In full focus: An exclusive interview with William Hill CEO Philip Bowcock

“I don’t think there was one particular moment when I realised I wanted the job full-time,” new William Hill CEO Philip Bowcock says, as he sits down with EGR Intel for his first major interview since being handed the role on a permanent basis in March.

“Although I do remember going to the Ayr Gold Cup with my wife in September where one or two of the execs were saying they wanted me to do it,” he adds. “And my wife turned to me and said ‘God, are you going to do this?’ But it was more a case of it evolving over time.”

While it was hardly a surprise when Bowcock, who had been in interim charge for nine months, was finally named the long-term successor to James Henderson, his appointment capped off a remarkable 18 months. Indeed, the former Cineworld and Tesco Property FD himself admits he wasn’t the board’s initial first-choice replacement.

Bowcock was made Hills’ permanent CEO in March

“I understood where the board was at and they quite rightly thought they would look outside of William Hill,” Bowcock says. In July, chairman Gareth Davis described the ideal candidate as having gaming, technology and international experience – so it seemed Bowcock, who only joined Hills as CFO in November 2015, would merely be keeping the seat warm.

“I was inexperienced from an industry perspective and in the organisation, but as time went on I acclimatised to the role,” Bowcock says. “And I think once you start to get recognition internally and externally and the board gets feedback, then it also makes their job easier.”

EGR Intel understands Betsson CEO Ulrik Bengtsson and former Paddy Power boss Andy McCue were high on the William Hill board’s shortlist, and had last year’s discussed merger with Amaya taken place, the need to appoint a new chief exec would have been removed altogether.

However, following a sure-footed start, which delivered growth in H2 and a positive beginning to 2017, Bowcock gradually became the preferred choice among senior staffers and board members alike, including Davis, who was said to be impressed by how the number cruncher took to the task.

The rebuilding process
Henderson’s departure followed a sustained period of underperformance, particularly within the online division which suffered from a poorly executed roll-out of its new front-end platform, a surge in customer timeouts and self-exclusions, costly bonus abusers, and a terrible Cheltenham Festival, among other factors.

Furthermore, despite the presence of a major summer football tournament, William Hill’s online revenues declined 3% to £277.2m in H1 2016. Meanwhile, the steady flow of negative news, coupled with regulatory uncertainty, had seen its share price tumble to below 260p, after it had been in excess of 420p just 12 months earlier. All of which meant Henderson’s days at William Hill were numbered.

And having joined Hills at the time of the now infamous ‘Project Trafalgar’ roll-out, which led to the exits of Online MD Andrew Lee and director of innovation and customer experience Jamie Hart – Bowcock had a front row seat to the unfolding turmoil. He describes those early months at Hills as “rocky” but ones which enabled him to identify the changes required.

“When you’ve got a finite amount of resource, you can’t do all things at once” – Philip Bowcock

 

“That period [after Henderson’s departure] was easy in one respect because it was very clear what we needed to do,” Bowcock says. “There was a huge amount of clarity that we needed to focus on getting the sportsbook right and then we could focus on other areas like gaming – that piece of it was fairly straightforward.

“The US business was running like clockwork and Australia had got its plans together – so I didn’t need to look into those two areas and could focus on what needed to happen with the online business,” he adds.

Bowcock uses the word ‘focus’ repeatedly during the interview, in doing so suggesting the firm had been guilty of overstretching itself previously. “I think when you’ve got a finite amount of resource, you can’t do all things at once,” Bowcock says. “The reality was that we shouldn’t try to do omni-channel, gaming and sports and everything else at the same time – let’s get one thing right before we move on to the next,” he adds. “It’s all about focus.”

Following a decline in H1 wagering, Bowcock’s first priority was on addressing the operator’s sportsbook, particularly UX and mobile. Results so far have been positive, with wagering up 4% in H2 and 11% in Q1 2017. The firm also streamlined its on-boarding processes, which brought a 17% increase in H2 registration conversions when compared to the first six months of the year.

And with sportsbook quickly producing green shoots – attention turned to gaming with a new senior team led by former Betfair gaming head Liam Wallwork as gaming director, a revamped Vegas product developed by its Grand Parade operation, and a single wallet to link up the previously segregated OpenBet and Playtech payment systems.

“I think [Online MD] Crispin [Nieboer] has done a great job in Gibraltar with the Online business and he’s built a good team around him,” Bowcock says. Under the leadership of Nieboer, William Hill has established a new P&L structure to replace the operator’s previous set-up of separate innovation, product development and operation divisions.

Bowcock has been impressed with the work of Online MD Crispin Nieboer

Nieboer also brought in expertise to drive the online team forward, including former Gala Coral product director Itay Fisher as CIO. “The journey the guys have been on and what they have done in such a short space of time, notably in Online, because that’s clearly where we had to put things right, has been very impressive,” Bowcock says.

“We’ve got momentum,” he adds. “I’ll never settle with what we’ve got but I feel we have something competitive now and we are starting to get back to market levels of growth.”

A fresh perspective
While there can be no doubt early progress has been made, more will be required over a longer period to convince the market William Hill has turned the corner. Indeed, it recently parted company with four senior members of its management team with director of sportsbook Stuart Weston, gaming chief product officer James Curwen and chief experience officer Juergen Reutter all quitting.

And following its hire of Ruth Prior as CFO from payments company Worldpay, some analysts are concerned by a perceived lack of gambling industry experience at the very top of the company.

“I just don’t buy that,” Bowcock says, pointing to the likes of retail chief Nicola Frampton, director of trading Terry Pattinson and Nieboer as evidence the firm has plenty of industry knowledge to succeed. In addition, Hills recently added experience in the shape of industry veterans Mark Brooker and John O’Reilly, both as non-execs.

“I think we’ve got a good mixture of people who are experienced and willing to speak up, as well as some new blood,” Bowcock explains. “If you look at Kristian [Welch] who is the head of digital marketing, he has made an immediate impact because he’s bringing ideas from outside the industry into William Hill.

“Yes, the industry has got its own uniqueness,” he adds, “but running a business is not always rocket science – it’s about getting the basics right. And as long as you’ve got that expertise in something like trading – and Terry Pattinson is one of the best trading directors in the world –
then that’s what matters.”

Perhaps unsurprisingly, Bowcock’s bean-counting background has seen him identify significant cost savings at Hills, with an annual sum of £40m to be stripped out of the online business – savings that the chief exec says will be reinvested back into areas such as marketing and product development.

“We have to focus on being efficient,” he says. “At no time since the inception of online has anyone taken a holistic review of how we do things and said we can operate more effectively. For instance, until about six weeks ago we had seven data centres looking aſter the UK – we probably need two or three.”

Playing catch-up
In such a fast-paced industry, merely standing still means you invariably go backwards. William Hill’s digital revenues for the past three full years read: £527.4m in 2014, £550.7m in 2015 and £544.8m last year, and Bowcock is fully aware stronger growth at rival firms means Hills has lost market share, particularly in the UK.

The enlarged Ladbrokes Coral has overtaken Hills in terms of online revenues, with £666.2m last year, while the combined Paddy Power Betfair is further ahead on £853m. Sky Betting & Gaming, meanwhile, has also grown rapidly, and organically, to £363.6m for the 12 months to June 2016, usurping Hills in the UK market in the process.

Bowcock says his aim is to return William Hill to UK number one

Bowcock says his goal is to return Hills’ online business to number one in the UK, but will do so in profitable fashion, highlighting the fact that the division still generates healthy profits. “We have to be very careful that when we grow top-line growth that we grow it profitably,” he says.

“There is always a danger that you go out and give such good offers to customers that they just go bargain hunting. I think people [other firms] have done that. Even if you look at the issues we had last year we still made £100m out of our Online business.” In comparison, Ladbrokes Coral’s digital operating profit was £68m in 2016, thanks to the Coral business – Ladbrokes.com and the Ladbrokes Exchange posted a combined operating loss of £9.6m in H1 2016, prior to the merger.

Bowcock explains a more refined, data-led approach to marketing has been adopted. Investment will be focused on areas where returns are maximised while a fine-tooth comb has been taken to its affiliate partnerships, with £6m saved by terminating costly CPA deals.

Furthermore, Hills expects to benefit from a new single platform, which is currently in development in partnership with OpenBet. Bowcock says the platform will be modularised into various parts – as many as 15, with Hills able to leverage the improved functionality as and when they become available over the next few years.

The work will also bring to an end the separate UK, Australian and US trading platforms, hand it more control in areas such as product development and integrations – effectively cutting out any third-party waiting times, help it develop a personalised customer experience, and aid its entry into new markets, something Bowcock says the operator is committed to.

Going grey
And according to the chief exec, any new markets needn’t be regulated. While licensed territories will always be preferable for public firms – and Hills has certainly been more risk-averse in recent years – much like some of its rivals, the operator is now beginning to take a more open-minded approach to grey markets.

“I think institutions and shareholders have become a bit more understanding about grey markets – and I clearly say grey as opposed to black,” Bowcock says. Since 2014, when its ‘other markets’ revenues were £91.2m, William Hill has withdrawn from a number of countries. Last year its other markets revenues increased by 1% to £68m.

“These things often go in cycles – so at the moment we are in a cycle where institutions are more open to grey areas,” Bowcock explains. “We are in a slightly different time than we were last year. I think we are quite open and one of the first things I did when I came was to be very clear about what is core and what is non-core.”

Bowcock refuses to be drawn on which markets might be of interest to Hills, either licensed or unlicensed, but broadly says he’s happy to be making money anywhere, so long as it doesn’t put Hills in breach of any local laws.

“I think institutions and shareholders have become a bit more understanding about grey markets” – Philip Bowcock

 

And had the Amaya merger taken place, the combined company would probably have more exposure to grey markets than Hills currently has. Despite public criticism of the merger discussions from the operator’s largest shareholder, Bowcock is happy to explain the thinking that brought about the talks, which ended in October.

“There is a huge amount of rationale having poker and sports both selling into casino,” he says. “Amaya are poker, in just the same way we have a USP in our sportsbook and I think to have a poker and sportsbook USP has some strategic logic. But clearly one or more of our shareholders
didn’t like the idea.

“It is never an ideal scenario when one of your largest shareholders publishes a public letter against what management is considering,” Bowcock adds. “The important thing here is that normally shareholders issue letters or public announcements once a company has gone out and recommended a transaction. We weren’t anywhere near the stage of recommending a transaction; we were only contemplating a transaction.”

News of a potential deal with Amaya resurfaced recently when its CEO Rafi Ashkenazi told Bloomberg a tie-up would make “a very good merger” and that William Hill may “need time before they re-engage in discussions”. However, Bowcock says Ashkenazi’s comments were purely a case of never say never. “No CEO ever rules out M&A completely because a large majority of M&A is opportunistic,” he says.

“And we are the same – do I go out looking for M&A? No I don’t. But if M&A comes along then of course you look at it.” Although Bowcock makes clear Hills is focused on organic growth and says the firm currently possesses the scale necessary to compete effectively in an increasingly taxed and regulated environment.

“It comes back to making us more lean and mean and getting our operational efficiency right,” he adds. “I think we can drive more value through that than doing any M&A at the moment.”

Rank bad deal
While its share price has recovered slightly in recent weeks, Hills’ valuation slump has had the vultures circling. Rumours persist GVC is interested acquiring the operator, while just one day after taking interim control last summer, Bowcock received a phone call to say the Sunday Times was going to run a story of a joint-bid by 888 and The Rank Group. “I didn’t really have too much time to think about it [becoming CEO] – I just had to get on with it,” Bowcock says.

Reflecting on the bid, which was just shy of 400p per share, Bowcock uses adjectives such as “unwelcome”, “ill-judged” and “opportunistic”. He says the notion of combining three organisations with very different cultures would have been nigh on impossible in reality to pull off, while he also questions the strategic merit of the deal.

“We all know the value and future of the industry is online – why then do William Hill shareholders want to own bingo halls in provincial UK?” Bowcock says in explaining his firm’s rejection of the proposed deal. “If they want to do that they can go and buy Rank shares,” he adds.

But that was last year, and things have changed since. Perhaps in a strange way, the uncertainty created by the various regulatory reviews currently taking place in the UK may actually work in Bowcock’s favour, in the short-term at least. He admits “any M&A is very difficult with anyone who owns shops”, particularly before the result of the FOBT staking review is known.

He says he has been to Downing Street to speak to government about the Triennial Review, which is threatening to cut stakes to as low as £2, despite there being little or no evidence that smaller stakes would reduce instances of problem gambling. But with proposals unlikely to be published until October, getting Hills back to above market rates of growth is Bowcock’s single focus.

And having already made a number of improvements to both sportsbook and gaming, William Hill is preparing to leverage the strength of its vast UK retail estate and finally hone in on the untapped omni-channel opportunity. Bowcock explains omni-channel had been on hold to ensure its digital product was up to scratch before proceeding. “I think we are there now,” he says.

Hills is to leverage the strength of its UK retail estate and hone in on omni-channel opportunities

According to Hills’ own estimates, more than half of its online customers gamble on the high street, while 26% of its regular retail customers gamble online. William Hill will be hoping for similar success enjoyed by Ladbrokes Coral, which recently revealed more than half of Coral.co.uk net revenues were now derived through omni-channel Connect card holders.

In line with Hills’ omni-channel strategy, it recently launched a new product enabling customers to remotely track and cash out their in-shop bets. The William Hill Plus web app allows customers to monitor all bets placed via its proprietary self-service betting terminals (SSBTs), and is currently available in approximately 1,500 Hills shops.

Bowcock admits the firm has been slow out of the omni-channel blocks but believes it can bridge the gap with new releases planned for later this year, including a single wallet. “You could say that others are ahead of us but I think the important thing is that we are in control of our own destiny as we’ve got our own SSBTs so we’re not reliant on third-party suppliers.”

Those words perhaps best sum up what Hills is broadly trying to achieve: to take ownership, or at least have control, of its own technology. Last year’s acquisition of Grand Parade, the investment in OpenBet owner NYX Gaming, the development of a flexible single platform, and even its Project Trafalgar front-end, despite its early issues, are steps in the right direction.

So after a tough couple of years, William Hill finally looks like a firm on the road to recovery, albeit a slow road. Bowcock says much of the heavy lifting has been completed ahead of schedule, and although it’s lost some market share, rivals may be concerned they didn’t make more of Hills’ travails when they had the chance.

Or as Bowcock notes: “One of our competitors looked at it [the Project Trafalgar launch] when it came out and said “crikey, we really can milk this, it’s going to take years to put right”. In fact, what some people thought would take years to put right we’ve done in a matter of months.” And with product development projects on hold at recently merged rivals, a focused William Hill may well be ready to seize back the initiative.