L db Ladbrokes plc k l Interim Results 5 August 2010 5 August - - PowerPoint PPT Presentation

L db k l Ladbrokes plc Interim Results

5 August 2010 5 August 2010

Peter Erskine Chairman Chairman

page 1

Brian Wallace Group Finance Director Group Finance Director

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S f f Summary of performance

Half Year ended 30 June (1) 2010 2009 Variance (Continuing operations) £m £m B(W) % Net revenue (excluding High Rollers) 492.1 504.4 (2.4) Operating profit (excluding High Rollers) 103.6 98.6 5.1 High Rollers 8.9 58.4 (84.8) Operating profit 112.5 157.0 (28.3) Net finance income / (costs)(2) 2.2 (25.7) 108.6 Tax(3) 240.1 (19.7) 1,318.8 Retained profit 354.8 111.6 217.9 EPS(4) 39.3p 15.8p 148.7 EPS ( l di HMRC b fi ) (4) 8 1 8 (46 2) EPS (excluding HMRC benefit) (4) 8.5p 15.8p (46.2) EPS (excluding HMRC benefit and High Rollers) (4) 7.7p 8.8p (12.5)

(1) Before non-trading items (2) 2010 includes £20.0 million interest credit following the HMRC tax settlement

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( ) g (3) 2010 includes £261.9 million tax credit following the HMRC tax settlement (4) 2009 adjusted for the bonus element of the rights issue announced on 8 October 2009

B tti d G i Betting and Gaming (excluding High Rollers)

Net revenue Operating profit Net revenue Operating profit Half Year ended 30 June 2010 £m 2009 £m Variance B(W) £m 2010 £m 2009 £m Variance B(W) £m UK Retail 332.7 343.6 (10.9) 76.9 82.1 (5.2) Other European Retail 64.9 67.1 (2.2) 7.7 5.1 2.6 eGaming 85.6 84.6 1.0 29.1 20.8 8.3 Core Telephone Betting 8.9 9.1 (0.2) (0.3) (1.4) 1.1 Corporate costs (1)

• (9.8)

(8.0) (1.8) Total 492.1 504.4 (12.3) 103.6 98.6 5.0

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(1) In the published interim and preliminary results for 2009 Corporate costs and International development costs were disclosed separately. These are now combined as Corporate Costs

UK R t il UK Retail

Half Year ended 30 June Half Year ended 30 June

£(22.1)m £10.1m £82.1m £76 9 £(0.3)m £8.2m £2.8m £76.9m £(8.1)m £4.2m

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EBIT 2009 World Cup… OTC GW - T/O OTC GW - % margin Machines GW Lower … Net VAT & GPT Cost savings EBIT 2010

UK R t il h UK Retail – per shop

Half Year ended 30 June 2010 2009 B(W)% a ea e ded 30 Ju e 0 0 £000 / shop 009 £000 / shop ( )% Average no. of shops 2,082 2,091 (0.4) OTC Gross Win 99.8 109.2 (8.6) OTC Gross Win margin 16.3% 16.7% Machine Gross Win 71.1 68.8 3.3 Total Net Revenue 158.0 162.8 (2.9) Gross profits tax (14.9) (16.3) 8.6 Operating costs (107.1) (108.1) 0.9 EBIT 36.0 38.4 (6.3) EBITDA 45.9 48.5 (5.4)

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Excludes greyhound tracks and income from associates

UK R t il ti t UK Retail – operating costs

2010 2009 Variance B(W) ( ) Half Year ended 30 June £m £m £m % H2 considerations Staff costs (99.2) (99.3) 0.1 0.1 Pay freeze ongoing; premium pay savings in Q4; performance bonus

• ffset
• ffset

Property costs (46.8) (47.1) 0.3 0.6 Still plan to open 50 new licences in 2010 Content costs (23.5) (22.4) (1.1) (4.9) Contract +RPI, plus higher VAT costs Levy (8.9) (10.9) 2.0 18.3 Dependent on horse performance Deprec – F&F (18.3) (19.0) 0.7 3.7 Deprec – machines (2.5) (2.5)

• NBV £10m with 2 years of

depreciation remaining depreciation remaining Other costs (27.2) (28.0) 0.8 2.9 Includes AMLD, shop consumables (slips, papers etc), marketing & shop maintenance Operating costs (226 4) (229 2) 2 8 1 2

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Operating costs (226.4) (229.2) 2.8 1.2 Average No. of shops 2,082 2,091

Oth E R t il Other European Retail

Net Revenue Operating Profit Comment Net Revenue Operating Profit Comment Half Year ended 30 June 2010 £m 2009 £m B(W) % 2010 £m 2009 £m B(W)% Ireland 39.9 42.3 (5.7) 5.7 5.4 5.6 CC NR down 3.9% € impact CC costs 4.7% lower Belgium 25.0 24.8 0.8 2.9 1.8 61.1 Lower levels of turnover

• ffset by better margin
• ffset by better margin

Lower Duty and costs € impact Spain

• (0 9)

(2 1) 57 1 Encouraging JV trends Spain

• (0.9)

(2.1) 57.1 Encouraging JV trends Total 64.9 67.1 (3.3) 7.7 5.1 51.0

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G i eGaming

Half Year ended 30 June 2010 2009 B(W)% £2.4m Unique active players (1) (000s) 626 592 5.7 Real money sign-ups (1) (000s) 266 249 6.8 Adjusted cost per acquisition (1) £88 £91 3.3 Cost per acquisition (1) £128 £144 11.1 £29.1m £4.9m Cost per acquisition £128 £144 11.1 £(2.0)m £(0.3)m £3.0m £0.3m EBIT 2009 Sportsbook Poker Casino Bingo GPT savings Cost savings EBIT 2010 £20.8m

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(1) See appendices for definitions

Relates to change in Net Revenue

G i N t eGaming – Net revenue

Half Year ended 30 June 2010 2009 Variance Half Year ended 30 June 2010 £m 2009 £m Variance B(W) % Sportsbook 33.5 30.5 9.8 Casino 26.5 26.8 (1.1) Poker 10.7 12.7 (15.7) Games 8.5 8.5

• Bingo

6.4 6.1 4.9 Net revenue 85.6 84.6 1.2

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G i ti t eGaming – operating costs

Half Year ended 30 June 2010 2009 B(W)%

20% 19%

a ea e ded 30 Ju e 0 0 £m 009 £m ( )% Levy & licences 0.4 1.7 76.5 Staff costs 11.2 10.8 (3.7)

(1)

20% 6% 1% 19%

Software & geographical partners (1) 10.4 10.8 3.7 Marketing (inc affiliates) 20.2 21.2 4.7 Banking & chargebacks 3.7 3.6 (2.8) Other costs (inc depn) 10 6 10 8 1 9

18%

Other costs (inc. depn) 10.6 10.8 1.9 Operating Costs 56.5 58.9 4.1

36%

Staff Marketing S ft & t Software & partners Banking / chargebacks Levy & licences Other

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Numbers in pie chart relate to 2010 costs (1) Payments to third party software and platform providers and geographical partners

C h Fl Cash Flow

Half Year ended 30 June

£694.2m £(164.7)m £35.7m £(80.0)m £0.9m 31-Dec-09 Net Debt Cash generated by

• perations

Interest & tax charges HMRC Settlement Capex Exchange &

• ther

mo ements 30-Jun-10 Net Debt £503.7m £17.6m

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• perations

movements

D bt Debt

Maturity profile

450 600

y p

Bank facilities Bond 150 300 £131 £225m £325m £560m £119m 2011 2012 2013 2014 2015 2016 2017 £131m

During the period: At 30 June 2010 undrawn committed bank During the period:

• Bought back £119m of 2012 bonds
• Issued £225m of 2017 bonds
• Unwound interest rate swaps

At 30 June 2010 undrawn committed bank

facilities of £669.9m

Half Year end leverage

Net debt to EBITDA ratio 2.2x Net debt to EBITDA ratio* 2.4x

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* Adjusted for High Rollers

Richard Glynn CEO CEO

I t d ti G l i Introduction - Galvanise

Structure & Review Goals & Rigorous Operational & Personnel Weaknesses & Priorities Implementation Imperatives

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F i th h ll Facing the challenges

Too little

Strategic focus

Too much

Brand over-reliance

Too many

Silos “e” excellence Group operational focus Controlled risk taking & innovation Owned IP rights Taking customers for granted Wasted investment Product sterility Sub-optimal supply terms Priorities Excuses page 16 Customer insight Responsibility & accountability

St f d ti Strong foundations

B t b d iti i th i d t Best brand recognition in the industry High quality retail estate g q y Only retail bookmaker with a loyalty scheme Balance sheet strength Strong regulatory reputation Very loyal and willing team of employees Very loyal and willing team of employees

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D li ith th Dealing with the consequences

Critical Success Factors Critical Success Factors

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O h t Sh h ld V l Our approach to Shareholder Value

Customer focus Customer focus Retail excellence ‘e’ excellence Technology & T di ll Trading excellence Brand effectiveness Regulatory leadership

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C t St t & R ibiliti Current Structure & Responsibilities

Ri h d Gl Richard Glynn CEO

John O’Reilly Chris Palmer Richard Ames MD UK & Ireland Retail John O’Reilly MD Remote Betting & Gaming Brian Wallace Group Finance Director Chris Palmer Corporate Development Director Andrew Harley Group HR Director

Retail Marketing Loyalty eGaming International Spain Marketing Trading Finance IT Tax Treasury In estor relations External comms Lobbying PR HR Internal Comms Reward Development HR Ser ices Trading Investor relations Secretariat Legal Belgium HR Services

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N St t & R ibiliti New Structure & Responsibilities

Ri h d Gl Richard Glynn CEO

Gary McIlraith Digital Channels International & Strategy Richard Ames Consumer Operations Brian Wallace Group Finance Nick Rust Retail TBA Consumer Experience Andrew Harley Group HR

eGaming (UK & Intl) Group strategy CRM strategy Customer acquisition M bil Trading & trading ops IT Customer service High Value Customers P i ti Finance Tax Treasury Investor Relations S t i t UK Ireland Spain Belgium T l h b tti Marketing Brand & Values Loyalty/OddsOn! Customer experience C t h HR Internal Comms Reward Development HR S i Mobile International dev Process innovation Security Project management Compliance Special Operations Secretariat Procurement M&A Legal Telephone betting Customer research Customer Comms PR/Regulation/Lobbying HR Services

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BI / Reporting

K f l Key focal areas

Retail eGaming Customer Brand Marketing / Customer Proposition / Customer journey / Customer LTV % GW margin Sportsbook Deliverables g Machines Costs Shop Estate p Casino International B2B / B2G Foundations IT excellence / Trading excellence / “e” excellence / High Value customers / Partnerships

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C t f Customer focus

Means

Customer responsibility Listening to customers

How

I l t Earning customer loyalty Involve customers Understand the customer journey Widen product proposition C t

Why

Enhance lifetime values across the business

Why

Enhance lifetime values across the business Widen product proposition & customer net Enhanced segmentation Minimise churn Customer across the business across the business Evolve OddsOn!

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R t il ll Retail excellence

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‘ ’ ll ‘e’ excellence

Best of breed products Best of breed products Customer acquisition Greater customer insight – personalisation & reward Understand customer journey more trial; less churn more trial; less churn

Lifetime Value

Widen distribution Widen / Improve product (eg BiP enhancement)

Value

Widen distribution (eg mobile) International expansion Social Media (eg e a ce e )

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T h l i l ll

M d l d li

Technological excellence

Modular delivery Scalable solutions Partner delivery International capability Optimised pricing Optimised pricing, trading and liability management

Sportsbook

Enhanced products Innovation (product & distribution)

B d ff ti Brand effectiveness

Historically… The opportunity…

S lid B d I l ( k t t) ■ Solid Brand ■ Improve relevance (market, segment) marketing flexibility ■ Silo’d marketing approach ■ Director of Consumer Experience – deliver value across all channels ■ Over-reliance on brand ■ Recognise brand stretch ■ Improve capacity / skills to launch new brands ■ Glocalisation

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R l t l d hi Regulatory leadership

On the regulatory agenda Actions

■ Ongoing machine & offshore reviews ■ Review of dormant accounts and uncollected winnings Taxation uncertainties subsist ■ Champion regulatory partnerships ■ Drive long term regulatory stability ■ Realign market perceptions ■ Taxation uncertainties subsist ■ Levy discussions ongoing ■ European regulation is piecemeal and ‘grey’ ■ De-stigmatise the industry through responsibility ■ Be the reasonable and responsible voice

• f the industry

and grey ■ US federal reviews ongoing

• f the industry

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C t & I t t Costs & Investment

Cost efficiency programme Cost efficiency programme

Phase 1 almost complete: 150 cost streams identified Phase 2: further cost savings expected

Additi l i t t i it l ll ti Additional investments may require capital allocation

Invest defensively (protect) Invest offensively (enhance) Technology and personnel Technology and personnel

Returns-based investment criteria

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Th ti li The timeline

Short term (0-12 months) Medium term priorities (12m+) ■ Structural changes ■ Personnel changes ■ Galvanise cost reductions ( ) ■ Continuing cost efficiencies ■ Re-architecture of ‘in play’ sportsbook ■ Sportsbook technology enhancements p ( ) ■ Galvanise cost reductions ■ Key supplier contract negotiations – including machine supplier decision ■ Realignment of marketing spend ■ Sportsbook technology enhancements ■ Odds On! Loyalty programme evolution ■ ‘e’ skills enhancements ■ Realign suppliers ■ ‘Embedding Excellence’ programme g pp ■ Targeted international expansion Ongoing: ■ “e” excellence ■ Technology investment ■ Organisational and personnel investment ■ Cultural change ■ Embedding excellence ■ Customer focus

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Summary

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Appendices Appendices

B tti d G i Betting and Gaming (excluding High Rollers)

Net revenue Gross win Half Year ended 30 June 2010 £m 2009 £m Variance B(W) % 2010 £m 2009 £m Variance B(W) % UK Retail 332.7 343.6 (3.2) 359.5 375.4 (4.2) Other European Retail 64.9 67.1 (3.3) 66.2 70.4 (6.0) eGaming 85.6 84.6 1.2 97.8 98.2 (0.4) Core Telephone Betting 8.9 9.1 (2.2) 9.1 10.0 (9.0) Total 492.1 504.4 (2.4) 532.6 554.0 (3.9)

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UK R t il KPI UK Retail – KPIs

Half Year ended 30 June 2010 2009 Variance B(W) % OTC Gross win margin 16.3% 16.7% Like for like OTC amts staked decline (7.4)% (7.6)% Like for like OTC net revenue decline (6.1)% (11.6)% Like for like total costs (1) decrease (1)% (3)% Like for like shop staff costs decrease (0.9)% (2.9)% Stake per slip (2) £8.40 £8.27 1.6 Average number of machines 7,911 7,897 0.2 g , , Average weekly gross win per machine £723 £703 2.8

Like for like takes into account shop openings and closures

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p p g (1) Excludes VAT, Freebets and Gross profits tax (2) Slips exclude machines

UK R t il R lt UK Retail – Results

Half Year ended 30 June 2010 2009 Variance £m £m B(W) % OTC gross win 211.5 231.6 (8.7) Machines gross win 148.0 143.8 2.9 Total gross win 359.5 375.4 (4.2) OTC net revenue 207.3 219.8 (5.7) Machines net revenue 125.4 123.8 1.3 Total net revenue 332.7 343.6 (3.2) Associate income 1.7 1.7

• Gross profits tax

(31.1) (34.0) 8.5 Staff costs (99.2) (99.3) 0.1 Property costs (1) (46.8) (47.1) 0.6 Content costs (2) (32 4) (33 3) 2 7 Content costs ( ) (32.4) (33.3) 2.7 Other costs (inc. depn) (3) (48.0) (49.5) 3.0 Operating costs (226.4) (229.2) 1.2 Operating profit 76.9 82.1 (6.3)

(1) R t t d tiliti

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(1) Rent, rates and utilities (2) Pictures, data, levy, Sky (3) Depreciation = £20.8m (2009: £21.5m)

UK R t il Adj t t t i UK Retail – Adjustments to gross win

2010 2009 Half Year ended 30 June OTC £m Machines £m Total £m OTC £m Machines £m Total £m Variance B(W)% Gross win 211.5 148.0 359.5 231.6 143.8 375.4 (4.2) Freebets (4.2) (0.7) (4.9) (11.8) (1.3) (13.1) 62.6 VAT

• (21.9)

(21.9)

• (18.7)

(18.7) (17.1) Net revenue 207.3 125.4 332.7 219.8 123.8 343.6 (3.2) Gross win growth (8.7) 2.9 (4.2) (8.0) 0.9 (4.8) g 10 v 09 % / 09 v 08 % ( ) ( ) ( ) ( ) Revenue growth 10 v 09 % / 09 v 08 % (5.7) 1.3 (3.2) (12.0) 2.1 (7.4)

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I l d Ireland

Half Year ended 30 June 2010 2009 Variance £m £m B(W) % Gross win 41.2 45.6 (9.6) Adjustments to gross win (1) (1.3) (3.3) 60.6 Net revenue 39.9 42.3 (5.7) Betting tax (3.9) (4.4) 11.4 Other costs (30.3) (32.5) 6.8 Operating profit 5.7 5.4 5.6 Constant Currency amounts staked decrease (4.3)% (7.9)%(2) y ( ) ( ) Constant Currency gross win decrease (7.8)% (17.9)%(2) Shop numbers at the end of the year 285 286 (0.3)

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(1) Fair value adjustments, freebets and VAT (2) 2009 change adjusted for Eastwood and McCartan Acquisitions to show like for like performance

G i R lt eGaming – Results

Half Year ended 30 June 2010 % age of 2009 % age of Variance £m g net revenue £m g net revenue B(W) % Gross win 97.8 98.2 (0.4) Fair value adjustments (1) (12.2) (13.6) Net revenue 85.6 84.6 1.2 Gross profits tax

• (4.9)

5.8 Levy and licences (0.4) 0.5 (1.7) 2.0 Staff costs (11.2) 13.1 (10.8) 12.7 Software & geographical partners (2) (10.4) 12.1 (10.8) 12.7 Marketing (inc. affiliates) (20.2) 23.6 (21.2) 25.1 Banking and chargebacks (3.7) 4.3 (3.6) 4.3 Others costs (inc. depn) (10.6) 12.4 (10.8) 12.8 ( p ) ( ) ( ) Operating costs (56.5) 66.0 (58.9) 69.6 4.1 Operating profit 29.1 34.0 20.8 24.6 39.9

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(1) Adjustments for free bets, promotions and bonuses (2) Payments to third party software and platform providers and geographical partners

G i KPI eGaming – KPIs

Half Year ended 30 June 2010 2009 B(W) % ( ) Unique active players (1) (000s) 626 592 5.7 Real money sign-ups (2) (000s) 266 249 6.8 Cost per acquisition (3) £128 £144 11.1 Adjusted cost per acquisition (4) £88 £91 3.3 Adjusted cost per acquisition £88 £91 3.3

(1) A player who contributed to rake and/or placed a wager during the period (2) A new player who has registered and deposited funds during the period (3) Total of all online and offline marketing spend (including promotions and bonuses netted from revenue) and all affiliate expenses relating to deals where affiliates are paid a one off fee for each sign up and all bonus costs (except those relating to sign ups from revenue share affiliates) divided by the aggregate

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affiliates are paid a one-off fee for each sign-up and all bonus costs (except those relating to sign-ups from revenue share affiliates) divided by the aggregate real money sign-ups from non-affiliate sources and the number of real money sign-ups through affiliates that are paid a one-off fee (4) As per cost per acquisition, but excluding any marketing costs attributed to CRM activity

G i KPI eGaming – KPIs

Half Year ended 30 June 2010 2009 Variance B(W) % Sportsbook Gross win margin 6.5% 7.2% Unique active players (000s) 457 406 12.6 Average monthly active player days (000s) 932 789 18.1

(1)

Yield per unique active player (£) (1) 73 75 (2.7) Casino Unique active players (000s) 151 130 16.2 Average monthly active player days (000s) 157 146 7.5 Yield per unique active player (£) (1) 176 206 (14.6) P k U i i l (000 ) 10 Poker Unique active players (000s) 75 107 (29.9) Average monthly active player days (000s) 248 308 (19.5) Yield per unique active player (£) (1) 142 118 20.3 Games Unique active players (000s) 93 93

• A

thl ti l d (000 ) 129 125 Average monthly active player days (000s) 129 125 3.2 Yield per unique active player (£) (1) 91 91

• Bingo

Unique active players (000s) 66 69 (4.3) Average monthly active player days (000s) 133 136 (2.2) Yi ld i ti l (£) (1) 96 88 9 1

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(1) Revenue per unique active player for the period

Yield per unique active player (£) (1) 96 88 9.1

C T l h B tti R lt Core Telephone Betting – Results(ex HR)

Half Year ended 30 June 2010 % age of 2009 % age of Variance £m g net revenue £m g net revenue B(W) % Gross win 9.1 10.0 (9.0) Fair value adjustments (0.2) (0.9) Net revenue 8.9 9.1 (2.2) Gross profits tax (1.3) (1.5) 13.3 Levy (0.5) (0.8) Staff costs (4.1) 46.1 (4.4) 48.4 Direct operating costs (1) (0.9) 10.1 (1.1) 12.1 Others costs (inc. marketing & depn) (2.4) 27.0 (2.7) 29.7 Operating costs (7.9) (9.0) 12.2 Operating loss (0.3) (1.4) 78.6 p g ( ) ( )

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(1) Direct operating costs include telephone, bandwidth and banking costs

C T l h B tti KPI Core Telephone Betting – KPIs (ex HR)

Half Year ended 30 June 2010 2009 Variance B(W) % Number of call (000s) (1) 2,771 3,054 (9.3) Agent cost per call 63p 62p (1.6) Gross win margin 6.6% 6.0% Unique active players (000s) (2) 72.4 79.5 (8.9) Average monthly active player days (000s) 149.1 166.9 (10.7)

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(1) Number of calls (excluding customer service calls) (2) A player who has placed a wager during the period

C h Fl Cash Flow

Half Year ended 30 June 2010 2010 2009 2009 £m £m £m £m Cash generated by operations 164.7 140.0 Interest and tax 44.3 (45.3) PPE Capital spend (12.8) (14.8) Intangibles (4.8) (7.1) Total capital spend (17.6) (21.9) Cash flow after interest, tax and capital 191.4 72.8 Dividends paid

• (54.4)

p ( ) Exchange and other movements (0.9) 6.7 Net borrowings movement 190.5 25.1 Opening net borrowings (694.2) (987.1) Closing net borrowings (503 7) (962 0) Closing net borrowings (503.7) (962.0)

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A l i f C Analysis of Capex

Half Year ended 30 June 2010 2009 £m £m Capex UK Retail 11.1 11.6 Ireland 1.5 2.2 eGaming and Telephone Betting 3.9 3.2 Other 0.9 2.1 17.4 19.1 Statutory and licence acquisitions 0.2 2.8 17.6 21.9 Continuing 17 2 18 4 Continuing 17.2 18.4 Discontinued 0.4 3.5 Total 17.6 21.9

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