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

Paddy Power Betfair 2018 Preliminary Results 6 March 2019

Introduction Peter Jackson, CEO

3 Today’s agenda  How PPB will deliver sustainable shareholder returns  Overview of our strategy  Financial review  Operating review

4 Sector remains very attractive space for investment Global gambling revenue 1 c.$450bn c.$405bn c.$335bn Online CAGR 2013-18 c.11% Each 1% migration from offline to online equates to c$4bn revenue 11% 8% Online 6% (% of total) 2008 2013 2018 Larg La rge g glob lobal ma market with key trends benefitting s scale le online ope opera rator ors: 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 1 Source: H2GC

5 PPB positioned for success within the sector Lead adin ing s spor orts ts Subst stant ntial Dist stin inctiv tive capab abil ilit itie ies brands ds onli line s scale le  Differentiated products  £1.5bn revenue Str trong g  Global risk & trading expertise  >£400m marketing spend foun oundations ons  Proprietary technology  >1,000 tech developers  Digital marketing  Podium positions in key regulated markets UK, A Aust stral alia & ia & Ireland i in 2 2018 Regul ulation & n & invest stment nt d driving a ng access t ss to f fast- growing m mar arkets ts Huge c22% c22% oppor ortunity t y to grow o outsi side de 80% 80% core m mark rket ets of PPB revenue of Global online gambling revenue 1 Financial ial f flexib ibil ility ity Highly c cash ash g generativ ative  Ability to utilise debt for opportunities & Underlying free cash flow Fin inan ancia ial deleverage quickly 2016-2018: stren rengt gth  Option to buyout FanDuel & Adjarabet £89 £894m 4m minorities with cash or equity (98% of underlying profits after tax) 1 Source: H2GC

6 Four pillar strategy to achieve success Attain tain p podium m Maximi imise p profit itabl ble Pur ursue U US Grow B Bet etfair i r in pos ositions ns i in n growth i wth in c core oppor ortunity y rest of of w wor orld addit itional al r regulat ated mark rket ets rigor orous ously mark rket ets  Target core bettors with  Invest in leading customer  Invest in leading customer  Identify attractive markets unique sports proposition propositions propositions  Offer tailored regional  Achieve position via organic  Leverage FanDuel brand /  Leverage distinct assets customer propositions or inorganic investment fantasy sports  Capitalise on regulatory  Invest in regional growth on  Disciplined marketing & developments returns-based approach promotional spend  Operate efficiently &  Minimise cost to serve  Achieve scale in key states sustainably global customers  Leverage central operational capabilities  Grow w mar market sh shar are  Huge o oppo pportunit ity  Increas ase d diversif sific icat atio ion  Su Sust stai ainable c cash ash  Access t ss to addit additional g growt wth mar markets  Cre reate lon long-term rm v valu lue generatio ion Suppo pported b by: People ple Product & & technology gy Key e y enablers Operate r resp spon onsi sibly Cust stomer-ce cent ntri ric f c focu cus Co Core v val alues s …del eliveri ering sustainable s shareh reholder r der ret eturns

7 Substantial progress made in 2018  Paddy Power back taking market share Maxi Maximise e profitable g growth wth  Evolving Betfair’s proposition to better leverage its unique exchange-sportsbook combination in in c core m re mar arkets  Sportsbet driving increased customer activity with additional generosity  Significant technology development ongoing to enhance global customer proposition & Grow B Bet etfair i r in minimise cost to serve rest of of w wor orld Attain tain p podium m  Adjarabet acquisition secures no.1 position in fast-growing, regulated online pos ositions ns i in n Georgian market addit itional al regulated m mark rket ets  FanDuel acquisition gives us leading brand & fantasy sports advantage Pur ursue U US oppor ortunity y  Key market access deals secured rigor orous ously  Leadership position established in NJ sports betting Proposing to re-name Group, Flut lutter r Ent ntertainme nment nt p plc lc in May (subject to shareholder approval at our AGM), reflecting increased diversity of our brands and operations

Financial review Jonathan Hill, CFO

9 Key financial highlights 2018 2017 YoY Re Reve venue £1,873m £1,745m Revenue +7%  EBITDA pre-US sports betting towards top £475m £473m Underlying EBITDA pre-US sports betting Flat end of guided range at Q3 trading update Underlying EBITDA £451m £473m (5%) (£465m-£480m) Profitabili lity Reported Profit before tax £219m £247m (11%)  EBITDA reduced by £24m investment in Reported Earnings per share 241.7p 257.9p (6%) US sports betting Underlying Earnings per share 379.3p 398.0p (5%)  Year-end leverage of £(162)m £244m Net (debt) / cash Financia Financ ial 0.4x, compared to po position 0.4x -0.5x Net debt / LTM EBITDA target of 1-2x 200p 200p  Dividend maintained Proposed total dividend per share Sha hare reho holder at 200p per share, at re retu turn rns £584m £149m Total cash returns including buybacks a payout ratio of 53%

10 Revenue highlights ONL NLINE NE AUSTR TRALIA IA US US RETAI AIL GROU GR OUP £m YOY OY % % PROFORMA 2 2018 2018 YOY OY % % 2018 2018 2018 2018 2018 2018 YOY OY % % 2018 2018 YOY OY % % YOY OY % C CC 1 CC CC 1 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%  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 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 Unde derlying g growth: +£2 +£24m / / +5% +5% £’m £’ 16 15 71 16 9 24 13 475 47 473 47 451 51 451 51 3 2017 EBITDA FX impact FanDuel 2017 Revenue Marketing Betting tax Other costs 2018 EBITDA US sports 2018 EBITDA 1 2 2017 DFS Proforma growth cost growth changes pre US sports betting losses EBITDA CC betting investment 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

12 Group P&L summary YOY % Y % £m 201 018 2017 17 YOY OY % % CC CC  Depreciation increasing with Revenue 1, 1,873 873 1, 1,745 745 +7% +7% +9% +9% investment in platform integration and product improvements Gross profit 1,403 1,340 +5% +6% Underlyin ing EBITDA 451 451 473 473 -5% 5% -3% 3%  Net interest reflects increased interest costs on gross debt Depreciation & amortisation (90) (81) +11% +13% Und nder erlying ng oper erating ng profit 360 360 392 392 -8% 8% -6% 6%  Separately disclosed items mainly Underlying net interest (4) (3) +4% amortisation of acquired intangibles on 2016 merger and Separately disclosed items (138) (142) -3% FanDuel and write down on DRAFT Profit bef Pr before t e tax 219 219 247 247 -11% 11% Tax (38) (29) +31%  Non-controlling interest represents US losses attributable to minority Profit a Pr after er t tax 181 181 218 218 -17% 17% shareholders of FanDuel Group Non-controlling interest 21 - n/a Profit a Pr attribut utable t e to eq equi uity 201 201 218 218 -7% 7% holder ers o of the e co company ny