INTERESTS IN ASSOCIATE

The Group uses the equity method of accounting for associates and joint ventures. The following table shows the aggregate movement in the Group’s investment in associates.

£m

At 2 January 2013 12.6

Share of profit before interest and taxation 4.8

Share of interest (0.4)

Share of taxation (1.0)

Dividend received (2.0)

At 31 December 2013 14.0

At 31 December 2013, William Hill Organization Limited, a principal subsidiary of the Company, held an investment of 19.5%

(1 January 2013: 19.5%) of the ordinary share capital of Satellite Information Services (Holdings) Limited (SIS), a company incorporated in Great Britain. The Group is able to exert significant influence over SIS, by way of its 19.5% holding and its seat on the Board of directors.

The SIS group of companies provides real time, pre-event information and results, as well as live coverage of horse racing, greyhound racing and other sporting activities and events via satellite. The statutory financial statements of SIS are prepared to the year ending 31 March. The consolidated figures above are based on statutory accounts to March 2013 and

management accounts thereafter.

Financial statementsGovernanceStrategic Report

15. INTERESTS IN ASSOCIATE

The following financial information relates to SIS:

31 December 2013

£m

1 January 2013

£m

Total assets 137.0 153.6

Total liabilities (65.0) (89.1)

Total revenue 284.5 177.8

Total profit after tax 17.5 18.7

William Hill Organization Limited also holds directly or indirectly 33% of the entire share capital of Lucky Choice Limited and of 49’s Limited. These companies were formed for the purpose of promoting and publicising certain numbers betting formats.

In the opinion of the directors, the results of these companies are not material to the results of the Group. Consequently, the investments have been stated at cost and have not been accounted for under the equity method, which would normally be appropriate for an associated undertaking.

16. ACQUISITIONS

(a) Acquisition of Australian and Spanish operations from Sportingbet PLC (Sportingbet)

On 19 March 2013, the Group acquired the Australian sportsbook operations of Sportingbet and the Miapuesta brand and was granted a call option over Sportingbet’s locally licensed Spanish business. The acquisition, representing a further step in the Group’s strategy of selective international expansion, was made for a cash consideration of £459.4m and resulted in the Group acquiring 100% of the share capital of the entities acquired.

The call option over the Spanish business was exercised in September 2013 for nil additional consideration and control was assumed on 17 September 2013.

Goodwill recognised on acquisition represented expected profit enhancements from future revenue growth prospects and is not expected to be deductible for tax purposes.

The acquisition-date fair values of the assets and liabilities acquired are provisional. These may be further adjusted, particularly in respect of intangible assets, current liabilities and deferred tax provisions, as we gain further understanding of the business. The provisional purchase price allocation is set out in the table below:

Fair value

£m

Net assets acquired:

Intangible non-current assets 170.7

Property, plant & equipment and software 5.1

Investment property 10.8

Cash at bank 25.9

Receivables 9.3

Payables (49.0)

Deferred tax provisions (43.0)

Total net assets acquired 129.8

Goodwill 329.6

Total consideration 459.4

The aggregate cash consideration, net of cash acquired, was as follows:

£m

Cash consideration paid 459.4

Net cash acquired (25.9)

Net acquisition cash flows 433.5

Included within the intangible non-current assets were £170.7m of separately identifiable intangibles that comprised brands, customer relationships, contractual relationships and software.

The fair value of the trade and other receivables comprised contractually receivable sums of £13.9m, net of a provision of £4.6m for potentially unrecoverable amounts.

NOTES TO THE GROUP FINANCIAL STATEMENTS

16. ACQUISITIONS

The acquired Australian operations have been included within a new operating segment under the name “Australia”, which was created on their acquisition, and their contribution to the period’s result was revenues of £78.5m and a £2.3m loss after exceptional items. Had they been acquired on 2 January 2013, they would have contributed £104.2m of revenue and £5.7m of profit before tax and after exceptional items during the 52 weeks to 31 December 2013. The acquired Spanish operations have been included within the “Online” operating segment and generated a £0.6m loss in the period. The revenues of the acquired Spanish operations are not separable from those of other businesses operated by the Group in Spain and are included within the Online results in note 2. Had they been acquired on 2 January 2013, they would have contributed an additional £4.1m of revenue and a £1.0m loss before tax during the 52 weeks to 31 December 2013.

Simultaneously with the purchase, the Group entered into a loan agreement with the joint purchaser, GVC, under which the Group lent £12.0m to GVC. This loan is repayable in instalments over the period to June 2016. At the end of the period, ca.

£5.1m had been repaid. Of the remaining £6.9m, £4.6m is presented as a non-current loan receivable.

(b) Acquisition of tomwaterhouse.com

On 12 August 2013, the Group acquired 100% of Tom Waterhouse N.T. pty Limited (“tomwaterhouse.com”), an Australian online betting business, as part of a strategy of selective international expansion as the Group develops its second “home”

market in Australia.

The acquisition was completed for a cash consideration of AU$35m (£20.5m). A potential additional earn-out on a sliding scale of up to AU$70m is payable to the vendors, subject to tomwaterhouse.com achieving incremental operating profit on a sliding scale between AU$10m and AU$30m in the year to 31 December 2015. The Group has the option at its sole discretion to pay this earn-out in cash or in shares of William Hill PLC, with the number of such shares to be calculated based on the share price in the 30 days prior to settlement. At the date of acquisition, this earn-out was accounted for as a

derivative liability of £0.6m.

Goodwill recognised on acquisition represented expected profit enhancements from both future revenue growth prospects and expected cost synergies and is not expected to be deductible for tax purposes.

The acquisition-date fair values of the assets and liabilities acquired are provisional. These may be further adjusted, particularly in respect of intangible assets, current liabilities and deferred tax provisions, as we gain further understanding of the business. The provisional purchase price allocation is set out in the table below:

Fair value

£m

Net assets acquired:

Intangible assets 3.6

Cash in bank and on hand 2.6

Deferred tax provision (0.4)

Other net liabilities (9.0)

Total net liabilities acquired (3.2)

Goodwill 24.3

Total consideration 21.1

The aggregate cash consideration, net of cash acquired, was as follows:

£m

Total consideration 21.1

Less contingent element (0.6)

Cash consideration paid 20.5

Net cash acquired (2.6)

Net acquisition cash flows 17.9

Included within the intangible non-current assets was a brand with a fair value of £3.6m. The fair value of the trade and other receivables was not materially different from the contractually receivable sums.

The tomwaterhouse.com business has been included within the “Australia” operating segment and generated £8.2m in revenues and a loss of £5.6m in the period after exceptional items. Had the business been acquired on 2 January 2013, it would have contributed £20.7m of revenue and a £13.3m loss before tax during the 52 weeks to 31 December 2013.

Financial statementsGovernanceStrategic Report

17. INVENTORIES

31 December 2013

£m

1 January 2013

£m

Raw materials, consumables and bar stocks 0.2 0.2

18. OTHER FINANCIAL ASSETS