SLIDE 1
1 Financial Overview Ian Bull, Chief Financial Officer Review of operations Richard Glynn, Chief Executive Q&A
LADBROKES H1 2012
AGENDA
SLIDE 2 Continuing operations before exceptional items (1) Excluding High Rollers (2) Includes amortisation of customer relationships of £1.3m in both 2012 and 2011 (3) Underlying EPS excludes impact of High Rollers and is based upon expected full year tax charge of 5.3% in 2012
Net revenue (1) 529.0 487.8 +8.4% Operating profit (1)(2) 106.9 96.3 +11.0% High Rollers 20.5 (4.0) n/a Finance costs (16.8) (15.7)
Profit before tax 110.6 76.6 +44.4% Underlying EPS (3) 9.4p 7.5p +25.3% Dividend 4.3p 3.9p +10.3% Net Debt 397.0 449.4 +11.7% Half yr ended 30 Jun 2012 £m 2011 £m B+W-
LADBROKES H1
GROUP PERFORMANCE SUMMARY
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SLIDE 3 £96.3m £106.9m £(14.7)m £15.9m £5.0m £4.2m £0.2m H1 2011 PBIT UK Retail European Retail Telephone Digital Corporate Costs H1 2012 PBIT
GROUP OPERATING PROFIT
11% GROWTH DRIVEN BY UK & EUROPEAN RETAIL Revenue growth driving the bottom line UK Retail driven by machines & OTC growth Ireland up 76% and Belgium up 80% driving European Retail Disciplined operation of core telephone Digital driven largely by investment year over year 3
SLIDE 4 £75.4m £91.3m £(0.4)m £(6.6)m £(5.5)m £(4.4)m £4.7m £28.1m H1 2011 PBIT OTC Net Revenue GPT/Assoc Inc Machines Net Revenue LFL Costs Machines New openings costs H1 2012 PBIT
UK RETAIL
PROFITS GROWING BY 21%
Growth in OTC net revenue (includes £3.2m Euros) Staking and margin up on 2011 Machines net revenue up 20.1% Costs expected to be up circa 6% (higher machine growth & more shops) 4
2.4% 1.9% 2.8% 7.1%
SLIDE 5 UK RETAIL
RESILIENCE OF OTC CONTINUES
H1 2012 H1 2011 Var Stake per slip (£) 8.50 8.25 3.0% Slips (m) 147.3 150.6 (2.2%) Amts staked (1) (£m) 1,257.2 1,248.5 + 0.7% GW margin% 16.2% 16.0% + 0.2%
Continued stability in OTC activity Amounts staked up (Euros replaces lost horseracing) Margin 16.2% (17.2% Q1 & 15.3% Q2) up 0.2% points YOY Q2 margin decline driven by last month of Premier league and Euros 5
(1) Greyhound tracks accounts for £5.6 million of amounts staked (2011: £5.4 million)
SLIDE 6 FY 2010 FY 2011 H1 ‘12
Net revenue £256m £298m £168m GWPTW 730 860 947
2,083 2,103 2,137
7,953 8,050 8,247 Density 3.82 3.83 3.86
UK RETAIL
MACHINES GROWTH CONTINUES
Machine net revenue up 20% for H1 GWPTW £970 in Q2 (up £47 on Q1) Increased density adds £1.6m in H1 £96m revenue added in last 2 yrs Machines growing part of mix Lowers impact of sporting results Improves earnings reliability
41% 43% 46% 50% 50% 3% 12% 15% 23% 19%
0% 20% 40% 60%
H1 10 H2 10 H1 11 H2 11 H1 12
% shop GW GW growth
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SLIDE 7 UK RETAIL
PROFIT PER SHOP CONTINUES TO GROW
EBIT per shop for up 12.5% 36% growth over past 2 years Only 1% of shops do not contribute
38.4 24.1 32.8 33.5 35.2 35.6 41.7 10 15 20 25 30 35 40 45 50 55 60 H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12
+21%
77.3k 68.7k 56.9k
0.2% football margin Q3
+12%
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H1 2010 excludes one off VAT credit of £3,200 per shop. Numbers excludes greyhound tracks and income from associates
SLIDE 8 UK RETAIL
GROWING ESTATE FURTHER WITH < 3 YR PAYBACK
Shop estate is flexible, growing profitability and with attractive ROI Average payback on openings < 3 yrs 25 openings to date (2 closures) – expecting 75 new shops in 2012 (60 net)
50 100 150 200 250 300 Pre '11 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Post '22 45% of the estate has a break clause or lease expiry within the next 3 years (38% of the total rent)
break/lease expiry in yr
0% 25% 50% 75% 100% 125% 150% 175% 2007 2008 2009 2010 2011
% payback
YR5 YR4 YR3 YR2 YR1
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SLIDE 9 £31.0m £16.3m £(1.6)m £(14.7)m £(5.3)m £4.3m £0.4m £2.2m H1 '11 Q1 sports Q2 sports H1 gaming Poker Costs Exit & new territories H1 '12
DIGITAL OPERATING PROFIT
SPORTSBOOK MARGIN MAIN CAUSE OF Q2 SLOWDOWN
May was lowest sportsbook margin since August 2009 Total NGR Q1 +5.9% (s’book 22.4%) - Q2 NGR +0.2% (s’book flat) No improvement in poker rate of decline
Q2 margin 1.3% < Q2 2011 3.4% margin in May = £4.2m NGR
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Digital profit for H1 2012 of £15.0 million (H1 2011: £29.7 million) including amortisation charge of £1.3 million (2011 H1: £1.3 million) Exit & new territories includes ‘lost’ NGR for territories exited in addition to net operating losses from Spain & Denmark
SLIDE 10 DIGITAL OPERATING COSTS
INVESTING TO GROW 10
H1‘11 H1‘12
£54.7m £69.4m £71.5m £7.3m £3.9m £1.8m £1.7m £2.1m H1 '11 A&P IT related
Depreciation Other H1'12 Like for Like New territory costs H1 '12 Total
£16.8m increase in operating costs (£14.7m in ‘existing territories’) A&P (excluding new territories) 25% of NGR H1 (H1 2011 17%) IT costs driven by expansion of product & development of trading & website Increased depreciation reflects capex invested in 2011 Expect H2 costs similar to H1
£14.7m
Digital costs for H1 2012 of £72.8 million (H1 2011: £56.0 million) including amortisation charge of £1.3 million (H1 2011: £1.3 million)
SLIDE 11
CAPEX
INVESTING FOR GROWTH & INCREASED RETAIL EXPANSION
£m Spend in H1 45 Balance remaining 50 Prelims FY 2012 guidance 95 Extra shops 3 Digital overspend 3 Revised FY 2012 guidance 101 Expect 75 new shops in 2012 (+£3m) Overrun on website, mobile and data warehouse (+£3m) Expecting circa £101m spend in ‘12 11
SLIDE 12 TAX, EPS & DIVIDEND
DIVIDEND GROWTH REFLECTS INCREASE IN PROFIT
Earnings per share H1 2012 At expected FY tax rate (5%) 9.4p At normalised rate (10%) 8.9p
Tax charge for FY 2012 expected at 5.3% EPS at expected FY tax rate 9.4p Tax expected to be 10% in 2013 & 2014 EPS based on 10% rate is 8.9p Dividend policy is 2x covered by normalised earnings Interim dividend 4.3p up 10.3% 12
All numbers exclude High Rollers
SLIDE 13 CASH FLOW
STRONG CASH SUPPORTS GROWTH, DIVIDEND & DEBT REDUCTION EBITDA growth circa 30% year on year FY 2012 tax rate of 5.3% July 2012 bond (£131m) matured & paid £225m 2017 bond remains £375m undrawn against 2016 RCF Net debt : EBITDA 1.6x at period end
H1 2012
EBITDA 154.0 Interest (11.5) Tax (10.7) Capex (45.0) Other 5.3 Free cash flow 92.1 Dividend (35.2) Debt reduction 56.9 Opening net debt 453.9 Closing net debt 397.0
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Net debt : EBITDA calculated pre high Rollers
SLIDE 14
Financial Overview Ian Bull, Chief Financial Officer Review of operations Richard Glynn, Chief Executive Q&A
LADBROKES H1 2012
AGENDA
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SLIDE 15
GROUP PERFORMANCE
STRONG GROWTH IN H1
Strong group performance in H1 Digital profit decline more than expected Retail business resilient – growing both machines & OTC Over 20% growth in UK Retail EBIT Ahead in European Retail Group EBIT ahead 11% Cash and balance sheet robust 15
SLIDE 16
DIGITAL DEVELOPMENTS
TECHNOLOGY DELIVERY IN H2
Management changes increase Digital focus & accountability Sportsbook delivered in Q4 Customer migration starts Q4 Mobile delivery follows closely as based on same technology Data warehouse now active for trading – deployed to marketing teams Q4 Ongoing further upgrades to trading capability 16
SLIDE 17
DELIVERY OF TECHNOLOGY IN H2
IMPROVED WEBSITE & MOBILE PLATFORM
Personalise – offers, customer preferences Promote higher margin product Encourage multiple betting Improved showcase of product A better experience for our customers Hybris learns & adapts 17
SLIDE 18
MARKETING PLATFORM
TRAFFIC & CONVERSION
Consistent brand marketing Enhanced ‘search engine’ & affiliate marketing Better and more product (BIP/Games) Improved customer journeys Growth in actives 18
SLIDE 19
MARKETING PLATFORM
CUSTOMER DEVELOPMENT STARTS WITH DATA
Access consistent cross channel data (from Data Warehouse) Build customer predictive models Intervene...right time, right message, right value Maximise lifetime value 19
SLIDE 20
PRODUCT DEVELOPMENT
WE ARE GROWING OUR GAMING CONTENT
Open platform approach is enabler 2010 – Global Draw 2011 – Microgaming, Ash, Blueprint H1 – Realistic, Openbet, Cryptologic H2 – IGT, Probability, Mazooma, Playtech 20
SLIDE 21 PRODUCT DEVELOPMENT
CONTINUING TO EXPAND SPORTSBOOK PRODUCT
20000 40000 60000 80000 100000 2011 2012 2013 Football Total
Total events up > 200%
90,000 markets by end of 2013 Adding opportunities to bet 24hrs a day BIP now 58% of sportsbook stakes Ladbrokes a market leader 21
SLIDE 22
CAPABILITY DEVELOPMENT
FURTHER ENHANCING TRADING & LIABILITY MANAGEMENT
Trading transformation program More automation More data in real-time More reliable More control More still to come in H2 and beyond 22
SLIDE 23
DIGITAL DEVELOPMENT
BRINGING IT ALL TOGETHER
What we are doing will drive NGR More product development Better product presentation Enhanced website & mobile experience Sustained actives growth Improved data Enhanced CRM Increased trading efficiency
NGR
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SLIDE 24
UK RETAIL
A GROWING BUSINESS ON THE UK HIGH STREET
0% 2% 4% 6% 8% 10% 12% 2010 11 H1 11 H2 12 H1
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SLIDE 25 UK RETAIL
TREND OF STABILITY IN OTC
50 60 70 80 90 100 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
Slips (m)
200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 2010YR - 01PRD 2010YR - 06PRD 2010YR - 11PRD 2011YR - 04PRD 2011YR - 09PRD 2012YR - 02PRD
OTC footfall
0.00% 5.00% 10.00% 15.00%
100 200 300 400 500 600 700 800 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
Stakes £k Stakes growth %
25
5.0 6.0 7.0 8.0 9.0 10.0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12
Stake per slip £
SLIDE 26 UK RETAIL
MACHINES KEEP ON GROWING
699 746 723 751 791 850 866 930 923 970 500 600 700 800 900 1,000 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1'12 Q2'12
GWPTW £947 for H1 – this is £957 in shops where density has not changed 37% of the estate already achieving average > £1,000
39% increase
period
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SLIDE 27 UK RETAIL
GROWING ALL CATEGORIES OF GAMES
Roulette & cards circa 70% of total gross win Newer versions drive demand Strong growth in B3 slots with focus on new content
12.9% 10.3% 30.7% 0% 5% 10% 15% 20% 25% 30% 35% Roulette Cards B3 Slots 2.0% 2.5% 3.0% 3.5% 4.0% 1 3 5 7 9 11 13 15 17 19 21 23 25
Gross win growth by game type
Overall machines margin Core roulette margin
B3s driving machine margin higher 27
SLIDE 28
UK RETAIL
ODDS ON KEY ENABLER OF YIELD MANAGEMENT
Area exclusive to Odds On customers Personalised screens games & messages 28
SLIDE 29
UK RETAIL
FURTHER MACHINES OPPORTUNITIES
Yield management Utilisation rates offer potential upside Focus on ‘day parts’ producing strong results (Sunday evenings up 60%) Further to go on density Targeted approach to competition driving growth rates > estate average
GWPTW % total estate % Utilisation < £500 per shop 15% 14% £501-£1000 48% 18% £1001-£2000 34% 27% > £2000 3% 41%
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SLIDE 30
Balance sheet strength supports growth and shareholder returns UK Retail performance underpins growth Digital delayed but confident in delivery Focussed on technology delivery in H2
IN SUMMARY
REINVIGORATION OF LADBROKES WELL UNDERWAY
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SLIDE 31
H1 2012
APPENDICES
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SLIDE 32 Half year ended 30 June Net revenue Operating profit 2012 £m 2011 £m Variance B(W) £m 2012 £m 2011 £m Variance B(W) £m UK Retail 370.5 337.7 32.8 91.3 75.4 15.9 European Retail 63.9 60.5 3.4 10.3 5.3 5.0 Digital 88.3 85.7 2.6 15.0 29.7 (14.7) Core Telephone Betting 6.3 3.9 2.4 0.9 (3.3) 4.2 Corporate costs
(10.8) 0.2 Total 529.0 487.8 41.2 106.9 96.3 10.6
Operating profit is before exceptional items
BETTING & GAMING
(EXCLUDING HIGH ROLLERS)
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SLIDE 33
BETTING & GAMING
(EXCLUDING HIGH ROLLERS)
Half year ended 30 June Net revenue Gross win 2012 £m 2011 £m Variance B(W) % 2012 £m 2011 £m Variance B(W) %
UK Retail 370.5 337.7 9.7 409.7 372.4 10.0 European Retail 63.9 60.5 5.6 65.1 61.7 5.5 Digital 88.3 85.7 3.0 107.4 99.1 8.4 Core Telephone Betting 6.3 3.9 61.5 6.6 4.1 61.0 Total 529.0 487.8 8.4 588.8 537.3 9.6
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SLIDE 34 UK Retail
KPIs
Half year ended 30 June 2012 2011 Variance B(W) %
OTC Gross win margin 16.2% 16.0% 0.2 pt Like for like OTC amts staked decline (0.7)% (3.5)% 2.8 pt Like for like OTC net revenue growth/(decline) 1.1% (5.4)% Like for like total costs (1) increase 5.2% 2.0% Like for like shop staff costs decrease (3.5)% (3.2)% Stake per slip (2) £8.50 £8.25 3.0 Average number of machines 8,247 8,019 2.8 Average weekly gross win per machine £947 £821 15.3
Like for like takes into account shop openings and closures (1) Excludes VAT, Freebets and Gross profits tax (2) Slips exclude machines
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SLIDE 35 UK RETAIL
FULL P&L
Half year ended 30 June 2012 £m 2011 £m Variance B(W)%
OTC gross win 206.7 202.2 2.2 Machines gross win 203.0 170.2 19.3 Total gross win 409.7 372.4 10.0 OTC net revenue 202.4 197.7 2.4 Machines net revenue 168.1 140.0 20.1 Total net revenue 370.5 337.7 9.7 Associate income 1.6 1.2 33.3 Gross profits tax (30.4) (29.6) (2.7) Staff costs (99.1) (99.0) (0.1) Property costs (1) (51.4) (48.9) (5.1) Content costs (2) (36.4) (31.1) (17.0) Other costs (inc. depn) (3) (63.5) (54.9) (15.7) Operating costs (250.4) (233.9) (7.1) Operating profit 91.3 75.4 (21.1)
(1) Rent, rates and utilities (2) Pictures, data, levy, Sky (3) Depreciation = £16.6m (2011: £18.1m)
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SLIDE 36 UK RETAIL
ADJUSTEMENTS TO GROSS WIN
Half year ended 30 June 2012 2011 OTC £m Machines £m Total £m OTC £m Machines £m Total £m Variance B(W)% Gross win 206.7 203.0 409.7 202.2 170.2 372.4 10.0 Freebets (4.3) (1.1) (5.4) (4.5) (1.8) (6.3) 14.3 VAT
(33.8)
(28.4) (19.0) Net revenue 202.4 168.1 370.5 197.7 140.0 337.7 9.7
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SLIDE 37 IRELAND
FULL P&L
(1) Fair value adjustments, freebets and VAT
Half year ended 30 June 2012 £m 2011 £m Variance B(W)%
Gross win 41.7 39.8 4.8 Adjustment to gross win (1) (1.2) (1.2)
40.5 38.6 4.9 Betting tax (3.8) (4.1) 7.3 Other costs (30.0) (30.7) 2.3 Operating profit 6.7 3.8 76.3 Constant currency amounts staked (decrease)/increase (3.3)% 9.5% Constant currency gross win increase/(decrease) 8.9% (3.4)% Shop numbers at the end of the period 293 294
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SLIDE 38 DIGITAL
FULL P&L
- (1) Payments to third party software and platform providers and geographical partners
- (2) Includes depreciation of £4.8m in 2012 (£2.8m in 2011).
Half year ended 30 June 2012 £m % of net revenue 2011 £m % of net revenue B(W)%
Net revenue 88.3 85.7 3.0 Betting tax (0.5) 0.6
Levy and licenses (0.4) 0.4 (0.4) 0.5
(12.6) 14.3 (12.0) 14.0 (5.0) Software and geographical partners (1) (11.2) 12.7 (10.9) 12.7 (2.8) Marketing (including affiliates) (24.6) 27.9 (14.9) 17.4 (65.1) Banking and chargebacks (3.5) 3.9 (3.1) 3.6 (12.9) Other costs (including depreciation) (2) (19.2) 21.8 (13.4) 15.6 (43.3) Operating costs (71.5) 81.0 (54.7) 63.8 (30.7) Amortisation of customer relationships (1.3) 1.4 (1.3) 1.5
(72.8) 82.4 (56.0) 65.3 (30.0) Total Digital operating profit 15.0 17.0 29.7 34.7 (49.5)
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SLIDE 39 DIGITAL
KPIs
(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 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
Half year ended 30 June 2012 2011 B(W) %
Unique active players (1) (000s) 746 614 21.5 Real money sign-ups (2) (000s) 342 249 37.3 Cost per acquisition (3) £129 £124 (4.0)
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SLIDE 40 DIGITAL
KPIs
(1) Revenue per unique active player for the year
Half year ended 30 June 2012 2011 Variance B(W) %
Sportsbook Gross win margin 6.2% 6.6% (0.4) pt Unique active players (000s) 583 471 23.8 Average monthly active player days (000s) 1,141 939 21.5 Yield per unique active player (£) (1) 64 72 (11.1) Casino Unique active players (000s) 199 132 50.8 Average monthly active player days (000s) 190 146 30.1 Yield per unique active player (£) (1) 145 219 (33.8) Poker Unique active players (000s) 55 59 (6.8) Average monthly active player days (000s) 154 189 (18.5) Yield per unique active player (£) (1) 102 126 (19.0) Games Unique active players (000s) 105 91 15.4 Average monthly active player days (000s) 146 124 17.7 Yield per unique active player (£) (1) 90 94 (4.3) Bingo Unique active players (000s) 60 54 11.1 Average monthly active player days (000s) 115 114 0.9 Yield per unique active player (£) (1) 118 133 (11.3)
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SLIDE 41 EUROS 2012
AMOUNTS STAKED AND GROSS WIN
41
Gross win H1 2012 £m H2 2012 £m Total £m Margin
UK Retail 3.2 2.7 5.9 19.7% European Retail 1.0 0.2 1.2 16.0% Digital 1.2 0.9 2.1 10.0% Core Telephone Betting (0.2)
(5.3)% Total 5.2 3.8 9.0 14.6%
Amounts staked H1 2012 £m H2 2012 £m Total £m
UK Retail 28.0 2.1 30.1 European Retail 6.9 0.6 7.5 Digital 18.8 2.1 20.9 Core Telephone Betting 2.6 0.4 3.0 Total 56.3 5.2 61.5
SLIDE 42 EXCEPTIONAL ITEMS
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Half year ended 30 June 2012 2011 £m £m
Spanish retrospective online gaming taxes (1) (2.2)
- Loss on closure of shops (2)
(1.5) (1.1) Business restructuring costs
Corporate transaction costs
Interest rate swaps termination costs
Total (3) (3.7) (4.8)
(1) Spain issued online gaming licences for all products (except slots) effective from 1 June 2012. The Spanish tax authority has
required that online operators with customers in Spain pay taxes retrospectively under two historic laws that previously were not applied to offshore online gaming. Having completed a self-assessment in accordance with the Spanish tax authority’s requirements, the Group has incurred costs of £2.2 million (including surcharges, interest and related professional fees) in relation to these retrospective taxes.
(2) The £1.5 million loss on closure of shops is made up of a £0.6 million loss on closure of UK Retail shops (30 June 2011: £0.9
million) and a £0.9 million loss on closure of European Retail shops (30 June 2011: £0.2 million). These include a loss on disposal
- f intangible assets of £0.5 million (30 June 2011: £0.1 million), a loss on disposal of property, plant and equipment of £0.2 million
(30 June 2011: £0.5 million) and cost accruals of £0.8 million (30 June 2011: £0.5 million).
(3) Continuing operations before tax (2012 tax credit - £0.2 million, 2011 tax credit - £0.6m).
