Project Star

1
Proposed Acquisition of Stanley Leisures Retail
Bookmaking Operations
16 May 2005
2
Disclaimer
This presentation provides a summary of the
relevant transaction. Any decision by
shareholders on whether to vote in favour of the
transaction should be based on the circular to be
distributed to shareholders of the company in due
course, and not on this summary. This
presentation does not constitute or form part of
any offer or invitation or solicitation to
purchase shares, nor should this presentation or
any part of it form the basis of any investment
decision. Any synergies or enhanced earnings
anticipated in this presentation should not be
taken to be a forecast of profits and should not
be interpreted to mean that the earnings per
share for any period following the acquisition
will necessarily be greater that for any prior
period.
3
Agenda
1. Introduction and Overview - David Harding
2. Stanleys Retail Bookmaking Overview and
Integration - Tom Singer
3. Cost Savings and Revenue Opportunities - Tom
Singer
4. Funding and Capital Structure - Tom Singer
5. Timetable and Summary - Tom Singer
4
Introduction

• Agreement of the terms of the proposed
  acquisition of Stanley Leisures domestic retail
  bookmaking operations for 504 million
• Stanleys Retail Bookmaking comprises of 624
  Licensed Betting Offices (LBOs) in Great
  Britain, Northern Ireland, the Republic of
  Ireland, Jersey and the Isle of Man
• Stanleys Retail Bookmaking is fourth largest
  operator of LBOs in the UK
• William Hill is assuming the UK competition risk
• Subject to shareholder approval at EGM to be
  held in mid June 2005
• Anticipated completion shortly thereafter
• Board commitment to review enlarged Groups
  capital structure following the acquisition and
  competition authorities review

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Key Messages

• A rare opportunity for William Hill to increase
  the scale of its UK retail betting estate,
  creating the UKs leading network of LBOs
• Significant scope for synergies and improvement
  in the profitability of Stanley's Retail
  Bookmaking
• Stanley's Retail Bookmaking has EBITDA of 37.2
  million after adjustment for year ended 2 May
  2004 expected to be slightly lower in the year
  ended 1 May 2005 in line with all bookmakers
  including William Hill
• Expected to deliver pre-tax synergies of circa
  13 million in 2006
• Expected to enhance earnings per share(1) before
  exceptional items and generate returns in excess
  of William Hills cost of capital in 2006, the
  first full financial year following the
  transaction
• Enhances opportunity to grow profitability of
  core business in medium term

(1) This statement should not be interpreted to
mean that future earnings per share of William
Hill following the proposed acquisition will
necessarily be higher than historical earnings
per share
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Background to the Proposed Acquisition

• Strategy since listing of delivering sustainable
  earnings growth for its shareholders
• Profit on ordinary activities after tax (before
  exceptionals) has grown 153 over last two
  financial years
• Proposed return of capital announced in absence
  of suitable acquisition opportunities
• Subsequently, opportunity to acquire Stanley's
  Retail Bookmaking arose

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Reasons for the Proposed Acquisition
A rare opportunity to substantially increase
distribution reach

• Addition of 624 LBOs in Great Britain, Northern
  Ireland, the Republic of Ireland, Jersey and the
  Isle of Man
• Highly complementary estate (North West of
  England, Ireland)
• Limited number of comparable opportunities

William Hill
Stanley's Retail Bookmaking
Total 1,613
Total 624
Scotland and North East 120 LBOs
Scotland and North East 269 LBOs
Offshore 100 LBOs
North 316 LBOs
North 145 LBOs
London North 366 LBOs
London North 22 LBOs
London South 366 LBOs
London South 46 LBOs
Mid West, including Midlands, Liverpool, Wales
and South West 296 LBOs
Mid West, including Midlands, Liverpool, Wales
and South West 191 LBOs
Note Stanley LBO breakdown conformed to William
Hills divisional split
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Benefits of the Proposed Acquisition
Significant scope for synergies

• Completed due diligence
• Confident of substantial synergies by applying
  William Hills disciplines and approach to the
  enlarged group...
• - ...pre-tax synergies of 13 million
• - ...combination of hard synergies (cost and
  contract improvements) and operational
  (revenue enhancement) synergies

Attractive financial and strategic benefits

• Attractive immediate financial returns
• - Expected to enhance earnings per share and
  generate returns in excess of WACC in 2006,
  first full financial year
• Fundamental strategic benefits not provided by
  previously allocated return of capital

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Strategic Benefits not Quantified in Synergies

• 1 or 3 - Offensive or Defensive
• - New markets/competitive challenge
• - Buying power and influence
• - Partner of choice - UK consolidation
• - International deregulation
• Strategic benefits of extended
  distribution/scale
• - Product range/depth in low margin environment
• - Increased limits/improved liability management
• - Single account - cross sell product/channel
  proposition
• - Maximum leverage of investments in technology
• - Long term - Tote/Lottery licenses?

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Management

• Tom Singer to be promoted to Chief Operating
  Officer
• - Full responsibility for integration
• - Extensive experience of business integration
  projects
• Shai Wasani will assume some of Toms
  responsibilities for finance function
• Instigating a search for new Finance Director
• David Harding to continue role as Chief
  Executive
• At EGM will seek shareholder approval for new
  share based incentivisation arrangements for
  David Harding and Tom Singer

• Board believes the Proposed Acquisition is in
  the best interests of the Company

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Agenda
1. Introduction and Overview
2. Stanleys Retail Bookmaking Overview and
Integration
3. Cost Savings and Revenue Opportunities
4. Funding and Capital Structure
5. Timetable and Summary
12
Stanley Betting Overview

• Stanley operates 624 LBOs in Great Britain,
  Northern Ireland, the Republic of Ireland,
  Jersey and the Isle of Man
• Proposed acquisition does not include Stanleys
  telephone and interactive betting operations or
  international business
• EBITDA of 37.2 million after adjustments for
  year ended 2 May 2004
• Marginally lower level of profitability expected
  for year ended 1 May 2005 due to unfavourable
  horseracing and football results

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Integration

• Due diligence completed
• Business plan for combined business going
  forward
• First 6-8 weeks post completion doing further
  analysis
• Pace of integration subject to possible
  competition issues
• After competition issues resolved, early focus
  on
• - Rebranding of LBOs (William Hill more
  recognisable national betting brand)
• - Rationalisation of central functions and
  removal of duplicate structures
• - Harmonisation of prices and product offering
• - IT integration issues

14
Agenda
1. Introduction and Overview
2. Stanleys Retail Bookmaking Overview and
Integration
3. Cost Savings and Revenue Opportunities
4. Funding and Capital Structure
5. Timetable and Summary
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Overview of Synergies, Costs and Capex

• Expected total synergies of circa 13 million in
  2006
• 7.5 million from cost synergies and 5.5
  million from revenue synergies
• Exceptional revenue costs

(already announced)

• Upfront capex investment of 10m principally to
  harmonise IT systems
• Further capex investment of 20 million to
  improve retail estate over the next three years

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Synergies cost savings and economies of scale

• Immediate opportunity to improve efficiency of
  enlarged business through elimination of
  duplicate
• - Back office functions
• - Line management structures
• Reduce corporate overheads
• Net reduction in aggregate expenditure on
  branding, marketing and sponsorship
• Seek to improve commercial terms with suppliers

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Synergies revenue synergies and profitability
improvement

• Rebranding under the more recognisable William
  Hill brand
• Introduction of William Hills full range of
  products, prices and risk management systems
• Development of additional services that provide
  more betting opportunities for LBO customers
• Optimisation of FOBT / AWP mix
• Leveraging of investment in new and existing
  shop technology
• Cross sell William Hills remote channels to LBO
  customers

18
Agenda
1. Introduction and Overview
2. Stanleys Retail Bookmaking Overview and
Integration
3. Cost Savings and Revenue Opportunities
4. Funding and Capital Structure
5. Timetable and Summary
19
Funding and Capital Structure

• Funded through existing resources and increasing
  borrowings (previously to be used for return of
  capital)
• Review of capital structure will be undertaken
  by the Directors of William Hill
• View to establish efficient capital structure
  for the enlarged Group
• Directors will outline proposals following
  completion of the Proposed Acquisition and after
  competition authorities review is complete
• Proposals may include a combination of one-off
  returns of capital, share buy-backs and
  dividends

20
Agenda
1. Introduction and Overview
2. Stanleys Retail Bookmaking Overview and
Integration
3. Cost Savings and Revenue Opportunities
4. Funding and Capital Structure
5. Timetable and Summary
21
Timetable

• Proposed Acquisition is conditional on EGM vote
• Circular to be sent to shareholders shortly
• EGM to be held in mid June 2005
• Completion shortly after EGM
• Trading update to market in July
• Mid August at the earliest to be free of
  significant competition risk
• Update on progress at interim results
  announcement (provisionally re-scheduled for 5
  September 2005)

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Summary

• A rare opportunity for William Hill to increase
  the scale of its UK retail betting estate,
  creating the UKs leading network of LBOs
• Significant scope for synergies and improvement
  in the profitability of Stanley's Retail
  Bookmaking
• Stanley's Retail Bookmaking has EBITDA of 37.2
  million after adjustment for year ended 2 May
  2004
• Expected to deliver pre-tax synergies of circa
  13 million in 2006
• Expected to enhance earnings per share(1) before
  exceptional items and generate returns in excess
  of William Hills cost of capital in 2006, the
  first full financial year following the
  transaction
• Enhances opportunity to grow profitability of
  core business in medium term

(1) This statement should not be interpreted to
mean that future earnings per share of William
Hill following the proposed acquisition will
necessarily be higher than historical earnings
per share
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Q A
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Proposed Acquisition of Stanley Leisures Retail
Bookmaking Operations
16 May 2005