Hills to invest £20m a year in online
CEO admits "smart and targeted" bolt-on acquisitions in main markets possible.
William Hill will invest more than £20m a year in its soon-to-be fully owned online business and is studying a number of potential “bolt-ons” in its core markets of the UK, US, Australia, Spain and Italy, its group chief executive has revealed after agreeing to buy out Playtech’s 29% stake for £424m.
Noting that such investment was not possible under the previous joint venture agreement and outlining the board’s rationale for the call option, Topping said: “We felt the structure of the William Hill Online JV, while very successful, isn’t right for the future of the business in the long-term.
“The only question remaining was do we buy it now or wait two years [however] major shareholders have backed our view that it could well cost more in two years’ time and we’re confident we’ll get benefits [between now and 2015],” the CEO added.
While Topping revealed “We have no intention to enter into any large M&A activity for the foreseeable future,” following the exercise of the WHO call option and the proposed completion of the Sportingbet acquisition later this month, he did not rule out “small to medium-sized” bolt-on acquisitions and “smart and targeted investment” in the operator’s core markets of the UK, US, Australia and Spain “should they become apparent”.
“We will look to strengthen our UK, US and Australian business with smart and targeted investments should they become apparent,” he said, while the operator also noted that the Sportingbet deal “ initially quoted at £454m, has risen to £460m.
“William Hill is a strong story and a clear one. We’ve come a long way and these are major milestones as we move to make full control of WHO. The joint venture has been a success and we have been delighted [with it] but it’s time to move on,” he added.
Under the terms of that deal, Hills will acquire Sportingbet’s Australian and Spanish businesses with a call option on Sportingbet’s Miapuesta database with the remainder of the business being acquired by GVC Holdings. This agreement is set to be formalised on 19 March.
The US is a firm focus, Topping said, adding, “if we are to achieve the ambition of becoming a £5bn company then the USA will offer us the chance for that step up”.
There [it is about] integration, we have strengthened the management team with three additions in last month, will capitalise on the platform we’ve created and [continue to talk to] land-based casino groups outside Nevada.
When asked about entry into potential new markets, Topping said: “Our concentration is definitely Australia, the UK, Italy, Spain and the US. We’re not looking at any other markets but won’t rule anything out in terms of acquisitions.”
He revealed that its branding strategy for Hills’ Australian business is as-yet undecided, acknowledging that “Sportingbet is a very strong brand in Australia as is Centrebet. “I need to look at branding with both Centrebet and Sportingbet present, something which has confused me,” he said.
I think we’ll take our time and ask for research to be done among Australian punters. We would like to see an association with the William Hill brand, whether that’s the William Hill brand itself, ‘Sportingbet: A William Hill company’ or ‘Centrebet: A William Hill company’, but there’s a lot of work to be done,” he added.
Topping said there is “a lot more to come” from its online business now valued at £1.5bn. Outlining the highlights of the last year and looking to future growth the long-serving CEO mentioned the company’s September 2012 launch of live casino as particularly impressive with net revenue up 57%, growth in mobile gaming net revenue up 700% and growth in football, basketball and tennis in-play turnover in the second half of its financial year up 59% driven largely by “product enhancements” and the operators ability to offer a wider range of products and markets on the most popular sports and events.
He described Spain and Italy as “going great guns” with the latter delivering good results in slots in particular following the country opening up the sector in early December last year. He said WHO would extend its tennis and cricket products in 2013 opening up cricket to ball-by-ball on every domestic game. He added that his team is “working on” adding major US products including every game from the NFL (American football) and NBA (basketball), while there would an increase in attention on player management, CRM, bonusing and tailored customer content.
On current trading and the first seven weeks of this year from 2 January to 19 February 2013 Topping said that online sportsbook turnover was higher than Over The Counter numbers, explaining: “This doesn’t mean we have weak retail but that we have two bloody strong businesses”. Group net revenue for the first seven weeks of this year was up 20%, online net revenue up 29%, sportsbook net revenue up 75%, and retail net revenue up 13%.
Mobile weekly turnover averaged £16m a week generating 34% of overall sportsbook turnover with Topping adding that the company as “on track” to hit its target of 40% of overall sportsbook turnover being generated by mobile.
On strategy Topping concluded by saying that the company is “focused and determined but we will not spread ourselves too thinly”.
“If you want to run a business it’s not rocket science, it’s about putting more product in front of the customer, darts, football, basketball, horse racing, etc”¦ easy,” he added.