William Hill PLC Hill William IT’S WHO YOU PLAY WITH Annual Report and Accounts 2019 Accounts and Report Annual Annual Report and Accounts 2019 William Hill PLC Contents Strategic Report Corporate Governance Report Financial Statements 01 Our investment case 62 Governance at a glance 124 Independent Auditor’s Report 08 Chairman’s statement 63 Chairman’s governance statement 134 Group financial statements 10 Group at a glance 66 Corporate Governance Report 177 Parent Company financial 12 CEO’s review 83 Audit and Risk Management statements 17 Market overview Committee Report 185 Five-year summary 20 Our business model 88 Corporate Responsibility 186 Statement of Group Accounting 22 Stakeholder engagement Committee Report Policies 24 Key Performance Indicators 90 Nomination Committee Report 26 Our strategy in action 93 Directors’ Remuneration Report Other information 38 Sustainability Report 120 Directors’ Report 197 Abbreviations and glossary 50 Non-Financial Information 123 Directors’ statement of 199 Shareholder information Statement responsibilities 51 Financial review 58 Viability statement 59 Managing our risks Pages 01 to 61 form the Strategic Report of William Hill PLC for the 52-week period ended 31 December 2019. The Strategic Report has been approved by the Board of William Hill PLC and signed on behalf of the Board by the CEO and CFO. 2019 performance highlights Net revenue1 R Profit/(loss) Basic (loss)/ Adjusted Basic, adjusted Dividend (£bn) before interest earnings per operating profit2 R earnings per per share and tax (£m) share (p) (£m) share3 R (p) (p) £1.6bn £12.9m -3.1p £147.0m 10.7p 8.0p 17 7.4 16.6 12.9 (3.1) 13.2 273.8 26.1 1.6 1.6 1.6 12.0 233.6 20.6 8.0 147.0 10.7 (687.9) (83.6) 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 1. Net revenue is an industry term equivalent to revenue as defined in the notes to the financial statements. 2. We achieved a statutory profit of £12.9m due to £134.1m of exceptional costs, predominantly related to the restructuring of the Retail estate post Triennial Review. Adjusted operating profit is defined as profit before interest and tax, excluding exceptional items and other defined adjustments. Further detail on exceptional items and adjusted measures is provided in note 3 to the financial statements. 3. Adjusted EPS is calculated using adjusted profit after tax and is used in evaluating performance for dividend policy purposes. Further detail on adjusted measures is provided in note 3 to the financial statements. The calculation of EPS measures is shown in note 11 to the financial statements. RR. This performance metric is linked to Directors’ remuneration (see page 93 onwards). Strategic Report WILLIAM HILL IS ONE OF THE WORLD’S LEADING SPORTS BETTING AND GAMING COMPANIES Our 86 years of heritage and strong brand, combined with our growing digital expertise and global presence, create a solid platform from which to grow. With these foundations in place, our strategy will build a sustainable business that puts player safety at the heart of our culture. We are excited by the opportunities and recognise the challenges that lie ahead, as we work with our customers, our teams and our partners to provide a great betting and gaming experience. IT’S WHO YOU PLAY WITH William Hill PLC Annual Report and Accounts 2019 1 Images from our ‘Brotherhood’ marketing campaign which promotes moderate and sociable sports betting and gaming. TO REALISE OUR AMBITION… …OF DOUBLING PROFITS BY 2023… An investment in William Hill delivers cash-generative growth opportunities, underpinned by an embedded focus on safer gambling. This has enabled us to sustain the dividend while continuing to grow the business. 2 William Hill PLC Annual Report and Accounts 2019 TO REALISE OUR AMBITION… …OF DOUBLING PROFITS BY 2023… 2019 operating profit1 2023 ambition to £147m diversify internationally UK2 UK International International2 US2 US The ambition to double operating profit was established in November 2018 and relates to full year 2018 adjusted operating profit of £233.6m. 1. Adjusted operating profit is defined as profit before interest and tax, excluding exceptional items and other defined adjustments. Further detail on exceptional items and adjusted measures is provided in note 3 to the financial statements. 2. Geographical market is based on operating profit excluding corporate costs and other of £56.0m. William Hill PLC Annual Report and Accounts 2019 3 …WE’RE BUILDING A DIGITALLY LED… …INTERNATIONALLY DIVERSE… The global gambling industry is worth cUS$300bn 12% happens online and the growth is outpacing the1 retail market. This is a significant opportunity. Through continuous; only investment in our modular digital platform the competitiveness of our offering will ensure we participate in the growth of digital 12% gaming and sports betting. of global gambling happens online 1. H2GC; Global gambling gross win data, October 2019. 4 William Hill PLC Annual Report and Accounts 2019 …WE’RE BUILDING A DIGITALLY LED… …INTERNATIONALLY DIVERSE… We are diversifying our global reach through organic and inorganic growth. We anticipate the US, where we have access to 24 states will be the largest sports betting market in the world. Following the overturn of PASPA, estimates forecast the market will grow rapidly2, By 2023, the US to be worth between US$5bn and US$19bn gambling market is estimated to be to expand our Online offering into high-growth3 global geographies by 2023. We will continue worth up to beyond the UK. US$19bn 2. 24 states is contingent on the completion of the acquisition of Caesars by Eldorado. Excluding Caesars, William Hill US has access to 18 states. When referring to states this includes Washington D.C. 3. Broker research, CIA country profiles, U.S. Census Bureau, H2GC. William Hill PLC Annual Report and Accounts 2019 5 …SAFE AND RESPONSIBLE… …BUSINESS OF SCALE Our investment case is underpinned by our commitment to safer gambling. Our aspiration that nobody is harmed by gambling guides our decision-making and sustains a culture of customer protection. In the UK we are actively involved in the Betting and Gaming Council and are working with others to lead the development of the Safer Gambling Commitments. 6 William Hill PLC Annual Report and Accounts 2019 …SAFE AND RESPONSIBLE… …BUSINESS OF SCALE Betting and gaming are intrinsically cash-generative activities. William Hill delivers strong operating cash flow. When combined with our disciplined approach to investment, we have maintained a healthy balance sheet and a long-term track record of dividend Net revenue1 payment while continuing to grow the business. £1,582m Adjusted operating profit2 1. Net revenue is an industry term equivalent to revenue as defined in the notes to the financial statements. £147m 2. Adjusted operating profit is defined as profit before interest and tax, excluding exceptional items and other defined adjustments. Further detail on exceptional items and adjusted measures is provided in note 3 to the financial statements. Operating cash flow £183m William Hill PLC Annual Report and Accounts 2019 7 Chairman’s statement A YEAR OF TRANSITION 2019 has been a promising year of transition as we set out to deliver on our five-year plan to build a digitally led and internationally diverse business of scale. Basic, adjusted earnings per share1 10.7p Dividend per share 8.0p Roger Devlin, Chairman During the first year of delivery of our long-term strategy, we made success in the US. We look forward with great anticipation good progress on a number of fronts, while continuing to respond to the completion of the acquisition of Caesars Entertainment to the changing regulatory landscape in the UK and overseas. by our valued partner, Eldorado Resorts. We completed the acquisition of Mr Green in January 2019 for Creating a culture of self-regulation £245m to expand our global footprint and enhance our digital Throughout 2019, and in recognition of the regulatory capability. Mr Green brings the Group broader access to developments the industry is facing, we pushed forward with regulated markets, and its emphasis on customer protection self-regulation. In July, we agreed a package of measures to fund through its Green Gaming technology is a natural cultural fit. research, education and treatment initiatives in collaboration The integration has progressed well, and we have rebased with industry peers. This will see a ten-fold increase in our our International operations to Malta, to ensure the Company financial support for safer gambling measures over the next has an EU domicile post Brexit. five years. In August, the voluntary ‘whistle-to-whistle’ ban on In April 2019, we saw the implementation of the £2 stake limit advertising around live sports matches came into effect with on B2 gaming products. As set out in our strategic review in 2018, the intention to reduce exposure to under 18s. We are pleased our commitment to remodel our Retail operations saw the to note this has been a successful initiative, with a 97% reduction 2 decisive closure of 713 shops in the third quarter. Our Retail in sports gambling TV advertising seen by children . colleagues have risen to the challenge, executed the strategy, In November, the industry worked together with our new and we acknowledge their professionalism during this difficult representative body, the Betting and Gaming Council, to but necessary transition. announce a package of Safer Gambling Commitments. This is In 2018, the Professional and Amateur Sports Protection Act a comprehensive set of measures intended to deliver long-term (PASPA) was overturned, a regulatory development that has benefits to address the harm caused by gambling. provided the Group with material opportunities.