UK FTSE 250 gambling company builds its IR effort from scratch during the recession
We have seen how essential IR has been during the financial crisis. While trends might be moving toward real-time communications, however, trust cannot be engendered overnight.
Ralph Topping has worked at international gambling company William Hill since 1973 and in February 2008 was appointed CEO. He hired Lyndsay Wright as head of the firm’s new investor relations department in November that year. IR was in favor but badly out of shape. ‘It was totally reactive, not done to the standard you would expect,’ says Wright.
Last year was one of attention to detail, building for the future while dealing with debt. Keeping her head above water has been the key for Wright, who admits most of 2009 was spent reacting as she was thrust into preparations for a rights issue in March.
Originally listed on the London Stock Exchange back in 2002, William Hill’s share price had been underperforming since August 2007. And by the beginning of 2009 the firm’s debt stood at £1.4 bn ($2.2 bn). In a move to reduce the debt – producing a more ‘robust capital structure’ and ‘appropriate financial flexibility’, in the words of chairman Charles Scott – William Hill renegotiated its bank financing and launched a rights issue. The result was a 97 percent take-up by shareholders, and a new £350 mn in equity.
Once complete, the company’s leverage was reduced to a point at which it could enter the bond market for the first time. ‘We were pleased with the execution and the response we got from the shareholders,’ says Wright. ‘It was good for them and the stability of the balance sheet, and therefore a huge success for IR.’ William Hill went on to complete a high-yield bond in November 2009, raising £300 mn and diversifying half its debt requirement in one go.
Building a practice
The company now required excellent communication on the debt IR side. Wright admits she is still learning, ‘and many of our analysts were unsure about the bank debt market and this kind of upheaval in the balance sheet.’
Wright also wanted to take proactive steps to build her practice. ‘When I walked in, the budget was set,’ she explains. ‘But there was flexibility, and things I think are invaluable – such as financial PR and the website – took precedence over items I could do without.’ One example of this is the customer relationship management system. ‘I made do with spreadsheets and relied upon brokers to keep me updated with contact details,’ Wright recalls.
Her operation is frugal; improving efficiency is a priority for a department looking for steady and sustainable growth. ‘Our annual report, website and CSR report all needed work,’ she says. ‘If you get these three right, you elevate your market information so that investors have a higher understanding of the business even before they meet with you.’
William Hill conducted a peer review of these tools, looking initially to the gaming sector and then the wider leisure sector. ‘We analyzed the IR Magazine Awards and the IR Society Awards,’ Wright says. ‘In 2010 we will put our findings into practice.’
Clear messages
The annual report was a priority. It ticked a lot of boxes but was not communicated well, according to Wright. Corporate communications consultant Radley Yeldar has been appointed to continue its development this year.
Next came CSR. Wright is the first to admit that the company lags its peers in a CSR-heavy sector. ‘We have to stand as a responsible industry and show that we protect the vulnerable among our client base,’ she says. ‘We are heavily regulated, and we go above and beyond. There is a huge amount of quality information in the company and I have to get it out there.’ Peers Ladbrokes and Coral have separate corporate responsibility reports, and William Hill has established a social responsibility working group with a view to producing an independent report in 2010.
Wright is well acquainted with CSR from her time in the trailblazing pharmaceutical sector, where she headed IR at Acambis, now part of sanofi-aventis. She also bolstered William Hill’s support functions, adding as a second broker Investec, which complemented Citigroup’s bulge-bracket coverage with access to the small and mid-cap market. The next change was financial PR. ‘I saw 15 agencies in three months and we came back to our original agency, Brunswick, with a different team,’ explains Wright.
One watershed achievement of 2009 was the appointment of investor relations assistant Lili Huang in 2009. Huang came from William Hill’s flagship betting shop on Park Lane, London, where she was recognized as betting shop manager of the year in 2007. ‘I was used to being by myself in this function,’ says Wright. ‘But after about three months, I couldn’t live without her.’
For her part, Huang says she is enjoying the opportunity to help grow the new department. ‘I’m continuing to improve my internal and external communications,’ she adds.
Investor day
As well as building internally, Wright ended the year on a high with an investor day in late November. Significant commercial changes had resulted from William Hill’s online expansion: a joint venture with online gaming provider Playtech put the company in the top three internet gamers in Europe, but the online business needed to be rebuilt, so the focus was entirely operational.
‘The shareholders were very patient,’ recalls Wright. At interims in August, the head of the firm’s online team gave a progress report but there were still big concerns about what was happening. ‘There was information we should have communicated sooner,’ Wright admits. ‘We tended to do it on an ad hoc basis, but we needed to be more proactive.’The investor day proved a success, attracting a full house. Wright says Huang’s support was instrumental in organizing buy-side and sell-side attendance as well as a video webcast. The event began with a statement from Topping, in which investors’ bearish worries were addressed, and the head of the online business presented a full report.
It provided a practical test for the new department, and it was crucial in moving toward upfront IR. ‘We need to better our knowledge of investors before we put them in front of the CEO. We don’t fully understand this yet,’ says Wright. ‘But we are improving.’
This year, Neil Cooper replacing Simon Lane as finance director means internal relationship building will continue to be crucial for William Hill’s communications. ‘We need more integration between disparate elements of communication within the company. It is as simple as synchronizing your message and your calendar,’ says Wright.
Longer term, Wright believes the partnership between her and Huang could expand. ‘Ideally we will take control of our engagement with analysts and investors, with ad hoc site visits, for example, and simultaneously continue to develop internal communications,’ she explains. ‘We might require more resources.’ The number of research firms covering William Hill rose from 21 to 27 in 2009 and fund manager meetings doubled from 2008.
‘Looking forward, with results, the annual report and perhaps an investor event, suddenly your calendar is starting to fill up,’ says Wright. But on a tight budget, and in tough times, the basics remain important. ‘It was a huge opportunity when I came in, and now I am more excited than ever before,’ Wright concludes. ‘We really are going places.’
