transparency Rule 4.2.8R.

Neither the Company nor the directors accept any liability to any person in relation to the half-year financial report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.

By order of the Board,

R.J. Topping N. Cooper

Chief Executive Group Finance Director

2 August 2013 2 August 2013

Reference notes

(1) Group and Retail net revenue performance numbers are flattered by the transition from VAT and Amusement Machine Licence Duty to Machine Games Duty (MGD) on 1 February 2013. Underlying numbers are provided in the narrative, adjusting the prior year from the date of introduction of MGD to reflect the current tax regime.

(2) Operating profit is defined as pre-exceptional profit before interest and tax, before the amortisation of specifically identified intangible assets recognised on acquisitions, amounting to £5.4m in 2013 (2012: £1.8m).

(3) Basic EPS is based on an average of 836.7 million shares for 2013 and an average of 756.0 million shares for 2012, including an adjustment to reflect the impact of the rights issue completed on 5 April 2013.

(4) Basic EPS and dividend per share are stated before exceptional items and amortisation of specifically identified intangible assets recognised on acquisitions.

(5) This includes the contribution of William Hill Australia for the 15 weeks from completion on 19 March 2013 to the end of the period.

William Hill PLC

Interim Consolidated Income Statement (unaudited)

for the 26 weeks ended 2 July 2013

William Hill PLC

Interim Consolidated Statement of Comprehensive Income (unaudited)

for the 26 weeks ended 2 July 2013

William Hill PLC

Interim Consolidated Statement of Changes in Equity (unaudited)

for the 26 weeks ended 2 July 2013

William Hill PLC

Interim Consolidated Statement of Changes in Equity (unaudited)

for the 26 weeks ended 2 July 2013

William Hill PLC

Interim Consolidated Statement of Financial Position (unaudited)

as at 2 July 2013

William Hill PLC

Interim Consolidated Cash Flow Statement (unaudited)

for the 26 weeks ended 2 July 2013

William Hill PLC

Notes to the Group Financial Statements

for the 26 weeks ended 2 July 2013

1. Basis of accounting

General Information

William Hill PLC is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Greenside House, 50 Station Road, London, N22 7TP. The condensed consolidated financial information for the 26 weeks ended 2 July 2013, which has been approved by a committee of the Board of Directors on 2 August 2013, has been prepared on the basis of the accounting policies set out in the Group's 2012 Annual Report and Accounts on pages 75 to 76, which can be found on the Group's website www.williamhillplc.com, as updated for investment properties and amounts wagered, which can be found below. This condensed consolidated financial information for the 26 weeks ended 2 July 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The condensed consolidated financial information for the 26 weeks ended 2 July 2013 should be read in conjunction with the annual financial statements for the 53 weeks ended 1 January 2013, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The accounting policies used in the preparation of the interim financial information have been consistently applied to all periods presented.

The condensed consolidated financial information for the 26 weeks ended 2 July 2013 is unaudited and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006, but has been reviewed by the auditor and their report is set out at the end of this financial information. The results for the 53 week period ended 1 January 2013 shown in this report do not constitute the Company's statutory accounts for that period but have been extracted from those accounts, which have been filed with the Registrar of Companies. The auditor has reported on those accounts. Their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The directors consider that the 'adjusted' earnings per share measure, as disclosed in note 8, provides additional useful information for shareholders on the underlying performance of the business. It is not a recognised measure under IFRS and may not be directly comparable with 'adjusted' measures used by other companies.

Adoption of new and revised standards

There have been a number of new and amended standards and interpretations effective in the period. The only standard which has had an impact upon the values or disclosures in the financial statements is IAS 19 (revised 2011) 'Employee Benefits'. The principal impact has been the removal of separate assumptions for expected returns on plan assets and discounting of scheme liabilities and their replacement with a single discount rate for the net deficit, with the income statement presenting a net interest figure rather than separate income and expense values. There was no effect on the net assets or results of the Group.

Basis of accounting

The interim condensed consolidated financial information has been prepared in accordance with IFRS adopted by the European Union and therefore complies with Article 4 of the EU IAS Regulation.

The interim financial information has been prepared on the historical cost basis, except for the revaluation of certain financial instruments.

Basis of consolidation

The financial information incorporates the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 2 July 2013. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the interim consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations and investments

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit or loss in the period of acquisition.

Going concern

The Group meets its day to day working capital requirements from operating cash flows and its cash resources on hand, supplemented by a committed bank facility of £550m, which expires in 2015. In addition, the Group has long-term debt liabilities in the form of £300m of corporate bonds due in 2016 and £375m due in 2020. Whilst current economic conditions create uncertainty over the level of demand for the Group's products, the Group's forecasts and projections show that the Group should be able to operate within the level of its borrowing facilities over the foreseeable future.

Therefore, after making these enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial information.

Seasonality

The Group's overall profitability is primarily sensitive to sporting results, largely in terms of outcome but also in terms of the timing and presence of significant events that attract a large amount of stakes. For example, the comparative period included part of a major football tournament, the European Championships, where the current period does not. In addition, adverse weather conditions can disrupt the sporting calendar and limit betting opportunities.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise.

Amounts wagered

Amounts wagered does not represent the Group's statutory revenue measure and now comprises the gross takings receivable from customers in respect of individual bets placed in the period in over the counter LBO, Telephone, US, Australian and Online sportsbook businesses and net revenue for the period for LBO machines and online casino, poker and bingo products. This represents a change in treatment of LBO machines wagering, for which gross takings was previously utilised. This change has been made in order to improve consistency across the Group's segments and is reflected in current and prior period results. The presentation of net revenues, which is the Group's statutory revenue measure, is unaffected by this change.

2. Segment information

The Board reviews its reportable operating segments in line with guidance provided by IFRS 8 'Operating Segments'. The segments are aligned with the reports the Board and the Group's Chief Executive review to make strategic decisions.

The Retail distribution channel comprises all activity undertaken in LBOs including gaming machines. The Online segment comprises all activity undertaken online including an online sportsbook, online casino, online poker sites and other online gaming products. The Telephone segment comprises the Group's telephone betting services. The US segment comprises betting activity undertaken in the USA. The Australia segment comprises an online and telephone sportsbook under the Centrebet and Sportingbet brands in Australia which was acquired during the period (see note 9). Other activities include on-course betting and greyhound stadia operations.

Business segment information for the 26 weeks ended 2 July 2013:

1 The Group defines operating profit as pre-exceptional profit before interest and tax, before the amortisation of specifically identified intangible assets recognised on acquisitions.

2 The reports used by the Chief Executive to make strategic decisions use operating profit as a key metric. A reconciliation to profit/(loss) before interest and tax has been provided for information purposes only.

Business segment information for the 26 weeks ended 26 June 2012:

1 The Group defines operating profit as pre-exceptional profit before interest and tax, before the amortisation of specifically identified intangible assets recognised on acquisitions.

2 The reports used by the Chief Executive to make strategic decisions use operating profit as a key metric. A reconciliation to profit/(loss) before interest and tax has been provided for information purposes only.

Business segment information for the 53 weeks ended 1 January 2013:

1 The Group defines operating profit as pre-exceptional profit before interest and tax, before the amortisation of specifically identified intangible assets recognised on acquisitions.

2 The reports used by the Chief Executive to make strategic decisions use operating profit as a key metric. A reconciliation to profit/(loss) before interest and tax has been provided for information purposes only.

3. Exceptional items

Exceptional items are those items the Group considers to be one-off or material in nature that should be brought to the reader's attention in understanding the Group's financial performance. Exceptional items are as follows:

The tax impact of exceptional items is as follows:

1 On 19 March 2013, the Group acquired a number of operations from the Sportingbet Plc Group, as described in note 9. Costs relating to this acquisition were charged as exceptional items.

2 In 2012 the Group acquired three USA-based businesses. Both transaction and integration costs relating to this acquisition were charged as exceptional items.

3 During 2012 the Group applied for a gaming licence in Spain. As part of that process the Group agreed to settle a back taxes claim with the Spanish tax authorities which, including penalties and interest, totalled £4.6m.

4 In June 2013, the Group issued a £375m corporate bond and used the proceeds to settle £275m borrowed under a Term Loan Facility arranged in December 2012, with the remainder used to clear down outstanding amounts under the Group's revolving credit facility. The Term Loan Facility was immediately cancelled and the remaining balance of finance fees, which were being expensed over the life of the debt, was charged as an exceptional item.

 4. Investment income

Following the introduction of IAS 19 (revised 2011), finance income and costs relating to the Group's pension scheme assets and liabilities are presented net in finance costs.

5. Finance costs

The above does not include exceptional finance costs as described in note 3.

6. Tax on profit on ordinary activities

The effective rate in respect of ordinary activities is 6.9% (26 weeks ended 26 June 2012: 17.7%; 53 weeks ended 1 January 2013: 16.8%). This is lower than the 2013 statutory rate of 23.25% due to the deferred tax credit resulting from the enacted reduction in the corporation tax rate to 20% and the lower effective tax rate on the income of William Hill Online.

The effective rate in respect of ordinary activities before exceptional items is 6.6% (26 weeks ended 26 June 2012: 17.3%; 53 weeks ended 1 January 2013 16.5%) and excluding the deferred tax credit is 18.7% (26 weeks ended 26 June 2012: 21.4%; 53 weeks ended 1 January 2013: 20.8%).

7. Dividends proposed and paid

The directors have approved an interim dividend of 3.7 pence per share (2012: 3.2 pence per share) to be paid on 6 December 2013 to ordinary shareholders on the Register of Members on 25 October 2013. The comparative for 2012 has been restated from the previously reported 3.4p per share to take into account the impact of the rights issue (as described in note 15). In line with the requirements of IAS 10 - 'Events after the Reporting Date', this dividend has not been recognised within these interim results.

The 2012 final dividend of 7.8 pence per share (£55.0m) was paid in the half year ended 2 July 2013.

By agreement, the William Hill Holdings 2001 Employee Benefit Trust agreed to waive all dividends. The Company estimates that 866m shares will qualify for the interim dividend.

8. Earnings per share

The earnings per share figures for the respective periods are as follows:

The comparator figures have been restated to take into account the impact of the rights issue (as described in note 15) in line with IAS 33 "Earnings Per Share".

An adjusted earnings per share, based on profit for the period before exceptional items and amortisation (relating to intangible assets recognised on acquisitions), has been presented in order to highlight the underlying performance of the Group.

The basic weighted average number of shares excludes shares held by The William Hill Holdings 2001 Employee Benefit Trust and those shares held in treasury as such shares do not qualify for dividends. The effect of this is to reduce the average number of shares by 0.7m in the 26 weeks ended 2 July 2013 (26 June 2012: 1.2m, 1 January 2013: 0.9m).

9. Acquisition

On 19 March 2013, the Group acquired the Australian sportsbook operations of Sportingbet and the Miapuesta brand and was granted a call option over Sportingbet's locally licensed Spanish business. The acquisition, representing a further step in the Group's strategy of targeted international expansion, was made for a cash consideration of £459.4m and resulted in the Group acquiring 100% of the share capital of the entities acquired.

Goodwill recognised on acquisition represented expected profit enhancements from both future revenue growth prospects and expected cost synergies and is not expected to be deductible for tax purposes.

The acquisition-date fair values of the assets and liabilities acquired are provisional. These may be further adjusted, particularly in respect of intangible assets, current liabilities and deferred tax provisions, as we gain further understanding of the business. The provisional purchase price allocation is set out in the table below:

The aggregate cash consideration, net of cash acquired, was as follows:

Included within the intangible non-current assets were £169.5m of separately identifiable intangibles that comprised brands, customer relationships, contractual relationships and software.

The fair value of the trade and other receivables comprised contractually receivable sums of £13.5m, net of a provision of £4.6m for potentially unrecoverable amounts.

The acquired Australian operations have been included within a new operating segment under the name "Australia", which was created on their acquisition, and their contribution to the period's result is shown in note 2. Had they been acquired on 2 January 2013, they would have contributed £56.1m of revenue and £12.5m of profit before tax during the 26 weeks to 2 July 2013.

The call option over the Spanish businesses is exercisable in a six-month window from September 2013 and no amount is payable on exercise.

Simultaneously with the purchase, the Group entered into a loan agreement with the joint purchaser, GVC, under which the Group lent £12m to GVC. This loan is repayable in instalments over the period to June 2016.

10. Bank loans and other borrowings

Bank facilities

At 2 July 2013, the Group had the following bank loan facilities:

1. A committed bank loan facility of £550m provided by a syndicate of banks. At the period-end, £230m of this facility was drawn down. This facility is a Revolving Credit Facility ('RCF'), expiring in November 2015.

2. An overdraft facility of £5m, of which £nil was drawn down at the period-end.

During the period, the Group repaid and cancelled the Term Loan Facilities of £325m that were established during 2012. The remaining unamortised finance fees on the facility were charged to exceptional costs as described in note 3.

£550m Revolving Credit Facility

Borrowings under the RCF are unsecured but are guaranteed by the Company and by William Hill Organization Limited, one of the principal operating subsidiaries of the Company.

Borrowings under the Facility incur interest at LIBOR plus a margin of between 2.00% and 2.75%, determined by the Group's consolidated Net Debt to EBITDA ratio as defined in the loan agreement. A commitment fee, equivalent to 40% of the margin, is also payable in respect of available but undrawn borrowings under the RCF.

The upfront participation and other fees plus associated costs incurred in arranging the RCF have been capitalised and offset against the loans in the Consolidated Statement of Financial Position and are being amortised on a straight line basis over the life of the facility.

Overdraft facility

At 2 July 2013, the Group had an overdraft facility with National Westminster Bank plc of £5m (26 June 2012: £5m; 1 January 2013: £5m). The balance on this facility at 2 July 2013 was £nil (26 June 2012: £nil; 1 January 2013: £nil).

Corporate bonds

£300m 7.12% Guaranteed Notes due 2016

As part of its strategy to diversify its funding sources, the Company issued £300m of corporate bonds to investors in 2009. These bonds mature in November 2016 and are guaranteed by William Hill Organization Limited, a principal subsidiary of the Company. The bonds carry a coupon of 7.125% but together with the discount on issue of the bonds bear an effective interest rate of 7.25%.

£375m 4.25% Guaranteed Notes due 2020

In June 2013, the Group issued £375m of corporate bonds and used the net proceeds to repay £275m borrowed under a Term Loan Facility used to part fund the acquisition of Sportingbet plc's Australian business and Playtech's stake in William Hill Online, with the remainder of the bond used to clear down outstanding amounts under the Group's revolving credit facility. The bonds, which are guaranteed by William Hill Organization Limited, bear a coupon rate of 4.25% and are due for redemption in June 2020.

Finance fees and associated costs incurred on both issues of bonds, together with the discount on the 2009 issue, have been capitalised in the Consolidated Statement of Financial Position and are being amortised over the life of the respective bonds using the effective interest rate method.

11. Non-controlling interest

The non-controlling interest relates to the 29% share in William Hill Online owned by Playtech Limited ("Playtech") during the prior and part of the current period.

On 15 April 2013, the Group purchased Playtech's stake in the William Hill Online business for a cash consideration of £423.8m. As this was a transaction with minority equity owners of the business without a change of control, it has been recognised as an equity transaction in the Group's reserves and not as a business combination or investment. Directly attributable costs of £2.8m have been recorded in equity along with a receipt of £3.5m representing a subsequent working capital adjustment. A liability of £9.7m, representing fixed annual fees due to Playtech, was also reversed through equity following the end of the underlying obligation.

As a result of the purchase of this minority stake, the financial statements show a nil non-controlling interest in the Group balance sheet and present a non-controlling share of profits only up to 14 April 2013, being £15.3m. A reconciliation of the movements in non-controlling interests is provided in the Consolidated Statement of Changes in Equity.

12. Notes to the cash flow statement

Cash and cash equivalents (which are presented as a single class of assets on the face of the statement of financial position) comprise cash at bank and overnight deposits.

13. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associate and joint ventures are disclosed below.

Trading transactions

Associate

The Group holds an investment of 19.5% of the ordinary share capital of Satellite Information Services (Holdings) Limited (SIS). During the period the Group made purchases of £23.1m (26 weeks ended 26 June 2012: £20.4m; 53 weeks ended 1 January 2013: £41.3m) from Satellite Information Services Limited, a subsidiary of the Group's associated undertaking, SIS. At 2 July 2013 the amount receivable from Satellite Information Services Limited by the Group was £1.8m (26 June 2012 - £0.1m payable; 1 January 2013 - £3.1m receivable). Purchases were made at market price. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

Transactions between the Group and key management personnel in the first half of 2013 were limited to those relating to remuneration, previously disclosed as part of the Director's Remuneration Report within the Group's Annual report and Accounts 2012. There have been no other material changes to the arrangements between the Group and key management personnel.