When the Bet Pays Off
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When the Bet Pays Off Sportingbet was sold to rival bookmaker William Hill in March 2013 for £460 million. Jim Wilkinson, the former CFO, reveals what it’s like to be pulling the purse strings of a fast-growing public company in the volatile world of online gaming he five years Jim Wilkinson spent as TChief Finance Officer of Sportingbet plc were, by turns, exhilarating and exasperating: “The fast growth we experienced meant it was like holding onto a rocket for three days a week… and the next day you might be shut down in a country and suddenly lose 30 per cent of your overall profit.” It was therefore no real surprise that, when William Hill came knocking in September 2012, a sale was judged to be the most sensible outcome. “It was a very risky company operating in a very risky industry,” says Jim. “Having been through a period of extreme turbulence, part of our thinking towards the exit was that it was better for everyone to find a bigger home and make it safe.” www.criticaleye.net When the Bet Pays Off | 1 The saving grace was Sportingbet’s keeping one eye on the deal, was much thriving Australian division. Online more difficult than I’ve experienced in gambling was made legal Down Under past acquisitions… As FD you’ve following the Interactive Gambling Act of “ 2001 and the division, based in Darwin “The whole sale process puts great strain got to make and Sydney, operated under a licence on the internal management and directors provided by the Northern Territory because everyone’s got different agendas sure you have Government. At the time of the sale, it in terms of what they want to do after the proper numbers, shared 70 per cent of the market with rival deal; some might stay on, while others gambling firm Paddy Power. might want a pay-off.” management accounts, “William Hill really liked the international On this particular transaction there was aspect of our business,” says Jim. “They are also the time difference to contend with, forecasts and “ mainly a UK operation and wanted to be which exacerbated the stress heaped on number one in Australia, Spain and the management: “Australia was the main focus control of cash UK, so they financed a bid that got them of value, so we were having phone calls Australia and Spain and gave fellow bidder until six in the morning our time and then GVC Holdings the rest.” again at midnight when they were going calamity and an exceptional charge of into work. The sheer logistics of doing an £12 million for restructuring costs hitting POKER FACE Australian focused deal meant working at results, Jim knew he had his work cut out: odd hours and made it quite a strain… “As FD you’ve got to make sure you have But the sale didn’t go entirely smoothly. proper numbers, management accounts, It certainly complicated matters that “Every country has a different culture forecasts and control of cash. It probably there was press leak during the early to the UK, with different rules and took me the best part of a year to get my stages of negotiations, which Jim says regulations, so you need to understand team in place, and get the right information severely tested the board’s ability to everything from holiday times, payment sorted, to the stage where I could say, hand communicate during a crisis. Many of the processes, bonuses, how they actually on heart, that it is as good as it gets.” staff also didn’t welcome the interest for work, levels of remuneration, and fear of losing their jobs, and had already how quickly people expect integration He then played a pivotal role in the been unsettled following a failed bid by processes to happen.” company’s preparations to move from Ladbrokes the previous July. AIM to Main, which it eventually RAISING THE STAKES succeeded in doing in 2010. It wasn’t a The real issue, however, was poor straightforward process, ending up mired performance, with the total amount Jim arrived at Sportingbet in 2008 in a sea of legal complexity, and Jim wagered in the three months to 31 and found a company that was still needed all of his technical nous to find October 2012 falling to £594.3 million, reeling from the loss of its licence to a safe passage: “Any business which has compared with £693.7 million for the operate in the US: “America passed the a high degree of uncertainty around it, same quarter the previous year (Group UIGEA [Unlawful Internet Gambling like ours, isn’t particularly well suited to revenue fell £21 million to £38.8 million). Enforcement Act] which banned online being listed on either AIM or the Main gaming payments in the US in 2006, Market. This is true when it is difficult to “We had an extremely poor quarter right meaning Sportingbet had to pull out of be certain about future profit and there is around the horse-trading period, which the US market and lost everything save its a high degree of risk… meant some tough discussions about Australian and European businesses.” our valuation,” says Jim. “Keeping staff “We were operating in 26 countries so we motivated and trying to focus on running With nearly a third of the company’s needed to get legal advice from 26 lawyers. the business, while at the same time overall profits gone following the US And the regulations were changing so ▸ www.criticaleye.net When the Bet Pays Off | 2 fast that if you had a one month delay, “A convertible bond is a pretty rare thing you’ve then got to go and get those 26 to get in a normal FTSE 250 business,” opinions from the lawyers again.” says Jim. “It wasn’t without controversy “In Spain, they and we lost a couple of big equity holders Jim concedes that regulation was the one as a result of them not being given an thing that kept him awake at night. The found a 1966 option on the bond, but it ultimately anxiety over second-guessing whether a and 1977 got us the Australian market. And that’s particular government might wake up one the bit of the business that William Hill morning and decide to change its stance internet gaming wanted in the end.” on regulation, he describes as “like playing tax law which Russian roulette”. The sale to William Hill was Jim’s final cost us €17 “ hand with Sportingbet. Now he’s cashed Although online gambling is completely million in his chips, the question is, would he ever legal within the European Union (EU), consider returning to the table? individual countries are permitted to make their own laws that prohibit access “I wouldn’t necessarily be averse to to foreign gambling. “The biggest strategic away until we finally got a Spanish licence. experiencing it again,” says Jim. “The question we faced was whether to go into a But we were shut down a few times before industry is relatively new, it’s only been country that was unregulated or not, based that… and on one occasion they found around for about 15 years, and there are on which way we thought the government a 1966 and 1977 internet gaming tax law a whole bunch of regulatory issues to get might lean, where the money was and which cost us €17 million.” through, particularly in Asia, the US and what the value for shareholders might be,” most of the old eastern-bloc countries. But says Jim. “If you stop concentrating on IN IT TO WIN IT it’s absolutely massive and still growing product, you’ll lose ground and revenue extremely fast.” ▪ growth rates will start to fall, but if you’re Following its transition to the Main not on top of regulation you’ll get kicked Market, Sportingbet had access to a wider © Criticaleye 2013 out of a country… net of shareholders and was able to take the necessary steps to grow. Acquisitions “In the case of France, we pulled out came in the form of Australian company Jim Wilkinson altogether. With Spain, because it was such Centrebet in August 2011, then Danbook Ex-CFO a big part of the group, we kept plugging and Scandic, two of Denmark’s largest online Sportingbet betting operators, four months later. It was Jim’s hand in the Centrebet transaction that Jim joined Sportingbet plc as Group Vital Statistics was to be his enduring legacy. Finance Director in February 2008, Born: 1966, Wolverhampton prior to which he held the same Lives: Oxfordshire Although Sportingbet was struggling position at Johnson Services Group Married: Yes, 3 daughters to raise equity, Jim came up with an plc between 2004 and 2007. As a University: Salford, studying innovative scheme to finance the deal by Chartered Accountant, Jim qualified Economics raising £130 million through the issue of with Touche Ross before moving to Film: It’s a Wonderful Life new shares and a convertible bond – a Informa Group plc in 1994 to hold a Passions: Hiking (“I’ve walked low yielding corporate debt issue with series of management positions, most to the North Pole”) an attached equity option (so if the share significantly, Group Finance Director Holiday: Crete price of the company rises beyond a fixed from 1998-2004. Gambler?: “I now do a bit of point, investors benefit) – which was recreational gambling placed with institutional investors by ISM Contact Jim through: at weekends” Capital, but wasn’t offered to shareholders. www.criticaleye.net www.criticaleye.net When the Bet Pays Off | 3.