Paddy Power Betfair 2018 Preliminary Results 6 March 2019 - - PowerPoint PPT Presentation

Paddy Power Betfair 2018 Preliminary Results

6 March 2019

Peter Jackson, CEO

Introduction

3

Today’s agenda

• How PPB will deliver sustainable shareholder returns
• Overview of our strategy
• Financial review
• Operating review

4

2008 2013 2018

Sector remains very attractive space for investment

La Larg rge g glob lobal ma market with key trends benefitting s scale le online ope

• pera

rator

• rs:

s:

• Online market is growing fast & has long r

runway of further g er growth

• Regulation is creatin

ting a addit itio ional online m mark rket ets for global operators to target

• Regu

egulatory & & tax tax head headwinds in mature online markets drivin iving e economic mics to market l leaders

11% 6%

c.$335bn Online (% of total) c.$450bn

Global gambling revenue1

1 Source: H2GC

Online CAGR 2013-18 c.11% 8%

c.$405bn

Each 1% migration from offline to

• nline equates to c$4bn revenue

5

Str trong g foun

• undations
• ns
• £1.5bn revenue
• >£400m marketing spend
• >1,000 tech developers
• Podium positions in key

regulated markets

Fin inan ancia ial stren rengt gth Huge

• ppor
• rtunity t

y to grow o

• utsi

side de core m mark rket ets

Subst stant ntial

• nli

line s scale le Dist stin inctiv tive brands ds Highly c cash ash g generativ ative Lead adin ing s spor

• rts

ts capab abil ilit itie ies

• Differentiated products
• Global risk & trading expertise
• Proprietary technology
• Digital marketing

Regul ulation & n & invest stment nt d driving a ng access t ss to f fast- growing m mar arkets ts

• f PPB revenue
• f Global online gambling

revenue1

80% 80%

UK, A Aust stral alia & ia & Ireland i in 2 2018

c22% c22%

PPB positioned for success within the sector

Financial ial f flexib ibil ility ity

• Ability to utilise debt for opportunities &

deleverage quickly

• Option to buyout FanDuel & Adjarabet

minorities with cash or equity

Underlying free cash flow 2016-2018:

£89 £894m 4m

(98% of underlying profits after tax)

1 Source: H2GC

6

Four pillar strategy to achieve success

Maximi imise p profit itabl ble growth i wth in c core mark rket ets Pur ursue U US

• ppor
• rtunity

y rigor

• rous
• usly

Product & & technology gy

• Invest in leading customer

propositions

• Leverage distinct assets
• Capitalise on regulatory

developments

• Operate efficiently &

sustainably

Attain tain p podium m pos

• sitions

ns i in n addit itional al r regulat ated mark rket ets Grow B Bet etfair i r in rest of

• f w

wor

• rld

Suppo pported b by:

• Invest in leading customer

propositions

• Leverage FanDuel brand /

fantasy sports

• Disciplined marketing &

promotional spend

• Achieve scale in key states
• Leverage central
• perational capabilities
• Identify attractive markets
• Achieve position via organic
• r inorganic investment
• Target core bettors with

unique sports proposition

• Offer tailored regional

customer propositions

• Invest in regional growth on

returns-based approach

• Minimise cost to serve

global customers

People ple Cust stomer-ce cent ntri ric f c focu cus Operate r resp spon

• nsi

sibly

Key e y enablers Co Core v val alues s

• Grow

w mar market sh shar are

• Su

Sust stai ainable c cash ash generatio ion

• Increas

ase d diversif sific icat atio ion

• Access t

ss to addit additional g growt wth mar markets

• Huge o
• ppo

pportunit ity

• Cre

reate lon long-term rm v valu lue

…del eliveri ering sustainable s shareh reholder r der ret eturns

7

Substantial progress made in 2018

• Paddy Power back taking market share
• Evolving Betfair’s proposition to better leverage its unique exchange-sportsbook combination
• Sportsbet driving increased customer activity with additional generosity
• Adjarabet acquisition secures no.1 position in fast-growing, regulated online

Georgian market

• FanDuel acquisition gives us leading brand & fantasy sports advantage
• Key market access deals secured
• Leadership position established in NJ sports betting

Maxi Maximise e profitable g growth wth in in c core m re mar arkets Pur ursue U US

• ppor
• rtunity

y rigor

• rous
• usly

Attain tain p podium m pos

• sitions

ns i in n addit itional al regulated m mark rket ets Grow B Bet etfair i r in rest of

• f w

wor

• rld
• Significant technology development ongoing to enhance global customer proposition &

minimise cost to serve

Proposing to re-name Group, Flut lutter r Ent ntertainme nment nt p plc lc in May (subject to shareholder approval at

• ur AGM), reflecting increased diversity of our brands and operations

Jonathan Hill, CFO

Financial review

9

Key financial highlights

2018 2017 YoY

Re Reve venue

Revenue £1,873m £1,745m +7%

Profitabili lity

Underlying EBITDA pre-US sports betting £475m £473m Flat Underlying EBITDA £451m £473m (5%) Reported Profit before tax £219m £247m (11%) Reported Earnings per share 241.7p 257.9p (6%) Underlying Earnings per share 379.3p 398.0p (5%)

Financ Financia ial po position

Net (debt) / cash £(162)m £244m Net debt / LTM EBITDA 0.4x

• 0.5x

Sha hare reho holder re retu turn rns

Proposed total dividend per share 200p 200p Total cash returns including buybacks £584m £149m

• EBITDA pre-US sports

betting towards top end of guided range at Q3 trading update (£465m-£480m)

• EBITDA reduced by

£24m investment in US sports betting

• Year-end leverage of

0.4x, compared to target of 1-2x

• Dividend maintained

at 200p per share, at a payout ratio of 53%

10

Revenue highlights

• Onl

Online s sports: Solid growth with sportsbook +6% and Exchange -2%

• Onl

Online g gaming ng: Excellent performance

• Austral

alia: a: Strong underlying customer activity offset by adverse sports results and investment in promotions

• US

US: : Good momentum in existing businesses with £11m sports betting revenue in 2018 from New Jersey

• Reta

etail: : Revenue decline but estate outperforming competitors

£m

ONL NLINE NE AUSTR TRALIA IA US US RETAI AIL GR GROU OUP 2018 2018 YOY OY % % 2018 2018 YOY OY % % CC CC1 2018 2018

PROFORMA2

YOY OY % C CC1 2018 2018 YOY OY % % 2018 2018 YOY OY % % Sports revenue 678 +3% 403 +6% 172 +17% 222

• 3%

1,474 +6% Gaming revenue 270 +13%

• 20

+31% 110 +3% 399 +11% Total re reve venu nue 948 +5% 403 +6% 191 +18% 331

• 1%

1% 1,873 +7%

1 Constant currency (“cc”) growth is calculated by retranslating non-sterling denominated component of 2017 at 2018 exchange rates 2 On a proforma basis as if FanDuel (acquired 10 July 2018) was always part of the Group

11

EBITDA bridge

47 473 451 51 47 475

9 13 71 16 15 16 24

451 51

2017 EBITDA FX impact FanDuel 2017 DFS losses 2017 Proforma EBITDA CC Revenue growth Marketing cost growth Betting tax changes Other costs 2018 EBITDA pre US sports betting US sports betting investment 2018 EBITDA

£’ £’m

2

Unde derlying g growth: +£2 +£24m / / +5% +5%

1 EBITDA impact of revenue growth estimated using average 2018 cost of sales % 2 Includes annualised impacts of changes to UK and Australian POC tax and product fees/levies 3 Includes increased underlying cost of sales from year-on-year revenue mix changes and decreased other operating costs

1 3

12

Group P&L summary

£m 201 018 2017 17 YOY OY % % YOY % Y % CC CC

Revenue 1, 1,873 873 1, 1,745 745 +7% +7% +9% +9% Gross profit 1,403 1,340 +5% +6% Underlyin ing EBITDA 451 451 473 473

• 5%

5%

• 3%

3% Depreciation & amortisation (90) (81) +11% +13% Und nder erlying ng oper erating ng profit 360 360 392 392

• 8%

8%

• 6%

6% Underlying net interest (4) (3) +4% Separately disclosed items (138) (142)

• 3%

Pr Profit bef before t e tax 219 219 247 247

• 11%

11% Tax (38) (29) +31% Pr Profit a after er t tax 181 181 218 218

• 17%

17% Non-controlling interest 21

• n/a

Pr Profit a attribut utable t e to eq equi uity holder ers o

• f the

e co company ny 201 201 218 218

• 7%

7%

• Depreciation increasing with

investment in platform integration and product improvements

• Net interest reflects increased

interest costs on gross debt

• Separately disclosed items mainly

amortisation of acquired intangibles on 2016 merger and FanDuel and write down on DRAFT

• Non-controlling interest represents

US losses attributable to minority shareholders of FanDuel Group

13

Online

• Sports growth comprised of sportsbook +6%

and Exchange -2% (Q1 -7%; Q2-Q4 flat)

• Significant turnaround in gaming performance

with strong growth in Paddy Power

• Cost of sales adversely affected by c.£7m

relating to tax and levy changes implemented during 2017

• 8% marketing growth partially offset by
• perating efficiencies in other operating costs

£m 201 018 2017 17 YOY % Y %

Sportsbook stakes 5,453 5,633

• 3%

Sportsbook net revenue % 7.7% 7.0% +0.7% Sports revenue 678 660 +3% Gaming revenue 270 238 +13% Total r rev evenue enue 948 948 898 898 +5% +5% Cost of sales (231) (199) +16% Gro Gross profi fit 717 717 700 700 +2% +2% Gross margin % 75.6% 77.9%

• 2.3%

Sales & marketing costs (242) (223) +8% Con

• ntribution
• n

475 475 476 476 Fla lat Contribution margin % 50.1% 53.0%

• 2.9%

Other operating costs (158) (170)

• 7%

Underlyin ing EBITDA 316 316 306 306 +3% +3% EBITDA margin % 33.4% 34.1%

• 0.7%

14

Australia

£m 201 018 2017 17 YOY % Y % A$ A$ YOY % Y %

Sportsbook stakes 4,308 3,708 +16% +23% Sportsbook net revenue % 9.4% 10.9%

• 1.5%
• 1.5%

Revenue 403 403 404 404 Fla lat +6% +6% Cost of sales (121) (111) +9% +16% Gro Gross profi fit 282 282 292 292

• 4%

4% +2% +2% Gross margin % 69.9% 72.4%

• 2.5%
• 2.5%

Sales & marketing costs (82) (82) +1% +8% Con

• ntribution
• n

199 199 211 211

• 5%

5% Fla lat Contribution margin % 49.5% 52.2%

• 2.7%
• 2.7%

Other operating costs (62) (71)

• 12%
• 7%

Underlyin ing EBITDA 137 137 139 139

• 2%

2% +4% +4% EBITDA margin % 34.0% 34.6%

• 0.6%
• 0.6%
• Increased customer activity driving strong

stakes growth

• Net revenue % decline reflects:

— adverse sports results — decision to increase investment in promotional generosity

• Cost of sales includes impact of additional

POC tax and increased product fees

• Increase in marketing investment (in local

currency terms) ahead of new taxes

• Other operating costs reflect continuing
• perating efficiencies

15

Retail

• Outperforming competitors due to market-

leading, sports-led proposition

• UK estate (362 shops) revenue +1%
• Irish estate (264 shops) revenue -4% in local

currency — due to reliance on racing with Q1 2018 performance -11%

• Cost of sales increase due to changes in

revenue mix and Irish stakes tax

• Limited further cost efficiencies available in

retail

£m 201 018 2017 17 YOY % Y %

Sportsbook stakes 1,779 1,835

• 3%

Sportsbook net revenue % 12.5% 12.4% +0.1% Sports revenue 222 228

• 3%

Gaming revenue 110 106 +3% Total r rev evenue enue 331 331 334 334

• 1%

1% Cost of sales (73) (71) +4% Gro Gross profi fit 258 258 263 263

• 2%

2% Gross margin % 77.9% 78.9%

• 1.0%

Operating costs (187) (182) +3% Underlyin ing EBITDA 72 72 82 82

• 12%

12% EBITDA margin % 21.6% 24.4%

• 2.8%

Shops at year end 626 626 Flat

16

US

£m, Proforma1 201 018 2017 17 YOY % Y % US US$ YOY % Y %

Sportsbook stakes 423 Sportsbook net revenue % 2.6% Sports revenue 216 190 +14% +17% Gaming revenue 20 16 +26% +31% Total r rev evenue enue 236 236 205 205 +15% +15% +18% +18% Cost of sales (50) (37) +34% +38% Gro Gross profi fit 186 186 168 168 +10% +10% +14% +14% Gross margin % 78.8% 81.9%

• 3.1%
• 3.0%

Sales & marketing costs (95) (91) +4% +6% Con

• ntribution
• n

91 91 78 78 +18% +18% +24% +24% Contribution margin % 38.7% 37.7% +1.0% +1.7% Other operating costs (106) (86) +22% +27% Underlyin ing EBITDA (15) 15) (9) 9) n/a /a n/a /a

Proforma performance:

• Revenue growth in existing businesses of

13% in local currency, combined with £11m of sports betting revenue

• Sportsbook net revenue % low due to high

level of promotional spend acquiring customers

• Cost of sales disproportionately high on

sports betting given low sportsbook net revenue %

• Sales and marketing costs reflect fantasy

synergies more than offset by spend on sports betting in New Jersey

• Excluding sports betting, underlying

EBITDA improved by £19m from a loss of £9m in 2017 to a profit of £10m

1 All numbers & growth rates presented on a proforma basis as if FanDuel was always part of the Group.

17

• US is at a different stage of investment cycle
• Investment losses likely to be material in initial years
• Investment will fluctuate based on timing of state-by-state regulation
• Higher market share will equate to higher losses in early years
• Economics are shared with minority shareholders

We will report US separately from 2019

£’m 2018 Revenue 1,873 EBITDA pre US sportsbetting 475 US sports betting losses (24) Gr Group EBITDA DA 451 2018 £’m Gr Group ex ex-US US US US Gr Group Revenue ue 1,682 191 1,873 EBITD TDA 465 (1 (14) 451

18

US: 2018 EBITDA by business

Proforma £m

201 018 Fant ntasy, T TVG G & & Casin Casino Spo Sportsb sbook To Total

Stakes 423 423 Net revenue % 2.6% 2.6% Revenue 224 224 11 11 236 236 Con

• ntribution
• n

100 100 (9) 9) 91 91 Other opex (91) (15) (106) EBIT ITDA 10 10 (24) 24) (15) 15)

Fantasy sy, TVG & C Casi sino no b busi sine nesse sses: s:

• £100m positive contribution underpinned by good growth (actives +14%, revenue +13%)
• Substantial resources to leverage for sports betting (including £91m of opex ex-marketing)

Spor

• rts

tsboo

• ok:

k:

• Net revenue % reflects high level of online promotional spend and win-win nature of key US sports (infrequent draws)
• Cost of sales:

— Initially high as proportion of revenue, given many costs are based on gross revenues (before promotional spend) — Structurally higher than other markets given market access costs, supplier revenue shares, data fees & payment processing challenges

• Sportsbook contribution from newly launched online states is negative while the proportion of new customers

remains high (due to high levels of promotional and marketing spend versus revenue generated)

Revenue (net of promotions) less cost of sales (variable taxes & supplier costs) & marketing costs Includes product, technology & operations costs which are scalable and shared across businesses

19

US: financial guidance

• Given strong market growth and our excellent momentum in acquiring valuable

customers, we intend to continue to invest in customer acquisition

• Expect c

con

• ntrib

ibutio tion t to remai ain n negativ tive t throughout 2 t 2019 a and t to g generat ate p positiv sitive con

• ntr

trib ibutio tions 1 18-30 m 0 months hs p post-launc unch

Total al U US investm tment w t will b be driven b by fou

• ur areas

as:

• Additional investment to build out sports betting capabilities from H2 2018 through 2019
• Currently e

expect t total e expenditure o

• f b

between £ £145m & & £155m i in 2019 ( (2018: £ £106m)

• These costs support all our products and will be highly scalable
• Timin

ing o

• f regulat

atio ion/lau aunch i in e eac ach s stat tate w will dic ictat tate l level o

• f i

investm tment i t in e eac ach y year

• Key factors influencing timeframe to positive contribution: potential market size, tax rates,
• no. of skins / competitive intensity, market-access costs, availability of casino cross-sell
• States currently with visibility of go-live during 2019: Pennsylvania (retail & online); West

Virginia (online); New York (retail) Positiv

• sitive c

con

• ntr

trib ibutio tion from F Fantasy sy, T TVG & Casino ino b busi sine nesse sses

• Good mo

mome mentum in into 2019 driven by investment in promotions, marketing and product

• Continuing to invest both to grow customer base and to generate positive returns

Negativ ative con

• ntr

trib ibutio tion f from

• m

New J Jersey spor

• rts

tsbook

• k

Spor

• rts

tsboo

• ok

k con

• ntr

trib ibutio tion f from

• m
• ther s

stat tates Other opex ex (excludes marketing)

20

£m 201 018 2017 17

Underlying EBITDA 451 473 Capex (107) (89) Working capital (38) 55 Corporation tax paid (60) (45) Un Underlyi ying fr free c cash fl sh flow 247 247 395 395 Cash flow from separately disclosed items (1) (12) Free ee ca cash f flow 246 246 383 383 Dividends paid (169) (149) Share buyback (415)

• FanDuel acquisition (2017: DRAFT acquisition)

(71) (14) Interest and other borrowing costs (4) (0) Issue of shares 10 3 Net Net (dec ecrea ease)/inc ncrea ease in in c cash ash (403) 403) 222 222 Net cash at start of year 244 36 FX translation impact (2) (14) Net Net ( (deb ebt) / ca cash a at yea ear end end (162) 162) 244 244 Net Net deb ebt / / LTM EB M EBITDA 0. 0.4x 4x

• 0.

0.5x 5x

• Capex increase reflects additional US

investment

• Working capital adversely affected by:

― Timing of some Q4’17 costs paid in Q1’18 (c.£20m) ― Material prepayments at 31 Dec 2018, relating to European marketing assets and US sports betting assets (c.£30m) ― Expectation that negative working capital will begin to unwind in 2019

• £584m of cash returned to shareholders in

2018 via dividends and share buybacks

• FanDuel acquisition led to net cash outflow
• f £71m

Cash flow

21

Net cash at 31 Dec 2017 2018 Free cash flow FanDuel acquistion Dividends Share buybacks Other Net debt at 31 Dec 2018 Net cash

• utflow Jan-

Feb 2019 Net debt at 28 Feb 2019

Evolution of capital structure

Key developments Net Debt / EBITDA 0.7x

24 244 £’m 246 (71) (169) (415) (148) (162) 62) (31 310)

• 0.5x

0.4x

Reflects completion of buyback programme, £101m acquisition of 51% of Adjarabet and YTD cash flow

3

1 Includes issue of shares; interest & other borrowing costs and FX translation impact. 1

22

Free Cash h Flow

Surplus cash returns M&A Organic investment Sustainable dividends New ma market

• ppo

pportunities UK, UK, Ir Irel eland nd and and Australi lia

Invest in marketing / promotion / product to deliver growth and long term value Achie ieve p podiu dium m po posi sition in in at attrac active an and d su sust stai ainable regula lated m mark rkets Invest in in pr produ duct / / capab apabilities t s to scale le internatio ional ally Invest where our market leading position can be enhanced c. c.50 50% p pay-out r rat atio io Potential for cash returns over time beyond

• rdinary dividends

1x t to 2x net d debt / / EBITDA DA leverage erage

Balancing investment with cash returns and leverage

23

Impact of regulation/taxation changes on 2019 and 2020

• Significant regulatory developments across key markets in 2018
• Total estimated EBITDA headwind of £118m at 2018 revenue levels
• Regulatory developments also creating opportunities by opening new markets (e.g. US sports betting) and

cementing competitive advantages enjoyed by online-led, scale operators

KEY KEY T TAX & & REG REGULATORY HEA HEADWINDS ESTIMA TIMATE TED E EBITD ITDA IMP IMPACT A T AT T 2018 R REVENUE LE LEVELS LS

Group up t total Onli line Aus ustralia Ret Retail Australia: incremental POC tax & product fees c£50m c£50m UK retail: £2 machines stakes limit (applies from 1 Apr 19) c£30m c£30m UK online: increased remote gaming duty rate (applies from 1 Apr 19) c£16m c£16m Ireland: increased betting duty c£20m c£9m c£11m Other regulated markets1 c£2m c£2m Total al imp impac act c£118m c£118m c£27m c£27m c£50m c£50m c£41m c£41m Of which incrementally impacts on 2019 c£107m c£23m c£50m c£34m Of which incrementally impacts on 2020 c£11m c£4m

• c£7m
• 1. Includes increased betting taxes in Italy and Romania, reduced betting tax rates in Spain and taxes in Sweden

24

Other f finan ancial al guidance ce

• 2019 underlying net interest expense currently expected to be £8m to £10m (pre-IFRS 16 impact)
• Group (ex-US) full-year 2019 underlying effective tax rate expected to be between 12% and 14%
• Shares in issue: 78.1m shares post completion of buyback programme in Feb’19 (average share count

for 2019, assuming no further share changes, of 78.6m)

• IFRS 16: c.£165m balance sheet impact (additional asset & liability); reported operating profit impact

immaterial (c.£40m rent reduction offset by increased depreciation); additional £4m to £5m of interest expense (reduces reported EPS)

Current t t trad ading

• Trading in 2019 year to date is in line with our expectations

Current trading & financial guidance

FX FX Capex Adjar arabe abet

• £101m acquisition cash outflow on completion (1 Feb 2019)
• Business is part of and will be reported within the Online division
• Fully consolidated subsidiary (11 months in 2019) with a 49% minority interest recognised on the

income statement & balance sheet

• 2018 EBITDA was c.70% GBP denominated (Australian & US division profits are in AUD & USD respectively)
• Applying current spot rates to 2018 EBITDA there is a c.£5m headwind into 2019
• Full-year 2019 capex currently expected to be £120m to £130m

Quar arterly reporting

• Q1 and Q3 trading updates will continue to update on key revenue trends
• No longer reporting quarterly EBITDA

Peter Jackson, CEO Dan Taylor, CEO Europe

Operating review

26

Responsible gambling is key to long-term sustainability

Cus ustome mers rs

All key stak akeholders expect us us to

• put op
• perating re

g responsibly at at th the c core

• re of
• f ou
• ur bus

business

Key c consid sideration f for at attrac acting an and d retai aining t tal alent Su Sust stai ainability is is a a key invest stme ment c criteria ia We ha have a a re responsibility t y to

• keep t

the heir r exp xperience saf safe an and d fun

Site t tool

• ols

We offer a a leadi ading su suit ite o

• f tools t

s to help c cust stomers man manag age t their ir pl play Not everyone wil will c choose se t to use se tools, s, so so o

• ur jo

job is t is to pr proactively mo monitor an and in d intervene No o

• ne o
• rgan

anisa sation can an so solve this is al alone, so so we work ac across ss the spectru rum

Shareh ehold lder ers Em Emplo ployees

Enga ngagi ging p g proactively wi with ou

• ur c

cus ustomers rs on

• n re

responsible gam gambl bling and g and i inc ncreasing cross-indust stry c collaboration

Data ta-dri riven i n intervent ntion Industr try c col

• llab

aborat atio ion

27

Paddy Power: back winning market share in 2018

Lon Long-term r revenue trend Recent nt r revenue nue moment ntum um

Sig Signif ific ican ant t turnar around in in per erforman ance in e in 2018 due e to:

• Improved p

produc uct p post co comple pletion o

• f pla

latform i rm int ntegra ration

• Gami

ming ng product ct dri riving ng i incre ncreased cr cross-se sell

• Improved ma

marketing ng e execut cution re re-eng ngaging re recre creationa nal l cus custome mers

• Targ

rgeted v value lue promo motions ns t that re reward lo loyalt lty

+1% +11%

Paddy Power online YoY revenue growth1

2010 2011 2012 2013 2014 2015 2016 2017 2018

Paddy Power total online revenue rolling LTM1

Platform integration with limited new product Clear mobile product leadership Significant improvements in competitor mobile products

2017 2018

1 Excludes revenues from Paddy Power Italy which was switched off in Q4 2017

28

Paddy Power: enhanced customer proposition driving momentum

% of sports customers also playing gaming 29% 32% 32%

2018 2017

Le Levera raging ng d distinct nct b bra rand nd & investing ng i in n promo motions ns Be Bett tter sp sports ts prod

• duct wi

with e th enha hanced gaming c con

• ntent

% of customers rating app as “Simplest & easiest to use”

17% 25%

Q4 2017 Q4 2018

6th

th

rank nked ed br brand nd 3rd rank nked ed br brand nd YoY YoY ch chang nge i e in a n aver verage d e daily act ctive e cus customer ers

• 12%

12% +2% +2% +12% +12% +13% +13%

Q1 Q2 Q3 Q4

2018 vs 2017

29

Retail: regulation provides opportunity to win further market share

£114k £71k £78k

LCL WH

Average sportsbook stakes per UK shop1

Key d dri rivers o

• f PP out

utpe performa rmance nce

Quality estate Brand Service & People Value Product & Content

• All shops in high footfall locations
• Best invested estate in the industry
• PP brand leveraged in shop
• Leading customer service scores
• The best odds, offers & loyalty

scheme in retail betting

• More product and content to bet on
• 1. 2018; source: competitor published accounts

PP w PP well positioned d for r regu gulation-dri riven ma n market co cons nsoli lidation

Average EBITDA per shop1

• Shops are more profitable & outperform on sports betting
• Shops are located in markets with a large number of competitors

Reg egulat atio ion im impac act

£1.9m £0.9m £0.9m

LCL WH

UK mac machines £ s £2 st stak akes l s lim imit

• 33% to 43% decrease in total

machine revenues

• Equates to c£30m in EBITDA

In Incre reased Iri Irish b h betting t tax

• c£11m EBITDA impact

Potential ial m mitig igat atio ion f factors

• Product innovations
• Substitution
• Market consolidation

30

Betfair: business model can offer unparalleled sports-betting

Top 3 rea easons c customer mers u use e ea each pr product

Spo Sportsb sbook Exc xchange Dua Dual-use se c cust stomers ar s are mo more v val aluab able

Aver erage r e rev even enue per e per Bet etfair u user er

Sportsbook only Exchange only Dual-use

0% 10% 20% 30% 40% 50% 60% 70%

Promotions Multiples Value

0% 10% 20% 30% 40% 50% 60% 70%

Value Lay bets Trading

Key c y customers Key v y value d drivers

UK&I co core e bet bettors Large l liquid idit ity provi vider ers Int nterna nationa nal co core e bet bettors

Product ct en enga gagement Spo Sportsb sbook & & Exchan ange h have c complementar ary t trait aits

Betfair sports Sportsbook

X-sell Brand nd & & market eting ng Liquidity f from

• m g

glob lobal n net depositor

• rs

Pr Product uct i inv nves estment ent

Gaming Exchange

Platf tform rm s stability ty & & integri rity ty

Oppo pportunity t to brin ing pr proposition c close ser t together

Leading valu lue prop

• pos
• sition
• n

>3x >3x >1. >1.3x 3x

31

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Betfair: growth should be considered in totality

Lon Long-term r revenue trend Recent nt r revenue nue moment ntum um

Betfair revenue rolling LTM

Exchange market switch-offs: Sportsbook launched (Jun’12)

• Revenue growth since 2013 driven by sportsbook, which has matured back towards market growth
• Exchange performance (flat Q2-Q4 2018) consistent with previous 5 years
• Medium term pressures on business:

— Market ‘switch offs’ for the exchange (continued growth in other markets) — Sportsbook competitive intensity in horseracing reduced exchange price advantage — Focus on sustainability with more proactive responsible gambling measures

• Sign

gnificant o

• ppo

pportunity t to gr grow gl global B l Betfair b brand t through pr produ duct ct i impr provements

+9% +4%

Betfair online YoY revenue growth 2017 2018

Total revenue Exchange revenue Exchange excl market switch-offs

32

Grow Betfair in rest of world

2019 f focus is is

• n bu

buil ildin ing pla latform rm cap apabil abilit ities ies Appr pproach ch

• Target core bettors globally with unique sports proposition
• Build an efficient global product, offering relevant customer propositions
• Invest in regional promotional & marketing spend on a returns-based approach
• Leverage scale & platform to minimise cost to serve global customers
• Languages
• Currencies
• Payment options
• Content localisation
• Localised sportsbook pricing
• Automated digital marketing & customer operations
• Promotional a

and d marketing i investment expe pect cted to dr drive i increased g growth from 2 2020

• Growing gl

ing global e exchang ange liq iquid uidit ity w wil ill b benef enefit it UK& UK&I I exchang ange r revenue nues Key p plat atform enh enhanc ancement nts t to be e completed on n a a phas ased ed bas asis is throug ughout ut 2 2019

33

Sportsbet: scale & leading proposition has driven long-term success

Str tron

• ng revenue g

growth wth & m market sha t share gains s Str tron

• ng p

profit t growth wth d desp spite i increase sed ta taxes s

• Consistent success driven by investment in brand & customer proposition
• Combined with scale this has driven profit & margin growth
• Sportsbet relatively well positioned for tax & regulatory headwinds
• Competitive intensity increased over 2018 but Sportsbet still offers market leading proposition
• Continuing to invest in leading proposition to drive continued market share gains

27% 27% 29% 29% 34% 34%

52% 48% 36% 21% 23% 30% 2010 2014 2018

Spo Sportsb sbet EBITD ITDA

36 51 96 166 245

2010 2012 2014 2016 2018

CAG AGR 201 2010-18 18 +27 +27% A$’m

Spo Sportsb sbet P& P&L b break akdo down (% of % of re revenue) EBITD ITDA Opex Cost of sales

Expected t ed to in increase t to c42% in in 2019

c17% c21% c26%

2010 2014 2018

Sportsbet et market et s share

( non-retail revenue1)

1 Based on competitor public filings and internal management estimates

133 194 333 560 720

2010 2012 2014 2016 2018

Spo Sportsb sbet Reve venue

A$’m CAG AGR 201 2010-18 18 +24 +24%

34

Adjarabet acquisition

Act ctively ly lo looking ng f for r additiona nal l bolt lt-on ac acquis isit itio ion o

• pportunit

ities ies Tra rans nsact ction n

• v
• verview
• £101m initial acquisition for 51% of business
• Call / put option to acquire remainder in 3 years at 7x 2021 EBITDA
• Adjarabet 2018 financials: Revenue £64m, EBITDA £20m
• Access to PPB sports capabilities & proprietary gaming content can enhance proposition

Sec Secures es No No.1 position i n in n at attrac activ ive m e mar arket Domi mina nant nt b bra rand nd wit ith u uniq ique e mar arketin ing as asset

2016 2017 2018

Georgian online gross revenue

c.£180m

CAG AGR c. c.40 40%

c. c.40% 0%

Operator 1 Operator 2 Operator 3 Operator 4 Others Georgian online market share

Adjarabet Additiona nal exposur sure to regu gulated ed Armen menian m market et (c.10% market et share)

0% 30% 60% 90%

Sponta tane neous us brand nd awarene ness ss

Top 3 competitors

15 yea ear (ex (exten endable) ) ex exclusive e agree eement wit ith Adjaranet et (l (lea eading Geo Georgian w web ebsite) e)

35

Huge m e mar arket

• ppo

pportuni nity Fan anDuel el well ll positioned f d for su success ss

• Proven consumer demand: illegal sports betting market handle estimated at $150bn (per AGA)
• Evolving New Jersey market already generating >$240m of annual sports revenue (based on last 3 months)
• Combined NJ, NY & PA states alone have 1.7x the Australian population

Unique ue c cross ss-sell ell

• ppor
• rtu

tunitie ities Operationa nal expertise se Lead adin ing Brand nd Extensive ve cus ustome mer b base 15 15 stat tates 10 y years multi-state wagering ring expe xperience >8m nationally across all products

Sports betting Fantasy Racing Casino

FanDuel: stealing a march in nascent US market

Early rly p podium um positioned d se secured

Marke ket-acces ccess

FanDu nDuel New w Je Jerse sey spo sports b bettin ing o

• nline mar

market sh shar are

Source: New Jersey Division of Gaming Enforcement industry reports; total market handle includes retail and online

23% 23% 27% 27% 31% 31% 38% 38% 37% 37%

Sep'1 ep'18 Oct'1 t'18 Nov' v'18 De Dec'18 Jan'19

New Je w Jerse sey spo sports b s bettin ing t total al mar market h han andl dle (Jul 18 – Jan 19) 46% 46%

36

FanDuel: key drivers of our initial success

>7m c cust stomers ac s across 4 ss 45 st stat ates 300k addit additional sig sign-ups o s over N NFL se seaso ason Fan antasy sy ac actives + +13% in in 2018

Le Levera raging ng Fan antas asy Sports ts Advan antag age

NJ sportsbook c customer ac activations by y source (Sep (Sep-Jan an)

Co Cost st pe per acquisit isitio ion f for fan antasy asy cust stomers s substantially lly lo lower r

Dir irect to SB SBK Fantas asy y datab abas ase

Le Leading ng cus custome mer r propo position n in in Ne New Jerse sey

• Lead

eading ap g app / / site

• Gene

nerou

• us &

& distinctive p prom

• motion
• ns
• Competit

itive p pric icin ing

• Sig

ignifi ficantly m more b re bett tting mar arkets

• Uni

Unique ue r retail p pos

• sition
• n
• Cro

ross-sellin ing t to B Betf tfair air C Casino drivin iving ad additional gr growt wth

37

Summary

• Sector has a very long runway of online growth
• Global regulation favours scale operators & creates new opportunities
• PPB well positioned to capitalise:

— Good momentum in our core markets — Increasing international diversification — Early podium position secured in US online market

• Focused on delivering strong & sustainable shareholder returns

Q & A

Appendix

40

Divisional overview

£m, Underlying

ONL NLINE NE AUSTR TRALIA IA RETAI AIL US US GR GROU OUP FY’18 YOY OY % % FY’18 YOY OY % % FY’18 YOY OY % % FY’18 YOY OY % % FY’18 YOY OY % % Sports revenue 678 +3% 403 Flat 222

• 3%

172 +83% 1,474 +6% Gaming revenue 270 +13%

• 110

+3% 20 +26% 399 +11% Total re reve venu nue 948 +5% 403 Flat 331

• 1%

1% 191 +75% 1,873 +7% EBIT BITDA 316 +3% 137

• 2%

2% 72 72

• 12%

2%

• 14

n/a /a 451

• 5%

5% Ope Operating pr profi fit 275 +3% 119

• 4%

4% 51 51

• 19%

9%

• 25

n/a /a 360

• 8%

8%

Regulated Online 46% Unregulated Online 4% Australia 22% US 10% Retail 18%

FY 2018 Y 2018 revenue evenue By Ma Market et By P Product FY Y 2018 2018 oper erating ng p profit By d divisio ision2

Online 62% Australia 27% Retail 11%

1 Group EBITDA and operating profit includes unallocated central costs 2 Before US losses of £25m and unallocated central costs of £59m

1

Online Sportsbook 45% Exchange, US Sports & B2B 22% Online Gaming 15% Retail Sportsbook 12% Retail Gaming 6%

41

Separately disclosed items

£m 201 018 2017 17

Non-cash acquisition related items: Amortisation on acquired intangible assets (101) (135) Fair value adjustment for share-based payments

• (7)

Non-cash items relating to the DRAFT business: Impairment of goodwill & intangible assets (27)

• Gain on contingent consideration

11

• Restructuring and strategic initiatives

(28)

• Profit on sale of investment

7

• Total

al se separ arately d y dis isclose sed it items ms (138) 138) (142) 142)