Driving Shareholder Value 24 July 2015 Agenda Transaction - - PowerPoint PPT Presentation

Driving Shareholder Value

24 July 2015

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Agenda

Transaction Structure Leadership Team Strategic Rationale Financial Overview CMA and Expected Timetable Q&A

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Disclaimer

The information contained in this document is not for release, publication or distribution to persons in Australia, Canada, Japan, Hong Kong, Singapore, the Republic of South Africa or the United States or in any jurisdiction where to do so would breach any applicable law. No public offer of securities is being made by virtue of this document. Greenhill & Co International LLP (“Greenhill”) is authorised and regulated by the Financial Conduct Authority in the United Kingdom. UBS Limited (“UBS”) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. Greenhill and UBS are acting for Ladbrokes plc (“Ladbrokes”) and are acting for no one else in connection with the merger between Ladbrokes and certain businesses of Gala Coral Group Limited (“Gala Coral”), (the “Merger”). Greenhill and UBS will not regard any other person as a client in relation to the Merger and will not be responsible to anyone other than Ladbrokes for providing the protections afforded to their respective clients, nor for providing advice in connection with the Merger or any other matter, transaction or arrangement referred to herein. Goldman Sachs International (“Goldman Sachs”) and Morgan Stanley & Co. International plc (“Morgan Stanley”), which are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK, are acting as financial advisers to Gala Coral and no one else in connection with the Merger. In connection with such matters, Goldman Sachs and Morgan Stanley, their affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in relation to the Merger, the contents of this document or any other matter referred to herein. Apart from the responsibilities and liabilities, if any, which may be imposed on Greenhill and UBS in their capacities as sponsors by the Financial Services and Markets Act 2000, as amended, neither Greenhill nor UBS accept any responsibility or liability whatsoever and make no representation or warranty, express or implied, for the contents of this document, including its accuracy, fairness, sufficiency, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with Ladbrokes and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of Greenhill and UBS accordingly disclaim to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement. Each of Greenhill and UBS and/or their affiliates provide various investment banking, commercial banking and financial advisory services from time to time to Ladbrokes. No person has been authorised to give any information or to make any representations other than those contained in this document and, if and when published, the public documentation and, if given or made, such information or representations must not be relied on as having been authorised by Ladbrokes, Greenhill or UBS. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority, the issue of this document shall not, in any circumstances, create any implication that there has been no change in the affairs of Ladbrokes since the date of this document or that the information in it is correct as at any subsequent date. This document may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of Ladbrokes. These statements, which speak only as of the date hereof, reflect Ladbrokes' beliefs and expectations and are based on numerous assumptions regarding Ladbrokes’ present and future business strategies and the environment Ladbrokes and, if the Merger proceeds, the combined entity will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. As a result, you are cautioned not to place undue reliance on such forward-looking statements. Greenhill and UBS and any of such person’s respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per share of Ladbrokes for the current or future financial years would necessarily match or exceed the historical published earnings per share of Ladbrokes. Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure given. This document is for information purposes only and does not constitute a prospectus or offering memorandum or an offer in respect of any securities and is not intended to provide the basis for any decision in respect of Ladbrokes or any other entity and should not be considered as a recommendation that any investor should subscribe for or purchase any such securities. Neither the issue of this document nor any part of its contents constitutes an offer to sell or invitation to purchase any securities of Ladbrokes or any other entity and no information set out in this document or referred to in other written or oral information is intended to form the basis of any contract of sale, investment decision or any decision to purchase any securities in it. This document comprises an advertisement for the purposes of paragraph 3.3R of the Prospectus Rules made under Part VI of the FSMA and not a prospectus. Any prospectus in connection with the Merger will be published at a later date. Investors should not subscribe for or purchase any securities referred to in this document except on the basis of information contained in the prospectus and any supplementary

• prospectus. Any decision to purchase or subscribe for securities in connection with the Merger described in this document should be made solely on the basis of the information contained in such prospectus and

any supplementary prospectus. Copies of the prospectus will, following publication, be available from the website of the National Storage Mechanism at www.hemscott.com/nsm.do and Ladbrokes’ registered

• ffice.

Transaction Structure and Leadership Team

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Transaction Structure

• Merger of Ladbrokes and Coral to create Ladbrokes Coral plc
• What is included in the Coral Group?

— Coral Retail, Eurobet Retail, Online (UK1 + Italy) — Includes Gala online but excludes Gala retail (Bingo) — Net financial debt of £865 million — Merger terms before equity placing: Ladbrokes shareholders 51.75%; Coral shareholders 48.25%

• Revised agreement with Playtech to ensure alignment and delivery of digital synergies
• c9.99%2 equity placing by Ladbrokes launched this morning, Playtech expected to be cornerstone
• Subject to CMA clearance and Ladbrokes’ shareholder approval
• Expected to complete in 2016
• 1. Business based in Gibraltar serving predominantly UK customers
• 2. Based on Ladbrokes plc’s current issued share capital

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Board Structure

John Kelly – Non-Executive Chairman Jim Mullen Group CEO 1 Ladbrokes To be approved by the Boards of Ladbrokes and Coral Rob Templeman Carl Leaver Executive Deputy Chairman1 Paul Bowtell Group CFO 3 Executive Directors 2 Non-Executive Directors from Existing Ladbrokes / Coral Boards 3 New, Independent, Non-Executive Directors

• 1. For 12 months post completion

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Jim Mullen – Group CEO

• Current CEO of Ladbrokes PLC
• Previous COO for William Hill PLC digital operations

including running the joint venture with Playtech

• Senior positions held at Murray Group, Arc Worldwide

and News International PLC

Strong Management Team

• 1. For 12 months post completion

Carl Leaver – Executive Deputy Chairman Paul Bowtell – Group CFO Andy Hornby – Group COO

• Current Group CEO of Gala Coral
• Previous Director of International, Home & Direct for

Marks & Spencer PLC

• Former CEO of DeVere Group PLC and MD of Travel

Inn (Whitbread PLC)

• Current Group CFO of Gala Coral
• Previous CFO of TUI Travel PLC, key role in merger
• f First Choice Holidays PLC and TUI Travel
• Held senior positions with Centrica PLC, WH Smith

PLC and Forte PLC

• Current Group COO of Gala Coral
• Previous CEO of Alliance Boots
• Former CEO of HBOS PLC and also held a range of

roles at Asda including Retail MD John Kelly – Non-Executive Chairman

• Current Senior Independent Non-Executive Director
• f Ladbrokes PLC
• Previously Chairman of Trainline.com and Novus

Leisure

• Former CEO and founder of Gala Coral Group

Strategic Rationale

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Potential for faster online growth

• Leading multi-channel technology
• Dual-brand strategy enabling effective cross-brand marketing to increase share of wallet
• Efficiencies across a larger customer and revenue base

The largest UK LBO estate

• Strongly cash generative
• Efficient and more sustainable in the long term

An extensive international portfolio of regulated businesses

• Strong retail and online operations in Italy, Belgium and Spain
• Rapidly growing online operation in Australia
• Platform for future growth

Significant cost synergies

• At least £65 million per annum
• Mostly delivered in the second year post-merger, underpinning shareholder returns

Strategic Rationale

Driving Value: Accelerated Online Growth, Substantial Synergies, Focused Execution

1 2 3 4

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1

Faster Online Growth: Multi-Channel

Digital (including International)

Actives (k) 1,1521 1,3203 Revenue (£m) 2222 2164 Revenue growth 17.5%2 48.2%4 EBITDA (before exceptional items, £m) 312 524

• Multi-channel delivers higher value customers

at lower cost and enhances loyalty

• Two national multi-channel brand networks
• Ladbrokes is the most recognised betting brand
• n the high street
• Coral has already deployed market leading

multi-channel technology which will advance Ladbrokes’ offering

• Online is 20% of combined group revenue,

growing strongly

• 1. Ladbrokes Digital: Financial Year to 31 December 2014
• 2. Ladbrokes Digital: LTM to 30 June 2015
• 3. Total of Coral.co.uk, Galabingo.com, Galacasino.com and Eurobet.it actives – Financial Year to 27 September 2014
• 4. Coral Group Online: LTM to 11 April 2015

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Faster Online Growth: Dual-Brand Strategy, Innovation

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Dual-brand:

• Advanced customer analytics employed to drive cross-brand play
• Retain customers
• Grow share of wallet

Innovation:

• Innovate once, deploy across multiple brands
• Both companies have a track record of innovation delivering results

Chelsea Apps Factory CR Games

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UK’s Largest LBO Estate: Efficient, Cash Generative

• UK’s largest LBO estate, significant economies of scale
• Dual-brand strategy with broad customer appeal
• Best-of-both teams, operational practices and technology
• Cross fertilisation of innovation to grow revenue:

— Slots, Football Jackpot, Coral Plus, Coral Connect, The Grid, SSBTs

Picture: Coral shop

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Extensive International Footprint: Platform For Growth

• Australia: Fastest growing operator1

— Increased marketing to deliver further growth — No.3 corporate bookmaker2

• Italy: Fastest growing operator

— No.2 position online — Strong multi-channel presence

• Spain (50% JV)

— No.1 position in retail, recently launched online

• Belgium

— No.1 position in retail, recently launched online

• Republic of Ireland

— No.3 position in retail, Examinership restructuring

c.11% of Combined Entity Net Revenue

• 1. 2014 H2 data, Morgan Stanley research notes dated 16 June 2015
• 2. Gross profit, online sport betting ranked 2014

3

• 3. Ladbrokes: LTM to 30 June 2015, excluding Ireland which is currently under Examinership. Coral: LTM to 11 April 2015
• 4. Spain converted from EUR to GBP at 2014 average FX of 0.806. Shown on 50% JV basis

Contribution of International3 (revenue) Spain £23m Belgium £55m Australia £46m Italy £120m

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Potential for faster online growth

• Leading multi-channel technology
• Dual-brand strategy enabling effective cross-brand marketing to increase share of wallet
• Efficiencies across a larger customer and revenue base

The largest UK LBO estate

• Strongly cash generative
• Efficient and more sustainable in the long term

An extensive international portfolio of regulated businesses

• Strong retail and online operations in Italy, Belgium and Spain
• Rapidly growing online operation in Australia
• Platform for future growth

Significant cost synergies

• At least £65 million per annum
• Mostly delivered in the second year post-merger, underpinning shareholder returns

Strategic Rationale

Driving Value: Accelerated Online Growth, Substantial Synergies, Focused Execution

1 2 3 4

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Overview of Coral Group

Strong performance across all channels following substantial investment

 Flexible, efficient and scalable infrastructure, re-built from the ground up in 2012/13  EBITDA more than doubled in FY14 to £49.5 million  Strong momentum, with mobile as key driver  #2 online player in Italy  Strong brands and personalised marketing

Online Revenue : £216.4m1 (% total Coral Group: 22%) EBITDA: £52.0m1

 One of the largest betting shop operators in Europe’s largest regulated market  Significant growth driven by rollout of 500 new licences in 2013 following €20 million investment  Strong multi-channel capability  Ongoing estate optimisation underpins future growth

Eurobet Retail Revenue: £84.0m1 (% total Coral Group: 9%) EBITDA: £16.4m1 871 licences2

 Leading multi-channel

• ffering

 Consistent track record of

• utperforming UK-listed

competitors  Unique products  Spent over £40 million opening more than 190 shops between FY12 and FY14

Coral Retail Revenue: £677.1m1 (% total Coral Group: 69%) EBITDA: £143.4m1 1,849 shops2

• 1. LTM to 11 April 2015
• 2. As at end of June 2015

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65.8 27.9 81.1 69.6 9.5 37.0

UK and European Net Revenue CY14 % Growth and £m Added

18.2% 196.5 267.5 527.4 409.5 180.5 210.0

UK and European Total Net Revenue (£m) CY14

• Clear leader in net revenue growth

(2014: +50%)

• Net revenue added in line with market leaders
• Continued momentum in 2015 – driven both by

customer acquisition and customer value

• Total net revenue is in line with Ladbrokes

and Skybet, with Paddy Power in sight

• Over 220k sign-ups to Coral Connect in

first year

• Multi-channel customers spending over twice

single-channel customers online

Overview of Coral Group: Online

Sources: Betfair = Core Revenues (exc US). WMH = Gibraltar licence (81% UK & 19% other unregulated) + Italy + Spain, excludes Aus. PP = UK + Ire + Italy, exclude Aus. Ladbrokes = Ladbrokes.com (predominantly UK) + Exchanges + Spain +Belgium + Denmark, excludes Aus. Skybet = UK. Excludes Bet365 due to lack of publically available information

“UK online gambling sector’s greatest success story” Gambling Compliance, Sep-14

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Overview of Coral Group: Retail

Based on calendar years

UK Retail: net revenue outperformance vs. UK listed competitors Italy Retail: sports market share (by stakes)

7.5% 7.5% 8.4% 9.9% 11.3% 11.6% 12.0% 13.4% 14.1% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

• Outperformed the market in both 2013 and

2014, driven by: — Innovative product offering — Exclusive, differentiated machines content — Operational excellence

• Continued market share gains in Italy driven by

strong underlying growth and investment in retail estate

• Now one of the country’s largest betting shop
• perators
• 871 licences, with further opportunities to
• ptimise locations

2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2% 0% 1% 1% 0% 0% 4% 2% 2%

2013 2014

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Potential for faster online growth

• Leading multi-channel technology
• Dual-brand strategy enabling effective cross-brand marketing to increase share of wallet
• Efficiencies across a larger customer and revenue base

The largest UK LBO estate

• Strongly cash generative
• Efficient and more sustainable in the long term

An extensive international portfolio of regulated businesses

• Strong retail and online operations in Italy, Belgium and Spain
• Rapidly growing online operation in Australia
• Platform for future growth

Significant cost synergies

• At least £65 million per annum
• Mostly delivered in the second year post-merger, underpinning shareholder returns

Strategic Rationale

Driving Value: Accelerated Online Growth, Substantial Synergies, Focused Execution

1 2 3 4

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• Substantial overlap in back office functions across retail, digital and central functions

— Harness best of both businesses, drive out duplicate costs

• Cost synergies of at least £65 million per annum expected

— c.35% in year following completion, c.85% in second year

• Potential further upside from cross-brand marketing, cross-fertilisation of innovation and the

transfer of operational best practice

• Cash costs of realisation: c.1x – 1.25x the level of synergies, predominantly in the first year

after completion

• Shop disposal proceeds will contribute to synergy and deal implementation costs
• Revised agreement with Playtech to ensure alignment and delivery of digital synergies
• Executive Deputy Chairman responsible for integration and synergy delivery for 12 months

post completion

Significant Synergies

4

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Customers

• Dual-brand strategy to retain customers
• Cross brand promotion to increase share of wallet
• Cross-fertilisation of innovation / unique products

Colleagues

• Clarity to be provided as quickly as possible after completion
• Best of both teams

Suppliers

• Designated responsibility and clear savings targets

Marketing

• Harness combined spend to secure procurement savings and deliver lower CPAs

Systems

• Single IT architecture with interim arrangement to ensure stability

Offices

• Rationalisation of real estate
• Maintenance of online operations in Gibraltar and Tel Aviv

Trading

• Ring-fenced pricing teams to protect integrity of each brand
• Single operations team, single system

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Planning already commenced to effect a rapid merger and deliver synergies

Synergies – Agreed Implementation Principles

Financial Overview

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Financial Overview: Enhanced Cash Generation (1)

Note: Side-by-side and combined financials are presented for illustrative purposes only and have not been adjusted for accounting differences nor purchase accounting. EBITDA as per respective company’s definition. Financial profile of Ladbrokes and Coral based on respective reported H1 results, before synergies. These do not represent pro forma financial information. Coral and Ladbrokes numbers unaudited.

LTM 30-Jun-15 LTM 11-Apr-15 Illustrative Enlarged Group (exc. Synergies) Revenue and EBITDA Revenue (£m) 1,1671 9821 2,149 EBITDA before exceptional items (£m) 1871 2051 392 % EBITDA margin before exceptional items 16.0% 20.8% 18.2% Cash flow Operating cash flow (£m)2 127 153 280 Balance sheet gearing Net debt (£m) 414 8654 1,279 Net debt / EBITDA 2.2x 4.2x4 Net debt / EBITDA (post placing & PF run rate synergies)3 2.7x

• 1. Excludes High Rollers
• 3. Assumes 9.99% placing, cash costs of synergy realisation (c.1x – 1.25x the level of synergies) and £65m run rate EBITDA synergies
• 2. Defined as EBITDA minus Capex
• 4. Proposed Net Debt at 9 April 2016. The current Gala Coral Group consolidated net debt includes debt which is attributable to the Gala Retail bingo business, which is not part of this transaction

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• Combined operating cash flow = c.£280 million excluding synergies
• Strong cash generation enables rapid deleveraging:

— Expected gearing of less than 2.5x net debt to EBITDA within 12-18 months of completion — Medium term target of 1.5 – 2.0x

• Debt structure to be finalised:

— Committed financing to be in place before posting of shareholder circular and may include existing Coral / Ladbrokes bonds — Medium-term balance sheet structure decisions (e.g. bank debt / bond mix) to be taken post completion

• Equity base strengthened:

— Non pre-emptive placing announced today to strengthen equity base at completion — Playtech expected to act as a cornerstone for up to 22.9% of placing

• Dividend: expect new Board to adopt Ladbrokes dividend policy announced today

Financial Overview: Enhanced Cash Generation (2)

CMA and Expected Timetable

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• The CMA will have jurisdiction to assess the deal under the UK Merger Regime and the deal

is conditional upon clearance by the CMA

• Competitive dynamic has changed dramatically since the 1998 MMC Report, with significantly

more competition from — Online and mobile segments — Betting exchanges — The high street – in particular, Betfred and Paddy Power growing aggressively in recent years

• Commit to engage with CMA early and constructively
• Shop disposals are expected as a resolution to competition issues

Combination is Deliverable

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Expected Timetable

Phase 2 c.6 months

8-12 Weeks 40 Working Days

10-12 months 23 Jul 15 Oct / Nov 15 Dec 15 Mid 16

Phase 1 8 weeks Preparation and Pre-Notification 8-12 weeks CMA process Other processes

• Announcement
• c9.99% placing
• Shareholder

circular

• Shareholder vote
• Committed

financing Scenario A

• Prospectus
• Dealing

commences

• Possible

completion Scenario B

• Prospectus
• Dealing

commences

• Possible

completion

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Potential for faster online growth

• Leading multi-channel technology
• Dual-brand strategy enabling effective cross-brand marketing to increase share of wallet
• Efficiencies across a larger customer and revenue base

The largest UK LBO estate

• Strongly cash generative
• Efficient and more sustainable in the long term

An extensive international portfolio of regulated businesses

• Strong retail and online operations in Italy, Belgium and Spain
• Rapidly growing online operation in Australia
• Platform for future growth

Significant cost synergies

• At least £65 million per annum
• Mostly delivered in the second year post-merger, underpinning shareholder returns

Strategic Rationale

Driving Value: Accelerated Online Growth, Substantial Synergies, Focused Execution

1 2 3 4

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Q&A