Paddy Pow er Betfair plc 2018 Interim Results 2 H1 Summary - PowerPoint PPT Presentation

Paddy Pow er Betfair plc 2018 Interim Results

2 H1 Summary  Difficult Q1 followed by a more favourable Q2  All divisions contributed to double-digit Q2 revenue growth  Good progress against our strategic priorities, particularly in returning Paddy Power to growth  Tax & regulatory headwinds now confirmed in Australia and UK Retail; we are well placed and investing accordingly  Strengthened our position substantially in the US following the FanDuel merger and important market access agreements

Financial & Operating Review

4 Financial highlights H1 1 H1 H1 YOY OY % % £m 201 018 2017 17 YOY OY % % CC 1 CC  7% revenue growth in CC: Revenue 867 867 827 827 +5% +5% +7% +7% − Q1 flat Cost of sales (210) (189) +11% +13% − Q2 +13% (pre-World Cup period +9%) Gro Gross profi fit 657 657 638 638 +3% +3% +5% +5% Operating costs (440) (419) +5% +7%  Operating costs up 7% in CC: Underlyin ing EBITDA 217 217 220 220 -1% 1% +1% +1% − Sales & marketing +14% EBITDA margin % 25.0% 26.6% -1.6% -1.4% − Other costs +1% Depreciation & amortisation (43) (40) +7% +8%  EBITDA excluding POC tax & levy changes Und nder erlying ng oper erating ng profit 174 174 180 180 -3% 3% -1% 1% and DRAFT losses +6% in CC: Underlying net interest (2) (2) -20% − Q1 flat Separately disclosed items (66) (75) -12% − Q2 +13% Profit before tax 106 102 +4%  Net cash of £148m at 30 June with £201m returned to shareholders via dividends & Underlying earnings per share 173.6p 181.1p -4% share buybacks in H1 Interim dividends per share 67p 65p +3% Net cash at end of period £148m £87m 1 Constant currency (“cc”) growth throughout this presentation is calculated by retranslating non-sterling denominated component of H1 2017 at H1 2018 exchange rates

5 Group EBITDA bridge World ld C Cup 2 2018 C Contributio ion June une Full ll July ly £m £m (H1 H1 im impac act) tournamen ment Revenue £23m £22m £45m £'m EBITDA 1 c.£0m c.£8m c.£8m c.3 c.23 c.40 c.8 6 c.3 220 220 217 17 214 21 2 H1 2017 EBITDA FX impact H1 2017 EBITDA Revenue growth USA start-up Marketing cost Annualisation of Other costs H1 2018 EBITDA 3 CC losses (DRAFT & growth changes to betting 4 NJ Exchange) taxes & levies 1 After estimated cost of sales and marketing investment 2 EBITDA impact of revenue growth estimated using average H1 2018 cost of sales % 3 Excludes marketing from USA start-up businesses 4 Includes impact from increased UK racing levy, increased UK online gaming POC tax and the introduction of POC tax in South Australia

6 Online  Good momentum in sportsbook & gaming: H1 1 H1 H1 £m 201 018 2017 17 YOY OY % % Q2 ( (pr pre e Q2 YoY oY Q1 Q1 World Cu d Cup) total al Sportsbook stakes 2,735 2,962 -8% Sportsbook +3% +15% +23% Sportsbook net revenue % 7.5% 6.2% +1.3% Gaming -4% +11% +14% Sports revenue 335 318 +5%  Exchange & B2B revenue -4%, with good growth Gaming revenue 127 120 +5% in football commissions offset by weakness in Total r rev evenue enue 462 462 439 439 +5% +5% horseracing commissions Cost of sales (109) (97) +13%  Cost of sales adversely affected by c.£6m from Gross profi Gro fit 353 353 342 342 +3% +3% the annualisation of changes to the UK racing levy and gaming POC tax Operating costs (211) (194) +9%  Operating costs up 9%: Underlyin ing EBITDA 142 142 148 148 -4% 4% − Sales & marketing +13%, driven by increased investment and World Cup spend − Other costs +2% Imp mpact from Adjust usted FX FX / / Le Levy & & YoY Yo Y % POC changes POC Revenue Nil +5% Underlying EBITDA -£7m +1%

7 Australia A$ A$ H1 1 H1 H1 £m YOY OY % %  Decrease in sportsbook net revenue % YOY OY % % 201 018 2017 17 reflects increased investment in promotional generosity Sportsbook stakes 1,935 1,699 +14% +22%  Cost of sales includes impact of South Sportsbook net revenue % 9.4% 10.2% -0.8% -0.8% Australian POC tax (payable from H2 2017) & Revenue 182 182 173 173 +5% +5% +12% +12% increased NRL product fees Cost of sales (51) (46) +10% +18%  Operating costs up 6%: Gross Pr Gro Profit 131 131 127 127 +3% +3% +11% +11% − Sales & marketing +14% Operating costs (72) (73) -1% +6% − Other costs -4% Underlyin ing EBITDA 59 59 54 54 +9% +9% +18% +18%  EBITDA +22% excluding South Australian POC tax

8 Retail  UK estate (365 shops) revenue +3% H1 1 H1 H1 £m 201 018 2017 17 YOY OY % %  Irish estate (264 shops) revenue -2% (-4% in constant currency) Sportsbook stakes 875 934 -6%  Like-for-like KPIs in constant currency: Sportsbook net revenue % 12.4% 11.6% +0.8% ― Sportsbook stakes -9% Sportsbook revenue 108 108 Flat ― Sportsbook revenue -3% Machine gaming revenue 54 52 +5% ― Machine gaming revenue +3% Total r rev evenue enue 162 162 160 160 +1% +1% ― Total revenue -1% Cost of sales (36) (34) +7% ― Opex +1% Gro Gross Pr Profit 126 126 126 126 Fla lat  5 new shops opened in H1 2018 (3 in the UK & 2 in Ireland) & 2 shops closed Operating costs (92) (89) +3%  Reminder of direct, pre-mitigation impact of £2 Underlyin ing EBITDA 34 34 37 37 -8% 8% gaming machine stake limit: Shops at period end 629 620 +1% ― 33% to 43% decrease in total machine revenues ― Equates to c£35m to £46m revenue (c.2% to 3% of Group revenue) FX FX Im Impact CC Yo YoY Y % Revenue +£2m Flat Underlying EBITDA +£1m -10%

9 US  Sports: TVG increased market share H1 1 H1 H1 US$ $ £m YOY OY % % driven by continued investment in 201 018 2017 17 YOY % Y % product, marketing and promotions Sports revenue 52 46 +12% +22%  Gaming: Betfair Casino now 2 nd Gaming revenue 9 9 +8% +18% largest online casino in New Jersey Total r rev evenue enue 61 61 55 55 +11% +11% +21% +21%  EBITDA comprised profits from TVG Cost of sales (14) (12) +15% +25% & Betfair Casino partially offset by Gro Gross profi fit 47 47 43 43 +10% +10% +20% +20% start-up losses in DRAFT & the Operating costs (38) (35) +7% +17% Betfair Exchange Underlyin ing EBITDA 9 7 +26% +26% +38% +38%

10 Cash flow H1 1 H1 H1 £m 201 018 2017 17  Working capital adversely affected by: Underlying EBITDA 217 220 ― Timing of some Q4’17 costs paid in Q1’18 (c.£20m) Capex (50) (50) ― Material prepayments at 30 June Working capital (42) 25 2018, relating to marketing assets Corporation tax paid (37) (22)  Cash flow from separately disclosed Un Underlyi ying fr free c cash fl sh flow 88 88 172 172 items includes the £22m receipt for the Cash flow from separately disclosed items 20 (8) disposal of our remaining stake in LMAX Free ee ca cash f flow 108 108 164 164  Returning £500m of additional cash to shareholders via share buybacks: Dividends paid (114) (95) ― £170m of initial £200m tranche Share buyback (87) - completed to date (£87m in H1) DRAFT acquisition - (14) ― Additional £300m programme over 6 months to commence following Interest and other borrowing costs (2) - completion of the initial tranche Issue of shares 2 2 Net Net (dec ecrea ease)/inc ncrea ease in in c cash ash (93) 93) 57 57 Net cash at start of period 244 36 FX translation impact (3) (6) Net Net ca cash a at end end o of p per eriod 148 148 87 87

11 Financial guidance  Full year underlying EBITDA, before impact of US sports betting, is now expected to be between £460m and £480m  Outlook reflects the following since our May’18 guidance: ― Recent trading momentum (good gaming & strong conclusion to World Cup offset by Full Y Year 2 2018 E EBITDA continued weakness in horseracing exchange revenues) ― Additional Australian POC tax (QLD payable from Oct’18) & product fee increases (combined impact c.£6m in H2’18) ― Inclusion of loss making FanDuel fantasy sports operations  US division now incorporates existing US assets, FanDuel fantasy sports & the Group’s US sports betting operations  Fully consolidated subsidiary with a minority interest recognised on the income statement FanDu Duel (from 10 July 2018) & balance sheet  Division expected to be loss making in H2’18 due to the seasonality of the fantasy sports operations & the launch of the sports betting business  At current spot rates FX impact on H2 2018 EBITDA is a c.£3m headwind versus H2 2017 FX FX (primarily A$)  Full-year 2018 capex expected to be c.£100m, including only incurred & committed US Capex sports betting expenditure Effective ta Ef tax x rate  Full-year 2018 underlying effective tax rate expected to be between 13% and 15%

Business Review

13 Good progress on priorities outlined in March 2018

Return Paddy Power to growth 14 Approach to reinvigorating Paddy Power  Re-establish product leadership  Better leverage distinct brand personality  Support focus on recreational market with increased marketing spend  Increase investment in retention