Divisional overview
Maximising exciting new opportunities.
Our most mature channel, Telephone continues to offer a service to a core group of highly loyal, sophisticated customers. However, we face challenging market conditions. Betting exchanges and offshore operators benefit from an uneven playing field, which has led to a decline in the profitability of Telephone over the last three years. We are reviewing our options for establishing a competitive position and returning Telephone to profitability.
In 2009, our net revenue margin reduced by 150 basis points, primarily as a result of weakness in the horseracing margin as the economic climate is reducing the number of runners per race and increasing price competition at the racetracks where the starting price is set.
Telephone net revenue has declined as offshore operators and betting exchanges have benefited from an uneven tax and regulatory playing field.
Marketplace
When William Hill started operating in the 1930s, the only way to place an off-course bet was by telephone or by post. For a core group of customers, Telephone continues to be the preferred channel, providing a quick, efficient and personal service.
Telephone betting is offered by several land-based operators. William Hill has one of the largest customer bases, with 113,700 active customers in 2009. Customers tend to be sophisticated horseracing punters, betting more, on average, than customers in the shops or online.
The current tax regime has created an uneven playing field among operators. UK-based operators, such as William Hill, pay 15% gross profits tax on gross win and a 10% statutory levy on any UK horseracing bets. Offshore operators pay neither. Betting exchanges pay 15% gross profits tax but not on gross win: instead, it is on the amount they take from customers, which is typically 2%–5% of the gross win generated by customers. This uneven playing field has severely hampered our ability to compete in recent years.
Strategic priorities
Telephone continues to be an important channel for servicing our customers and our goal for 2010 is to return Telephone to profitability. Telephone is our most expensive channel for taking a bet and we have call centres in Sheffield and Leeds that, at peak, can take 600 calls simultaneously. Given the competitive environment, we are reviewing how to service our customer base most effectively by optimising the customer base, reshaping our operations to meet the needs of those customers more efficiently and identifying where our operations should be located.
Performance
During 2009, telephone betting generated net revenue of £29.7m, a 25% decline from 2008, and an operating loss of £1.8m (2008 – profit of £5.9m). This included the impact of adverse sporting results but, more broadly, the effect of the uneven tax and regulatory playing field.