21st of August 2009 Author: Glo Wood
Waiting for the other shoe to drop - will Ladbrokes follow suit?
Recent speculation that William Hill plc would move its online operations to Gibraltar to better compete in a kinder tax climate were confirmed today (Tuesday) in a statement from the company.
The announcement was widely predicted in the UK, and industry observers are now waiting for the other shoe to drop - will rival group Ladbrokes follow suit? Ladbrokes has intimated that if Will Hill moves it may be forced to reconsider its own situation. Both groups have pointed to the difficulties of remaining competitive online when they carry a 15 percent UK tax burden and a 10 percent racing levy versus the 1.5 percent tax regime enjoyed by offshore based competitors.
William Hill recently confirmed plans for a GBP 350 million rights issue as part of a GBP 1.2 billion refinancing, and revealed that it was relocating 90 jobs in its sportsbook operation overseas, mainly to Gibraltar - a move widely interpreted as an advance warning on today's announcement. The company has also negotiated a new GBP 588.5 million debt facility.
The statement from William Hill plc confirmed that its online betting and gaming business, William Hill Online, will be moving its online betting service, sportsbook, and online fixed-odds games from the UK to Gibraltar. Thereafter, the sportsbook and games activities will be operating under a Gibraltar licence.
The transfer of the sportsbook and fixed-odds games is part of the ongoing integration of William Hill Online, which was created in December 2008 through the combination of William Hill's existing interactive business with assets acquired from Playtech Limited .
Gibraltar is a leading centre for online betting and gaming companies, offering access to skilled employees, an established regulatory environment and a competitive tax regime. William Hill Online's headquarters and core gaming operations are already based in Gibraltar. Approximately 75 employees have already relocated from William Hill's UK operations to join William Hill Online in Gibraltar.
"As a result of the move, William Hill Online will benefit from cost savings already being achieved by other offshore operators, which have previously put it at a commercial disadvantage," the statement announced.
"William Hill continues to have a substantial presence in the UK and Ireland, including 2 300 licensed betting offices and around 16 000 employees. It paid almost GBP 300 million in UK taxes and levies in 2008.
Ralph Topping, Chief Executive of William Hill, commented: “We are ambitious for William Hill Online to be a successful online betting and gaming business on the international stage. Having acquired European-focused websites, global marketing and multi-lingual customer services capabilities, this is the logical next step in our development of this business. William Hill Online has an increasingly international customer base and this move will ensure we are well positioned to compete on an international stage.”
In a seperate statement, the group released half-yearly results to the end of June 2009 for its online activities that included a 58 percent increase in net revenue to GBP100 million (H1 2008: GBP63 million. Online operating profit rose 13 percent to GBP 31.4 million (2008: GBP27.7 million). Telephone betting revenues were disappointing, falling 18 percent to GBP18.6 million, while operating profit dropped 73 percent to GBP 1.2 million.
Online net gaming revenues grew 88 percent during H1 as casino and bingo/skill gaming performed strongly with net revenues up 21 percent (casino) and 50 percent (bingo and skill gaming).
Despite earlier rumours of integration hiccoughs, the group seems satisfied that the newly formed William Hill Online is performing well, with new accounts and unique active accounts up 30 percent and 29 percent respectively.
Sportsbook revenue was down 1% due to poor betting results but new accounts were up 9 percent and unique active accounts up 7 percent. Poker revenues also disappointed, dropping 15 percent following the migration of the player base in March. However, management remains confident that the higher liquidity on the iPoker network will remedy the situation, and William Hill Online be adding sterling and Euro-based tables to the existing US dollar-denominated offering.
Live betting is assuming growing importance in the online activities and will constitute a core element in the company's sports offering in 2009-2010, building on the 18 percent quarter on quarter rise in net revenue growth achieved in the current year.
In a wider group sense, revenues for the group's retail division declined by one percent to GBP 393.2 million (H1 2008: GBP 398.2 million) and operating profit fell 10 percent to GBP 111.5 million. Total group revenues rose 5 percent to GBP 515.5 million (H1 2008: GBP488.8 million).
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