William Hill CEO exclusive: Philip Bowcock on why the bookmaker is finally back on track
With Hills in a more stable position on home turf, and with new opportunities further afield, could the UK operator finally be ready to silence its critics for good?
One word more than any other summed up the mood of the City after the release of William Hill’s H1 results – and that word was ‘relief’. It was an utterance repeated numerous times by analysts EGR spoke to about the company’s half-year financials, and the market reaction suggests investors felt broadly the same way after the operator’s share price climbed more than 7% on the day the figures were announced.
What was more striking, however, was the reaction of one long-term William Hill shareholder in particular. Speaking to EGR on the condition of anonymity, he went much further than the lukewarm response of most William Hill observers and stakeholders, describing the results as being “beyond my wildest dreams or expectations”.
Such a bullish proclamation seems at odds with a financial report which revealed Hills’ Online pro forma net gaming revenue (NGR) was down 2% year-on-year and operating profit had plummeted 12%. In contrast, GVC Holdings announced an 18% rise in the same six-month period on a pro forma basis, while digital NGR in the UK was 13% ahead of the previous year and underlying online operating profit was up 9%.
Some would no doubt simply dismiss the investor’s opinion as hyperbole. Former William Hill boss Ralph Topping, who took to social media to denounce the operator’s recent performance in characteristic fashion, would likely fit into this category. The mischief-making Scot mocked the bookmaker’s claim it was making good on its five-year strategy, likening its blueprint to the five-year economic plans the Soviet Union would roll out to, in his words, “make everyone forget about how bad things were”.
CEO Philip Bowcock is content with the overall progress made by the Online business during his tenure
So, what did prompt a major shareholder to react with such exuberance? “William Hill is not exactly a position we hold for its continued outperformance and operational excellence, so I’d have been fairly open for all of the potential historical weaknesses,” the shareholder explains to EGR. “There is also nothing in the results that is particularly staggering, but if you look at the Online business and exclude the due diligence metrics, for the first time it looks like a proper business again and seems to have actually turned a corner.
“While the management team might not always win many plaudits, I actually think they are very competent. [CFO] Ruth [Prior] is very impressive, detailed and granular, while [CEO] Philip [Bowcock] actually looked like a seasoned CEO at the presentation for the first time. Philip’s a trustworthy, honourable grownup, which isn’t a bad thing when others in the industry are doing their best to make that look like a really important criteria.”
Back to basics
This belief in having turned the corner is certainly the vibe William Hill chief exec Philip Bowcock gives as he runs through the company’s latest financial results with EGR. Our interview takes place nearly two-and-a-half years since Bowcock first appeared on the front cover of EGR Intel, emblazoned with the headline of Getting the house in order. It seemed an appropriate synopsis at the time for a business which was in disarray following the departure of Topping and under the stewardship of his successor James Henderson.
Bowcock has hardly had an easy ride himself since taking the reins at the 85-year-old bookie. In his time as CEO, he’s led the business through, among many other things, the political turmoil of the Triennial Review which fed into what has been an unprecedented general public backlash against UK gambling companies in recent months.
It sounds like Bowcock, from the perspective of getting the house in order at least, believes it’s been a job well done. He’s also confident Hills has learned its lessons from the FOBT debacle and is being far more proactive in dealing with some of the key issues via its Nobody Harmed by Gambling campaign and in collaboration with other big operators.
“The trouble with keeping a low profile is that we tried to do that during the Triennial,” he tells EGR. “I think the industry needs to get back to a fact-based and evidence-based approach to what is going on and what needs to change. The industry has learned a lot, but also it’s only going to work if we are all in this together – you’re only as good as your lowest common denominator.”
EGR Intel: Do you think your Nobody Harmed by Gambling pledge is a realistic ambition?
Philip Bowcock (PB): I think it sets the right tone. It also sets the tone for the whole of the organisation if one of the things we’re trying to abide by is that no one is harmed – that gives people the licence to say we don’t want to be doing this or that.
EGR Intel:What have been some of the key changes to your responsible gambing strategy?
PB: One thing we’ve spent a lot of time and money on is making sure we have the appropriate algorithms in place so we contact people when we think they may be showing traits or behaviours that are not conducive to a safe gambling environment. We take it all very seriously. We want to make sure we do follow through with what we said we’re going to do and act responsibly by making sure those people who actually do choose to bet and gamble with us are able to do so in a responsible way.
EGR Intel: How are you working more collaboratively with the rest of the sector?
PB: The creation of the Betting and Gaming Council is a really important step in having a unified approach across the industry. We will also work closer with the other ‘big five’ operators, but I think ultimately the Council will be the conduit to which everybody gathers around and says, ‘right, we’re all in this together.’
EGR Intel:How will you be sharing data with fellow operators?
PB: What we’re saying as a group is that where we can share data to identify people who are experiencing harm or have a problem, we should try and share that data. Now, that is easier said than done given the GDPR rules and database confidentiality, but we will look at ways of exploring how we do that.
EGR Intel: Do you think the industry can win back public trust?
PB: I think there is momentum here. If you look at what Tom Watson has said recently, he now differentiates between what he would call the leading operators in this sphere in terms of acting responsibly and some of the other 800 licensees who possibly are not. It’s easy to forget that 800 licences have been issued by the Gambling Commission.
EGR Intel: Richard Flint says in the long term there will be fewer brands due to UK regulation. Do you agree?
PB: I get where he’s coming from and I’m not going to disagree with him. I’d never disagree with Richard. But everybody has to act in the same way and I think you can have any number of licences and operators provided everyone raises their bar.
EGR Intel: Does the industry need to do a better job of taking on negativity when it is wrong?
PB: We are spending quite a lot of time inviting some of these individuals and groups into our organisation to explain to them what does go on and the actions we take. I think there is a lack of understanding, but it’s not born out of anything other than the industry hasn’t been willing to explain what it does better.
The CEO is also content with the overall progress made by the Online business during his tenure, which can be defined by a simple philosophy: getting the company “back to basics”. “There is a lot of work going on in the background to ensure our products, from a usability perspective, are as good as we can make them,” Bowcock adds.
“There is a page in our presentation in which you can read the metrics we’ve seen over the last six months or so and the improvements we’ve made,” he adds. “I would describe William Hill as now being a bit more mature than we were before and, in general, more like the grownup brand.”
The metrics Bowcock point to include a 33% year-on-year rise in customer satisfaction for its UK Online brand, a 42% increase in its net promotor score (NPS) and a reduction in customer service contacts per active customer. In addition, average revenue per user during H1 2019 was up 8% to £143 while CPAs were down 3% to £115.
Bowcock is also keen to highlight some of the key improvements made to the firm’s digital product in recent months, such as the inclusion of new registration and deposit processes to reduce customer friction points, as well as various changes to its gaming apps in particular. Next up in this vein is the roll-out of a new data platform which the CEO says is all about the “next generation of real-time data analytics” which will improve this customer yield even further.
Green machine
It’s hard to argue the William Hill product isn’t materially better than what it was two or three years ago – albeit not yet on the very top tier. The difference is night and day, and the brand’s offering can certainly hold its own against rivals. The bookmaker’s flagship business in the UK, which accounts for approximately two-thirds of Online revenues, is far more stable too and now seems to be maintaining market share. And although GVC’s online business appears to be going great guns with double-digit revenue growth, other competitors such as Flutter Entertainment and Sky Betting & Gaming were broadly flat in H1.
But are these noticeable improvements and positive customer metrics really good enough for what was once a market-leading brand? And will they finally lead to top-line growth? For Paul Leyland, industry analyst and former corporate development officer at Hills, the company now has to demonstrate it can achieve meaningful growth in the UK if it is to convince the naysayers it really has turned a corner.
“Underlying UK market trends will be what they will be, William Hill isn’t yet really in a position to grow the category, but it needs to do something to take share and this isn’t currently happening,” he says. “Sure, a bunch of UK headwinds are legislative or regulatory, but William Hill has lost share online, quite dramatically a few years ago, and is now only clinging to its position rather than growing it: that doesn’t fill you with confidence that the group can deliver something really exciting in the US, especially given the DFS head start (where was WH’s Nevada advantage?) and the rapidly increasing competition.”
Bowcock says the operator did see some improvements from a UK revenue perspective in Q2, however he is modest about William Hill’s ability to achieve meaningful growth from that market in the future. Indeed, he views the “UK market as being single digits now” and doesn’t “see double-digit growth in this market continuing”. He also believes the greatest opportunities lie further afield, not only in the US but in Europe too. “We all know about the regulatory challenges that not just William Hill but others in the industry have had to face in the UK,” he adds.
Mr Green is a key part of its plan to diversify away from the UK. The addition of the casino-focused operator to the William Hill family for £242m earlier this year came at a bad time in the context of issues in the Nordic markets but helped diversify the company’s revenue mix away from the UK, with net revenue derived from outside Hills’ home market increasing from 24% in H1 2018 to 33% this year. Not only did this deal give Hills a footprint in numerous European markets, it also provided the firm with a new international online hub in Malta ahead of Brexit and enabled Hills to make its first sportsbook launch since 2012 in Sweden.
“Rolling out William Hill in Sweden was very interesting,” the aforementioned shareholder says. “It’s not going to move the needle from a financial perspective, but it does move the needle from a competence and confidence perspective because they wouldn’t be spending any marketing dollars or have had the confidence to do that historically.”
American Dream
But while European markets may provide some much-needed respite for Hills’ UK struggles, there is no doubt the topic du jour for the online gambling industry is US sports betting. And that’s unlikely to wane any time soon.
William Hill is clearly confident in its chances across the pond. After all, few operators had a head start as substantial as the London-listed bookmaker when the US Supreme Court changed the face of the global gambling market forever last May by overturning PASPA. Indeed, Hills had already been live in Nevada since 2012, operated more than 100 books in the state and had a core US leadership team in place – three advantages most US sports betting incumbents simply didn’t have.
Bowcock believes the company’s head start in the US is critical
The company claims to have a 32% market share in Nevada now, which has grown substantially from the 23% figure in 2012. For Bowcock, the importance of this head start can’t be overstated. “I think we’re the only real betting brand in Nevada at the moment actually,” he says. “We’ve got about one third of the market and we’re in approximately half of the casinos.
“I think it’s important for a number of reasons that we’ve got the existing business. Firstly, it gives us the relationships. It was a real enabler to the Eldorado relationship, which has clearly helped to crystallise into the Eldorado/Caesars relationship, as well as a lot of other relationships we have with casino operators. Secondly, it gives us a management team which really understands the market and the way the American customer bets. Having an established brand there allowed us to get a good American team that understand not just sports betting, but also the wider sporting environment.”
Operators are now in a mad rush to build strong US teams that understand what kind of products work locally. Hills is among those doing just that in New Jersey to complement its existing Las Vegas HQ. The firm has recently hired a raft of people to report into long-serving William Hill US chief, Joe Asher, including a chief marketing officer from Madison Square Gardens and a chief digital officer from Yahoo Sports.
According to the operator’s H1 results, its existing US business – which in its financials includes only Nevada but no longer Delaware – generated net revenue of $49.8m and an operating profit of $17.4m. And crucially, with William Hill’s Las Vegas operation providing the company with plenty of cash, it can reinvest this into building its online business.
Gold rush
At the heart of this ongoing investment is the impending launch of Hills’ new proprietary technology platform. Set to go live in time for the beginning of the new NFL season, Bowcock says it will give the firm a “market-leading technology solution” flexible enough to enter all states, regardless of the operating model in place. It also claims it will be the first major proprietary online platform to go live in the US and will take advantage of its Grand Parade betting engine and Global Trading Platform.
However, William Hill doesn’t exactly have a flawless track record when it comes to launching complicated technology projects at scale. Its industry reputation famously took a major hammering from the blunders of the Trafalgar roll-out and it has taken years to rebuild that trust with customers too. The hope will be that Hills has learned from such mistakes because, if it hasn’t, the consequences could be even more substantial in the fledging US market where share for operators in all states hangs by a very thin thread.
“You’ve got to hope that if it’s a new Trafalgar, they are flying the British flag and not the French and Spanish flags this time,” Leyland adds.
Hills will also soon have to deal with the added pressure of new market entrants. Some of these will be old foes like bet365, which has been biding its time before revealing its hand in the US, while it will also have to contend with the likes of GVC/MGM’s Roar Digital and launch of The Stars Group’s Fox Bet proposition. Those are some real industry heavy-weights left to enter the market which will test just how significant first-mover advantage actually is in the online gambling industry.
But it will certainly have an abundance of opportunities to be a US market leader. After all, William Hill is hardly lacking in market access, with the bookmaker already live in eight states and set to benefit from primary skin access to 20 states as a result of Eldorado’s planned takeover of Caesars. Bowcock says the firm is also in talks with potential US media partnerships which, although he won’t be drawn into specifics, sound like they are well advanced and will likely be different to media deals we’ve seen so far in the market, with a focus on a customer database rather than a fully integrated partnership.
Regardless, how William Hill fares in the US really does feel like a key moment in the bookmaker’s rich history. Bowcock doesn’t seem too concerned by the prospect of the US betting market heating up so quickly and believes Hills will remain a key player no matter what happens. Now is Hills’ time to shine.
“The market is going to be large. Whether it’s $9bn or $29bn, it’s going to be substantial and far bigger than the UK,” he says. “The UK has five or six main players. In the US there certainly isn’t going to be just a couple of players, there are going to be multiple players and I think there is room for all of them. We just want to make sure we are in the leading one or two.”
If the bookmaker can achieve that lofty goal, the house will be more than in order.