2016 Annual Report and Accounts

The 2016 Annual Report and Accounts, incorporating the audited financial statements, have been published today and are available as a PDF document on the Group's corporate website at www.williamhillplc.com. Notifications will be sent to shareholders who have opted for electronic communication.

Copies of the Annual Report will be posted to shareholders on 14 March 2017, together with the Notice of 2017 Annual General Meeting and proxy forms. In accordance with Listing Rule 9.6.1, a copy of the 2016 Annual Report is being uploaded today to the National Storage Mechanism and will shortly be available for viewing.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements, were included in the preliminary results announcement released earlier today. That information, together with the information set out below, which is extracted from the 2016 Annual Report, is provided in accordance with the Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service. This information should be read in conjunction with the Company's preliminary results announcement. This announcement is not a substitute for reading the full 2016 Annual Report. Page or note references in the text below refer to page numbers and note numbers in the 2016 Annual Report.

Managing our risks

An active approach

Our Group risk appetite acknowledges the need to proactively balance risk with opportunity, and knowingly taking an approved level of risk is essential to allowing the Group to advance in its strategic aims. Effective management of these risks is an inherent part of our operations.

Principal risks across the Group are managed on a day-to-day basis by the Group Executive and steps are taken to assess whether the business is within the Group's risk appetite as set by the Board. Regular operational reporting from the executive and independent assurance provided on the Board's behalf to the Audit and Risk Management Committee ensure that the Board is regularly appraised on how risks are being managed. Particular focus is given to those risks which may threaten our strategic priorities or regulatory compliance.

Our approach

The Board is responsible for oversight and approval of appropriate responses to potentially significant risks in pursuit of the Group's strategic objectives. During the year the Board re-affirmed the existing risk appetite as being appropriate. The Board confirms that its assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, and which are set out in this 'Managing our risks' section, was robust.

Local business units consider their own risk profiles and a consolidated view is presented to the Board, highlighting both perceived material changes in risk and also any common themes for further review. The Group Executive are charged with managing risk and undertake these duties through specific review of the risk assessment in the Committee as well as formally considering risk as part of the investment appraisal process, Group and regional capital expenditure and project appraisals, review of key changes and through discussion with the Board as part of Group strategy days.

We continue to assess how best to conduct risk management throughout the Group. Whilst current processes are fit for purpose, we are currently investing with the Group Executive in a programme of risk analysis and data capture to enhance our capabilities to support decision-making. This process is supported by the Board and already forms a mandatory component of our investment appraisal process through the Corporate Development Office.

Set out below is the Board's view of key risks currently facing the Group, along with commentary on how this directly affects our strategic goals. Setting these risks out in priority order, we provide a view on the likelihood of these risks crystallising in the coming year and the potential impacts, along with an indicator of the change in risk compared to the prior year assessment. An explanation of how the Group manages its various financial risks is provided in note 23 to the financial statements.

Area of Risk: Regulatory Compliance and Change

Likelihood: High
Impact: High
Change: Stable

Impact on strategy

William Hill is committed to upholding the British Gambling Commission's core licencing objectives and adhering to the regulatory standards required in all of our licensed territories as they continue to evolve. Holding licences in key markets, such as with the Nevada Gaming Board, is an essential part of our growth strategy and therefore the risk of breaching local licensing regulations is a clear risk and must be managed. This multi-territory licensing drives a need to continually update processes and controls to ensure compliance, and to review the ongoing changes to our business to assess the impact on our licensing position. Changes to regulations in each of our licensed markets may have a negative impact on Group results.

What are we doing to address the issue?

We remain wholly confident that sustained investment in our compliance and other assurance functions allows us to identify, understand and address changing regulatory requirements in an efficient and effective manner. We actively engage with the UK Government and significant other parties to discuss the measures by which we fulfil our obligations under the licensing objectives in the UK.

We provide ongoing support and continued adherence to the voluntary ABB Code, and remain a committed member of the Senet Group, which aims to promote responsible gambling standards and to hold its members to account.

We maintain a dialogue with regulators and other key stakeholders in our licensed territories internationally, continually monitor the changing legal landscape and adapt our strategy on a country-by-country basis to changes in regulation. A high proportion of Online's revenues are derived from licensed territories, which mitigates risks associated with operating on a non-locally licensed basis.

We have well-resourced in-house compliance functions and have compliance officers in all of our strategic business units who are a core part of the local management teams, ensuring compliance has a voice at the top table in each location. Our Compliance processes and controls across the Group are well established and the compliance functions operate independently of operational management to both support management's compliance obligations and to provide ongoing assurance over the adherence to local requirements. A bi-monthly Group Compliance Committee provides all compliance officers with direct access to senior Group leadership including the Interim CEO and ensures compliance issues are shared across the Group to allow for the identification of trends and common issues.

We also engage with governments and regulators on a pro-active basis when changes to regulation are proposed and we actively contribute to public consultations. This is designed to promote the consideration of the interests of the Group and the industry before regulation is finalised. The Group Risk and Audit function also considers regulatory compliance as a core part of audit delivery, reporting directly to the Audit and Risk Management Committee, as an independent third line of defence.

Area of Risk: Cyber Crime and IT Security

Likelihood: High
Impact: High
Change: Increasing

Impact on strategy

The ability to provide a market leading offering to retain and attract customers, and the associated complex back-office functionality we require, is wholly underpinned by significant investment in proprietary technology and carefully selected third-party offerings. Increasing threats to these technologies from cyber-crime or malicious activities requires sophisticated protection techniques and growing investment to mitigate against them. The sports betting and online gaming industries, and the increasing digital footprint of our global operations, means that this risk is a material threat facing the Group.

What are we doing to address the issue?

During the year a significant DDoS attack on a previously unheard of scale was successfully addressed and customer impact minimised. The ability to scale our defence capability and work with mitigation partners to swiftly and successfully address rapidly emerging threats proved the value of investments made in this area.

Our technology security arrangements have prevented any material data security breaches or financial loss. However, the scale and complexity of the DDoS attack referred to above serves as a reminder as to the continually evolving and growing threats we face.

As well as working with a range of specialist security firms to enhance, review and test our defences against these threats, we continue to invest significantly in our in-house capabilities. This includes appointing a new Chief Information Security Officer with deep experience at a national infrastructure level, to enhance our team and to ensure our defences remain fit to address the changing threats.

The threat continues to change and it is clear that no company or sector is immune. We believe our exposure is being well managed and continue to be vigilant and not complacent.

Area of Risk: Transformation Programme

Likelihood: Medium
Impact: High
Change: New Risk

Impact on strategy

We recognise the benefits to be gained through a transformation programme to increase efficiencies and establish more effective ways of working in ensuring we can continue to invest in longer term growth.

Delivering widespread change through such a programme has the potential to impact core business processes, disrupt staffing models and adversely affect existing development roadmaps or business-as-usual activity if not properly managed.

What are we doing to address the issue?

Working with a leading global consultancy firm who have a depth of experience in delivering wide-reaching programmes of this type, we have produced both top-down and bottom-up efficiency models and are working with the leadership teams within our business to prioritise a delivery programme. The programme has the full support of the Board and the Group Executive, both of which regularly discuss and monitor progress. A fully resourced programme office is in place to manage the delivery timelines, dependencies and resourcing requirements in order to minimise delivery risk and impact on existing plans.

Each initiative is sponsored by a member of the Group Executive and led by a member of the senior management team within the relevant business to ensure full visibility of the impacts of change. An independent programme of assurance and risk management will report directly to the Interim CEO and Audit and Risk Management Committee for the duration of the programme.

Area of Risk: Competitive Landscape

Likelihood: Medium
Impact: Medium
Change: Stable

Impact on strategy

The challenge to acquire, retain and service customers continues to intensify as recent mergers within the UK gambling industry begin to embed and entrants from overseas continue to invest in the region. We must ensure our strategy acknowledges and responds to this across all areas of our business, but specifically with respect to product development, user experience and marketing effectiveness.

Failure to differentiate and meet the needs of our customers may lead to a 'race to the bottom' on pricing, this being a natural outcome for those who serve commoditised offerings.

What are we doing to address the issue?

The keys to success in an increasingly fragmented market are new product developments which are easy to use and which are marketed such that both new and existing customers feel valued and rewarded. All of these elements involve providing customers with a personalised experience. The combination of the flexibility provided by our front-end platform with investment into our back-office, data and trading platforms provides the tools required to understand and service our customers' needs. Steps taken in the year include the launch of our proprietary SSBTs in Retail, investments in NYX, improved access to development resource with the acquisition of Grand Parade and the development of our UNO single customer data warehouse, providing us with other opportunities to differentiate.

Aligned to this, our high-street presence and a change in the tone-of-voice of our marketing communications will ensure our brand is able to stand out in a crowded marketplace. Whilst we focus largely on our core brand, William Hill, we are also able to flex according to local market needs, as demonstrated by the use of Centrebet in Australia to complement our mass-market presence in that location.

Further, the appointment of Board members and key senior managers with deep industry experience during the year leaves us well placed.

Area of Risk: Delivery of IT Strategy

Likelihood: Medium
Impact: High
Change: Stable

Impact on strategy

The ability to deliver change through the development of our IT infrastructure and platforms is key to differentiating ours from commodity-driven offerings, enhancing customer experience through our time to market, front-end, customer analytics and personalisation.

Our global technology footprint comprises a sophisticated combination of core central services and capabilities and more targeted, more localised and business-specific capabilities, delivered from multiple locations, to meet specific local business needs.

What are we doing to address the issue?

During the period, the Board sanctioned major investments in order to support our IT strategy and ensure we are fit for purpose for future needs. Our investments in NYX and acquisition of Grand Parade are key enablers in our technology strategy alongside our internal investments in our front-end platform, SSBTs and other key initiatives, which in turn underpin several other strategic goals. These investments enhance both our infrastructure and our ability to develop and support future capabilities. Our investment in NYX supported its acquisition of Openbet, which positions us well to partner with them to deliver our next-generation back-end platform.

Grand Parade has already been integrated into William Hill and has significantly enhanced our development capabilities with several of the enhancements to our mobile experience being the direct result of Grand Parade development work. A clear roadmap is in place to utilise existing development resource alongside Grand Parade to enhance user experience and increase personalisation.

Area of Risk: Talent

Likelihood: Medium
Impact: Medium
Change: Stable

Impact on strategy

We operate in a highly competitive landscape with operations in multiple locations worldwide. Delivery of our strategy relies on the maintenance and development of a focused leadership team and access to a number of highly skilled specialists across the Group.

What are we doing to address the issue?

During the year the Board made a change at the CEO level and Philip Bowcock was appointed Interim CEO, supported by Mark Summerfield as Interim CFO. Whilst the roles are interim a clear focus of this leadership team has been to strengthen our senior management cohort and align leadership skills to the needs of the business. Several senior hires with a depth of betting, gaming and technical specialist experience have been appointed to the Online business and critical support functions.

In addition, following a review of the composition of the Board (see the report from the Nomination Committee on page 66) we have appointed three additional Non-executive Directors who bring significant digital, multi-channel and gambling industry experience.

As well as looking to strengthen with external appointments, we also recognise the need to do more to retain and develop the talent we have in-house. By making significant investments in our Human Resources leadership, and outsourcing much of the administrative work to a third party, our HR function is able to focus on talent development, robust performance appraisal and the alignment of reward to performance.

Overall, the Group provides competitive salary and benefits packages, including short-term bonuses and long-term share-based incentives, having taken steps to review and enhance reward arrangements during the year. All employees are encouraged to become owners of the business through a Sharesave programme. The Board has visibility of key leadership remuneration arrangements through the Remuneration Committee.

Following investment into the HR function, robust appraisal and goalsetting processes are being rolled out for 2017 and annual talent reviews will be conducted with the senior management team. The Group regularly reviews the levels of employee engagement through an annual employee survey and implements specific action plans to address areas of improvement.

Area of Risk: Business Continuity Management

Likelihood: High
Impact: Low
Change: Stable

Impact on strategy

With key operational offices in ten countries, supported by a network of operational hubs, licensed betting offices and sports books, disaster recovery facilities and business critical third-party locations, a comprehensive business continuity plan in the event of disruption to any of our key sites is required. Business continuity events include disruption to our people and locations which may impact the business' ability to service customer needs.

What are we doing address the issue?

Whilst we have successfully dealt with significant issues across our estate in the recent past, minimising the impact of any business interruption on our customer group and the ability to serve their needs is essential.

As we look to drive efficiencies across the Group we continue to consider whether our location strategy is aligned to our needs and where our exposures are unfavourable.

The Group now has access to business continuity (BC) sites in our core UK locations, multiple sites or bespoke BC facilities in key overseas locations, or the ability to rely on flexible ways of working in other locations. We have established a Brexit Working Group to consider the implications as we move towards the triggering of Article 50 and beyond, specifically considering the potential implications financially, operationally and from a regulatory perspective. This includes ensuring suitable arrangements are in place should there be disruption to the Gibraltar crossing or the availability of any services offered through Gibraltar, and validation of these arrangements by undertaking BC testing.

A BC management system is in place which includes a programme of rolling reviews of our Group-wide BC plans and we continue to evolve these plans in line with our wider business evolution. This is owned by a full-time BC Manager, with appointed BC champions in all key locations, as well as named BC plan owners in all business units. We continue to test and rehearse our people, technology and building services infrastructure to ensure that BC capability and readiness is embedded in the culture of the business and that our business is safe and secure and available for colleagues and customers. In 2017 a particular focus will be given to assessing BC capabilities across our supply chain.

BC readiness forms part of the regular reporting to the Group Audit and Risk Management Committee, to ensure adequate oversight of our plans and preparedness.

Area of Risk: IT Disaster Recovery

Likelihood: Low
Impact: High
Change: N/A* (*previously considered part of Business Continuity)

Impact on strategy

As a global business sharing elements of our trading platforms across different time zones, and with a global sporting calendar generating round-the-clock activity, any significant disruption to core platforms or online services is likely to have a significant impact on our ability to service customer needs regardless of its timing. It is therefore important that we establish robust disaster recovery mechanisms for such services, to ensure that any visible downtime is minimised in the event of disruption.

What are we doing to address the issue?

Minimising the impact of any platform or online service interruption on our customer group and the ability to serve their needs is essential. We therefore continue to work on refreshing our IT Disaster Recovery solution for the Online business, as well as leveraging next-generation technologies to continuously improve the underlying resilience of core services. In addition, as we look to drive efficiencies across the Group, we continue to consider whether our current data centre strategy is fully aligned to our needs, including whether opportunities exist to benefit our IT Disaster Recovery posture.

For our US and Australian businesses, separate local IT Disaster Recovery facilities, plans and processes are also in place and indeed have been improved over the last 12 months.

We continue to monitor the status of our IT Disaster Recovery capabilities across the Group to ensure that our protections are in line with business requirements, and that remedial action is taken where necessary. The status of our IT Disaster Recovery solutions have been regularly monitored by the Group Audit and Risk Management Committee.

33. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below. Transactions between the Company and its subsidiaries and associates are disclosed in the Company's separate financial statements.

Trading Transactions

Associates
During the period, the Group made purchases of £50.5m (52 weeks ended 29 December 2015: £49.9m) from Satellite Information Services Limited, a subsidiary of the Group's associated undertaking, SIS. At 27 December 2016, the amount receivable from Satellite Information Services Limited by the Group was £nil (29 December 2015: £nil).

The Group made no purchases from its associated undertaking, NeoGames. At 27 December 2016 and 29 December 2015, no amounts were due to or from NeoGames.

All transactions with associates were made on market terms.

The Group has made available a US$15m loan facility to NeoGames, of which $nil is drawn down.

Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'.

The disclosures above include c£26,000 received by directors in respect of dividends on the Company's ordinary shares (period to 29 December 2015: c£84,000).

The values presented above include share-based payments measured in accordance with IFRS 2. This is a different basis from that used for the presentation in the Directors' Remuneration Report ('DRR'). In addition, the above includes bonuses on a paid basis, whereas the DRR includes them on an accrued basis. Other than the inclusion of dividends, the timing of bonus inclusion and the basis of measurement of share-based payments, all values above are presented on a consistent basis with those disclosed in the DRR.

Pension schemes
The pension schemes of the Group are related parties. Arrangements between the Group and its pension schemes are disclosed in note 32.

DIRECTORS' RESPONSIBILITY STATEMENT

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS regulation and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 Reduced Disclosure Framework. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Parent Company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that directors:

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
• make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
• the Strategic Report, which includes the management report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• In addition, each of the directors considers that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

This responsibility statement is approved by the board of directors and is signed on its behalf by:
Philip Bowcock
Interim CEO
24 February 2017

Enquiries:

Luke Thomas
Company Secretary, William Hill plc
Tel: 020 8918 3935

About William Hill PLC

William Hill, The Home of Betting, is one of the world's leading betting and gaming companies, employing around 16,000 people. Founded in 1934, it is one of the UK's largest bookmakers with around 2,375 licensed betting offices that provide betting opportunities on a wide range of sporting and non-sporting events, gaming on machines and numbers-based products including lotteries. The Group's Online business (www.williamhill.com) is one of the world's leading online betting and gaming businesses, providing customers with the opportunity to access William Hill's products online, through their smartphone or tablet, by telephone and by text services. William Hill US was established in June 2012 and provides land-based and mobile sports betting services in Nevada, and is the exclusive risk manager for the State of Delaware's sports lottery. William Hill Australia is one of the largest online betting businesses in Australia, established through the acquisition of two businesses in 2013. It offers sports betting products online, by telephone and via mobile devices. William Hill PLC is listed on the London Stock Exchange. The Group generates revenues of c£1.6bn a year.