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TWST: Can we start with an introduction to William Hill (London: WMH.L), including a brief history and overview of your core activities?

Mr. Harding: William Hill is often described as the UK’s second-largest bookmaker because, with about 1600 high street outlets, we are a little bit behind Ladbrokes who have about 1850. But the business is much broader than just shops, and we have by far the dominant telephone business, with about a 40% market share, and certainly the results posted so far show we have the most profitable Internet business. When you put those things together, we are a lot closer to being number one in terms of profitability. High street gambling is a phenomenon unique to the British Isles. Some 40 years ago, the UK government chose to legalize high street bookmaking and now there are over 8000 local betting shops. If you haven’t been here it can be difficult to envisage, because the same phenomenon doesn’t exist in such scale anywhere else. This isn’t a business created by marketers; it is a business defined by legislation. In the UK, the high street is where people like to do their legal gambling, which therefore means course means there isn’t anything like the same demand for resort casinos as you see in the US. Quite simply, there is no need for them; it’s much more convenient to do it locally. In terms of how the business has evolved, it's always been seen as a good cash generative business through the years, although historically it was probably seen as a somewhat of a ‘down market’ activity. Bookmakers therefore tended to be owned by leisure conglomerates for the cash flow, but were essentially hidden from direct investment. More recently, and certainly since the advent of the National Lottery, gambling generally has been seen as a much more mainstream leisure activity, without any real social stigma attached to it. As a consequence, it’s been seen by the stock market as a much more mainstream investment and it is really on that basis that the latest financial holders saw a floatation as their preferred exit. It was timely in that the stock market was increasingly turning towards more traditional cash generative, yield type businesses after having had their fingers burnt with fantasy dotcom growth businesses. We were therefore able to float relatively easily and I have to say I think it’s been probably been one of the most successful IPOs of recent years. We have out-traded the market by some margin. Our shares have appreciated by over 40% since we floated and there has been a tremendous amount of interest in us. The venture capitalists sold out their residual stakes recently. It was ten times oversubscribed at float and three times oversubscribed for the residual shares at a 30% higher share price.

TWST: I understand there is some legislation working its way through the UK government or at least a large scale review of gambling at the moment.

Mr. Harding: There is and it's with a view to further deregulation. Its certainly not a moral issue, nor is it party political, and the debate now centers on the extent to which the government needs to protect some people from themselves, versus giving everyone individual freedom. The UK government knows well that decriminalizing gambling cuts organized crime out of it. Having realized that and having seen the benefits of a well-run and deregulated gambling industry for forty years, they’re now looking to further deregulation so that the industry can become an even greater tax earner for them.

TWST: What's on your business agenda for the next 12 to 24 months?

Mr. Harding: We have been organically growing the business 20+% and that’s kept us pretty busy. My view is that as long as you can keep delivering those kinds of growth rates from the business that you know is your core competence, then you should stick to your knitting. People are always asking me, “Are you interested in getting into other areas?” My answer, as always, is to never say never. But as long as we can deliver that kind of growth rate, we will stick to doing what we know best We have a fair bit of work to do to upgrade the technology of the business. So we are working very hard at the moment on EPOS (electronic point of sale) systems, which utilize the same bet capture and settlement software that we have on the telephone and the Internet, but take it into the shop environment, which is almost all cash. That, I think, will definitely give us a competitive advantage because quite clearly smaller bookmakers can't implement that kind of technology in house. This work will keep us pretty busy over a couple of years. A lot of our success in organic growth has been driven by product diversification, giving the customers access to more and different betting opportunities. Having discovered that formula, we are putting a lot of time and effort into further product diversification. We are constantly looking for new markets, but I would be wary of committing capital oversees. So the overseas growth is really limited to what we really get via the Internet.