It seems that things have gone a little downhill for William Hill over the past few months, and a lot of blame was put on former chief executive James Henderson.
“The lack of intelligible strategy after his departure makes it clear that the problem could be elsewhere.”
William Hill has always been one of the fierce frontrunners in the industry but lately it seems the online gambling giant has become the ultimate target for smaller companies looking to make their mark. Two of the small fish in the pond, namely Rank Group and 888, collaborated in a scheme to take over the online casino giant but failed to do so.
A series of unfortunate events
In March, William Hill announced that there could be a possible harsh decline in their full-year profit. It seems from the beginning of this year things just started spiralling out of control and ever since then the company has said goodbye to some of their longest-serving executives as well as their chief executive.
Henderson was just one of the many people who have left, unfortunately he was ousted as the CEO and according to chairman, Gareth Davies, the decision was “unanimous”. The board felt that Henderson was not fit to follow in the footsteps of Ralph Topping as CEO.
To keep their position at the top, William Hill tried to acquire Amaya but failed miserably when questions were raised about the logic of this acquisition. By the reaction of the operator’s largest shareholder, Parvus Asset Management, on the acquisition of Amaya, it became clear that the problems at William Hill go much deeper than hiring the wrong CEO.
Parvus owns a 14.3% stake in William Hill and argued that the board should look at new ways to create value for existing shareholders instead of opting to pursue a “value-destroying” deal with a rival company. Parvus went even further by accusing the board of having double standards as they disregarded the 888-Rank offer but tried to push the Amaya deal. Parvus is the only stakeholder who has publically spoken out about their unhappiness with William Hill and the questionable decisions they’ve been making lately.
The push for deals and the quick retraction thereof after questions of the logic behind them indicates that there was no strategic master plan behind the deal. Instead it seems that William Hill is grasping at straws to stay afloat. After the deal went south the online casino started talking up the prospects of organic growth, once more showing that there still might be no strategy or plan behind any current decisions.
The blame game and unhappy stakeholders
The analyst, Simon French of Cenkos Leisure, has suggested that the only way to boost the business could be an outright sale but even that might not be enough. According to French, it is difficult to identify the “catalysts for share price outperformance”; other factors such as the uncertainty of sustainability in cash flow from the Retail Estate should be taken into consideration.
Without an experienced permanent chief executive, the board of directors are left with the uneasy task of saving the company from its current difficult situation. The fact that Parvus publically announced its displeasure with the board and its “many operational missteps” suggests that other major shareholder including Capital Group and Morgan Stanley have done the same in private.
With the short-lived appointment of Henderson, the failed attempt to acquire 888 and the first revenue decline in a decade, it’s easy to see that the tenure of Gareth Davies as chairman has not been the easiest one. By trying to solve the operator’s technology issues through an expensive investment in NYX the company has managed to cut itself off from the Canadian market. William Hill is in need of a chief executive with experience of the gambling market and CFO Philip Bowcock’s appointment as interim CEO will very likely not be made permanent.
Bad choices and endless resignations
The board has a lot to answer for as regulation can be unpredictable but it does not explain the £25 million hole, instead this is an indication of a lack of proper planning. It’s clear that the financial plans for the year had fallen to pieces by March and although the effects of changing regulations have affected a lot of online casinos, it seems William Hill was affected most.
A former executive said that the organisation had made its plans for 2016 which was gone over by the finance team. Instead of focusing on a reachable goal the company seems to have opted for something a bit too optimistic and that is unfortunately always a 50/50 risk in any business. The executive expressed concern for the lack of awareness from the well-esteemed online casino, as they should have noticed that there was an issue.
William Hill is one online casino who has always valued longevity or so it seemed until the mass departure of executives such as Jamie Hart, Neil Cooper, Finbar Joy and Andrew Lee. Ever since the departure of these executives the board has undergone a massive transformation which has resulted in Crispin Nieboer going from a mere consultant to a managing director of online. With so many of the staff leaving the company seems to have realised the value of their long-serving staff.
Is it possible to get back on top?
One of the biggest problems is the lack of big names and experienced individuals on the William Hill board. It seems the board of executives lack much needed gambling expertise. In order to keep itself from going down the same road as pre-merger Betfair, William Hill must acknowledge that it is indeed a gambling business and not a tech wizard. According to an analyst the company needs to appoint directors who will help restore a gambling culture in the firm. William Hill might need to focus on strengthening their board before appointing a new CEO. The online casino should also remove its focus from expanding their reach both locally and internationally, as they’re already in every viable regulated market.
The online casino could expand their reach to Germany and Japan but with one slowly creeping towards regulation and the other one being a black market they won’t offer any immediate benefits. The company could also pursue a radical solution by making a major acquisition to take on Ladbrokes Coral and Paddy Power Betfair. These might not be first choices but any deal would boost the business. Another source has said that the company should sell its Australian business to place more focus on the UK.
The harsh reality is that there is no immediate solution and that William Hill needs a turnaround plan, a new CEO and a group of talented, experienced executives to join their board.
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