Preliminary results Year ended 31 December 2011 Richard Glynn, - - PowerPoint PPT Presentation

Preliminary results Year ended 31 December 2011

Richard Glynn, Chief Executive Ian Bull, Chief Financial Officer

Today’s line up

Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A

Highlights: on plan to deliver

page 2

Positive retail momentum Digital positioned to grow Building international presence Continued investment in 2012

Strong growth in machines Q4 £930 GWPTW Resilience in OTC - flat staking in 2011 Robust cost control - 2012 initiatives in place Momentum in Digital KPIs Net revenue impacted by poker & Q4 sportsbook Investments on track and delivering New website live in coming weeks Mobile growing strongly - 2012 a year of innovation Spain & Denmark, US acquisition, Lucky Racing in China Developments will converge in H2 Growing Digital revenues across 2012

Today’s line up

page 3

Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A

page 4

Summary of performance

Continuing operations before non-trading items (1) Underlying EPS excludes impact of High Rollers and HMRC benefit in the comparative year

Net revenue 980.3 976.6 +0.4% Operating profit 193.5 202.3

• 4.3%

High Rollers

• 3.2

5.0 n/a Amortisation

• 2.6
• n/a

Finance costs

• 32.8
• 34.0

+3.5% Finance income (HMRC)

• 20.0

n/a Profit before tax 154.9 193.3

• 19.9%

Tax

• 18.4
• 35.6

+48.3% Tax income (HMRC)

• 261.9

n/a Profit after tax 136.5 419.6

• 67.5%

Underlying EPS (1) 15.3p 15.2p +0.7% Dividend 7.8p 7.6p +2.6% Net Debt 453.9 492.0 +7.7% Year ended 31 Dec 2011 £m 2010 £m B+W-

£202.3m £194.2m £193.5m £(8.1)m £(6.9)m £(0.4)m £(3.6)m £9.9m £0.3m FY 2010 PBIT 2010 VAT Credit FY 2010 PBIT ADJ UK Retail Digital European Retail Telephone Betting Corporate Costs FY 2011 PBIT

Group – Underlying profit broadly flat

page 5

• Profit excluding one off VAT credit in 2010 down 0.4%
• UK Retail resilient in OTC, strong in machines, disciplined on costs
• Digital driven by H2 marketing investment , poker and Q4 sports results
• World Cup generated £17.3m in 2010 (£11.3m UK Retail, £3.0m Digital)

UK Retail – Underlying profit growth of 7%

page 6

(1) 5 year average (2007-2011) Gross win margin – 16.5%

£149.1m £142.4m £152.3m £(6.7)m £(24.3)m £(10.5)m £(1.4)m £3.7m £42.4m FY 2010 PBIT 2010 VAT Credit Adjusted 2010 OTC Net Revenue Gross Profits Tax Machines revenue Operating Costs Associate Income FY 2011 PBIT

• Consistent trend in OTC staking
• H2 margin 1.2% points less than average(1) and 1.9% less than 2010
• Machines net revenue growth of 16.6%
• Overall costs up 0.9% excluding new openings/closures & VAT credit

UK Retail - Stability in staking, results impact performance

page 7

2011 2010 Var % Amounts Staked (£m) 2,466 2,451 +0.6%

• No. of slips (m)

296 293 +1.0% Stake per slip (£) 8.33 8.36

• 0.4%

16.0% 15.3% 15.6% 16.3% 17.2% 16.7% 14.0% 15.0% 16.0% 17.0% 18.0% Half 1 Half 2 FY 2011 GW Margin 2010 GW Margin

• Stability in OTC activity
• H2 margin impact driven by football

and horseracing

• FY margin 0.9% points off 5 year

average(1)

• Euros uplift in H1 2012

(1) 5 year average (2007-2011) Gross win margin – 16.5%. Analysis excludes greyhound tracks

UK Retail – Machines growth accelerating through 2011

page 8

2009 2010 2011 Average no of machines 7,892 7,953 8,050 Gross Win (£m) 282.5 302.8 360.9 GWPTW (£) 685 730 860 Machines margin (%) 3.2% 3.3% 3.4%

• GW up 15% H1 and 23% H2
• Margin growth from better mix
• Growth initiatives for 2012
• Strong Q4 GWPTW of £930

282.5 302.8 360.9 (1%) 7% 19%

• 5%
• 2%

1% 4% 7% 10% 13% 16% 19% 200 250 300 350 400 2009 2010 2011

£m

UK Retail – Robust control of costs

page 9

• Disciplined cost control
• 3.7% absolute cost increase YOY, 1.3% from openings/closures
• Like for like cost increase only 0.9%, despite 7% opening hours increase

467.3 462.4 458.7 6.7 6.2 4.3 475.9

430 440 450 460 470 480 490 500 FY 2008 costs FY 2009 costs FY 2010 costs VAT Credit Openings and closures Other FY 2011 costs

Costs up only 1.8% Like for like cost increase of 0.9% LFL

UK Retail – Cost saving initiatives underway for 2012

page 10

• Cost headwinds for 2012 - pay review (pay freeze last 2 years) and content
• Initiative to evolve staff structure drives material saving
• Guidance for 2012 - 3% LFL costs and 5% overall

2011 Cost pressures Mitigating action Machines New shops 2012 5% (4)% 2% 2% Increase of 1% 3% LFL excluding openings

UK Retail – growing profit per shop

page 11

£‘000/shop 2009 2010 2011 Var to ‘09 Average number of shops 2,090 2,083 2,103 +13  60 openings planned in 2012 Revenue per shop 311.1 316.2 321.5 +3.3%  Euros, machine growth, margin Gross profits tax (30.1) (29.4) (27.3)

• 9.3%

Operating costs(1) (218.5) (220.5) (223.3) +2.2%  Initiatives underway : 3% LFL guidance EBIT per shop(1) 62.5 66.3 70.9 +13.4%

• Operating profit per shop up 7% on 2010(1)
• Strong foundation on which to build in 2012

(1) Excluding the impact of the £6.7m VAT credit (£3,200 per shop). In 2010 Analysis excludes greyhound tracks and income from associates

0% 25% 50% 75% 100% 125% 150% 175% 2007 2008 2009 2010 2011 % Payback YR5 YR4 YR3 YR2 YR1

UK Retail – disciplined investment grows profit

page 12

• 50 shops opened in 2011
• 60 openings planned for 2012

3.3

PAYBACK YRS

3.1 2.5

New shops payback in 3 years

Payback

Digital – decline driven by poker and sportsbook

page 13

• Poker driving two thirds of the YOY decline
• Sportsbook margin 0.1% up H1 but 1.2% down H2
• Operating costs(1) broadly flat for the full year

(1) Excluding the impact of the £0.8m VAT credit and including £0.4 of betting tax

£62.7m £61.9m £55.0m £(0.8)m £(4.6)m £(3.4)m £(0.9)m £2.0m FY 2010 PBIT 2010 VAT Credit Adjusted 2010 Poker Sportsbook Costs Gaming Revenues FY 2011 PBIT

Digital – H2 2011 sporting results drive decline in profit

page 14

• H1 profits up 6.5% or 9.5% LFL(1)
• Marketing investment up 32% YOY (£3.8m) in H2
• Poker rate of decline halved in H2 over H1
• H2 2011 volume at H2 2010 sportsbook margin worth £5m

£61.9m £55.0m £(3.8)m £(1.3)m £(3.6)m £(0.9)m £2.7m 2010 Adjusted H1 PBIT var H2 Digital Marketing Poker Sportsbook Other 2011 PBIT

Margin in H2 hides momentum in KPIs

(1) Excluding the impact of the £0.8m VAT credit

Digital – positive H2 2011 momentum carried into 2012

page 15

H1 Q3 Q4 Digital sign ups

• 6.4%

+31.8% +63.5% Digital actives

• 1.9%

+3.8% +26.1% Sportsbook sign ups +3.1% +39.8% +76.9% Sportsbook actives +3.1% +3.0% +24.1% Casino sign ups

• 37.1%

+9.3% +88.9% Casino actives

• 12.6%

+13.3% +72.1%

• Marked increase in digital KPIs in H2 2011
• Positive trend in sportsbook and casino
• Digital (online and mobile) net revenue up in January

Digital – disciplined investment in marketing

page 16

• Historically low investment as % NGR
• Q3 saw start of uplift in digital marketing
• Early results encouraging
• Sustainable investment required to

support development of digital offer

• Expect mid 20s as % of NGR in 2012
• Evenly balanced split H1:H2

20.2 11.7 14.9 15.5 24% 14% 17% 20% 10% 13% 16% 19% 22% 25%

• 5.0

10.0 15.0 20.0 25.0 H1 '10 H2'10 H1'11 H2'11 A&P % NGR £m A&P spend (World Cup)

Digital – 2012 profit will be H2 weighted

page 17

• NGR growth will be higher in H2
• Consistent level of marketing planned

in H1 and H2

• H1 profits will be down
• Profit growth during H2
• Well placed for 2013

H1 2012 H2 2012 Net revenue Marketing cost Profit

page 18

Balance sheet – continued capex investment

• Total spend in 2012 circa £95m
• £15m for new format shops and customer experience
• Step change capex as per guidance (£50m across 2011 and 2012)
• £5m on online International expansion

£m 2010 2011 2012 Shop development 18.8 22.4 19.0 New shop formats

• 15.0

Step change 25.0 25.0 Group IT 20.1 20.0 20.0 Other/International 9.9 9.9 16.0 Total 48.8 77.3 95.0

page 19

Balance Sheet – new bank facilities extend maturity

131 225 540 50 150 250 350 450 550 650 2012 2013 2014 2015 2016 2017 Debt Bank facilities

• Undrawn facilities £405m at end 2011
• Net debt to EBITDA 1.9x for 2011
• New bank facility matures 2016 and covers 2012 bonds
• Circa £275m undrawn post settlement

page 20

Cash flow – cash generation supports investment

£m 2011 EBITDA(1) 238.5 Other movements

• Interest

(36.0) Tax (18.1) Capex (77.3) Free cash flow 107.1 Dividend (69.0) Debt reduction 38.1 Opening net debt (492.0) Closing net debt (453.9)

• Cash supporting;
• capex investment in business
• growth in dividend
• further reduction of debt of £38m
• Cash & P&L tax rate 13% for 2012 & 2013
• Interest for 2012 at rate of 7.5%

(1) Excludes non-trading items

Today’s line up

page 21

Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A

Development Milestones Feb 2011

Machines

Best of breed offer Exclusive content Better customer experience

Pricing, trading & liability management platform

Improve product range Wider & deeper Bet In Play Optimised margin

eCommerce development

Compelling digital offer via more capable, flexible & intuitive website

Expansion of mobile

Market leading proposition

Digital Marketing

Leading data analytics, customer promotions, loyalty and retention

page 22

MILESTONES What were they...?

Development milestones Feb 2011 What have we done?

Machines Best of breed offer Exclusive content Better customer experience

• Successful rollout of Global Draw
• Significant growth ahead of plan
• Embedded operational excellence

Pricing, trading & liability management platform Improve product range Wider & deeper In Play Optimised margin

• New platform built and operating
• Material increase in BIP capacity
• More algorithmic trading

eCommerce development Compelling digital offer via more capable, flexible & intuitive website

• Search optimisation
• New sportsbook live in coming weeks

Expansion of mobile Market leading proposition

• Agreement with Realistic and Probablity
• Expansion of casino style games
• New apps on iPhone and Android

Digital Marketing Leading data analytics, customer promotions, loyalty and retention

• Improved cost and effectiveness of PPC,

SEO and affiliates

• New campaigns to maximise cross

product usage and share of wallet page 23

MILESTONES What we have delivered

19.2% growth in machine GW GWPTW of £860 700 matches in Oct up from 200 BIP turnover +20% H2 Improved search (H1 2011) New sportsbook live in coming weeks £15.6m NGR up 174% 33% sportsbook customers bet on mobile Momentum in sportsbook & casino sign ups & actives after Q3 campaign launch

RETAIL PRICING/TRADING DIGITAL INTERNATIONAL CUSTOMER REGULATION

page 24

• 1.5%

1.0%

• 0.3%
• 2.3%

3.8% 0.6%

• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% H1 H2 FY Underlying Reported

Resilience Growth Efficiency & Competitiveness RETAIL ‘Low ticket’ supports resilience of OTC

• Flat staking level shows stability of OTC
• Euros will provide uplift in June

Amounts staked for 2011 ‘flat’ reported AND underlying

page 25

RETAIL Machine momentum in 2011

• Efficient rollout, focussed operation
• Additional £58m gross win in 2011
• Improved return from better games mix

723 723 751 791 850 866 930

13% 14% 20% 24%

5% 8% 11% 14% 17% 20% 23% 26% 500 600 700 800 900 1,000 H1 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11

GWPTW growth

860 for 2011 up 18%

GWPTW £s

page 26

Resilience Growth Efficiency & Competitiveness

685 730 860 600 800 1,000 2009 2010 2011 2012

RETAIL More machines growth in 2012

• Yield management starting Q1
• Odds On will personalise experience
• New content drives demand
• Cabinet innovations

?

GWPTW £s

page 27

Resilience Growth Efficiency & Competitiveness

RETAIL Shop design improves customer experience

• Less emphasis on counter
• Increased focus on experience sports & machines
• More ‘managed’ service – staff engagement
• Lower cost model

REGULAR FORMAT NEW FORMAT

page 28

Resilience Growth Efficiency & Competitiveness

RETAIL Aligning staff structure to retail trends

page 29

Resilience Growth Efficiency & Competitiveness

• Overhaul of legacy staff structure
• Changing how we look after customers
• Incentivised shop staff
• Service level UP AND staff costs DOWN

PEOPLE Evolving our culture, valuing our staff Changing culture

• Investing in people as well as technology
• New culture across Ladbrokes
• Vision, Values, Ways
• Community initiatives

page 30

• Resilience of OTC
• Disciplined control of costs
• Growing machines in a growing market
• Innovating customer experience at a

lower cost per shop

• Differentiation grows market share

RETAIL Sustainable growth

63 66 71 50 55 60 65 70 75 80 85 90 2009 2010 2011

(1)

......a reliable and growing source of regulated revenue

13% growth in EBIT per shop

(1) Adjusted for one off VAT credit of £6.7m

Pushing further forward We are growing shop profits now 7% EBIT growth in ‘11 despite £7m more VAT from rate increase

page 31

RETAIL PRICING/TRADING DIGITAL INTERNATIONAL CUSTOMER REGULATION

page 32

2000 4000 6000 8000 10000 12000 2010 2011 2012 Q1 Q2 Q3 Q4

Grow BIP Manage margin PRICING TRADING

• Upgraded platform supports data feeds
• Over 700 weekly matches in October
• BIP turnover 20% H2 v 8% H1

Material increase in BIP football matches

BIP offer doubled in Q4

page 33

Grow BIP Manage margin PRICING TRADING

• More choices, more opportunities, wider audience
• More Bet in Play in all sports in 2012
• Plus 20k events means > 50k in 2012

More BIP events from midnight

• nwards

More markets at more times of the day

page 34 Tennis BIP 2011 v 2012 200 400 600 800 1000 1200

24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Tennis BIP Events Hours of the day 2012 2011

Grow BIP Manage margin PRICING TRADING

• Enhanced technology improves quality of trader data
• Flexibility facilitates;
• more automation of pricing (pre match & BIP)
• improved management of liabilities
• realtime analysis of price movements
• More tools to effectively manage margin
• Retain the art but increase the science

Increased use of ‘intelligent’ trading tools

Where investment in trading takes us

page 35

RETAIL PRICING/TRADING DIGITAL INTERNATIONAL CUSTOMER REGULATION

page 36

DIGITAL New sportsbook going live Delivery to customer

• Website
• Mobile
• Single click bet placement
• Emphasises higher margin products
• Learns and adapts to personalise
• Facilitates cross sell
• Simpler and quicker

page 37

page 38

11.0 12.6 14.6 16.3 9.8 11.6 13.5 15.4 1.9 1.5 0.7 3.1 0.0 4.0 8.0 12.0 16.0 20.0 Mar'10 Oct'10 Mar'11 Oct'11 Gamble via a mobile device in the last year Gamble via a mobile device monthly ONLY gamble via a mobile device

DIGITAL Mobile market is rapidly growing

In October 2011

• 28% new gamblers used a mobile device
• 11% were ‘solus’ mobile users
• 66% of ‘solus’ users new to market

Source : Kantar Media – Syndicated Online Gambling Research Wave 8 Report

Delivery to customer

• Website
• Mobile

DIGITAL Mobile users are younger

24% 34% 21% 12% 7% 1% 30% 42% 19% 7% 2% 1% 0% 10% 20% 30% 40% 50% 18-25 26-35 36-45 46-55 56+ Unknown

Digital demographics

Internet Mobile Source : Ladbrokes own data

• 72% of Mobile users are under 35
• Usage driven by
• spontaneity
• convenience
• Bet In Play

Delivery to customer

• Website
• Mobile

page 39

1 2 3 4 5 6 7 8 9 10 H1 '09 H2 '09 H1 '10 H2 '10 H1 '11 H2 '11

£m

Casino Sportsbook

DIGITAL We are growing mobile strongly

Mobile NGR of £15.6m up 174%

• Net revenue is strong and growing
• 33% digital sportsbook using mobile up from 12%
• Mobile NGR 17% of total sportsbook up from 6%

Delivery to customer

• Website
• Mobile

page 40

Delivery to customer

• Website
• Mobile

page 41

Source : Kantar Media – Syndicated Online Gambling Research Wave 8 Report

DIGITAL Growing Mobile casino

• Focussing on casino as well as sportsbook
• Casino 35% of NGR H2 ’11 (24% H2 ‘10)

Brand usage via mobile once a month or more on Casino

24 10 12 9 5 10 15 20 25 30 Ladbrokes Competitor Average Mar'11 Oct'11

page 42

DIGITAL Growing Mobile further in 2012

• More games in 2012 on mobile and tablet
• Agreements with Realistic and Probability

Delivery to customer

• Website
• Mobile

page 43

DIGITAL New mobile platform

• More games in 2012 on mobile and tablet
• Agreements with Realistic and Probability
• More apps including bingo and Euro 2012
• New mobile platform on track for Q2

Delivery to customer

• Website
• Mobile

RETAIL PRICING/TRADING DIGITAL INTERNATIONAL CUSTOMER REGULATION

page 44

Energising the brand Online marketing & CRM CUSTOMER

• Excitement key to engagement
• Momentum in key Digital KPIs
• Digital net revenue up strongly in Jan
• Consistent media presence throughout 2012

page 45

Energise brand Online marketing & CRM CUSTOMER

• Improved effectiveness of PPC & SEO
• Better management of affiliates
• Management of customer lifetime values
• Increased campaign effectiveness

page 46

page 47

Bridging slide What have we been doing What have we done DONE JUST DONE STILL TO COME Evidence increased games in casino

MILESTONES 2012 Deliverables

Development milestones What have we done? What comes next?

Machines

• Successful rollout of Global Draw
• Significant growth ahead of plan
• Embedded operational excellence
• Yield analytics to optimise peaks and troughs
• Personalisation of offer through OddsOn
• Focus on pipeline of content, exclusives and

more £2 B3 games Pricing, trading & liability management platform

• New platform built and operating
• Material increase in BIP capacity
• More algorithmic trading
• More science, less gut
• More BIP opportunities ‘around the clock’
• Further 20,000 BIP events
• More derived markets
• Margin optimisation tools

eCommerce development

• Search optimisation
• New sportsbook live in Feb
• Incremental sportsbook enhancements
• New suppliers and product in gaming
• More cross sell from sportsbook

Expansion of mobile

• Agreement with Realistic and Probablity
• Expansion of casino style games
• New apps on iPhone and Android
• New proprietary mobile platform
• Continued app expansion (Poker, Bingo,

Euro 2012)

• Remote betting slip

BI/CRM

• Improved cost and effectiveness of PPC,

SEO and affiliates

• New campaigns to maximise cross

product usage and share of wallet

• Work to enhance campaign analytics,

predictive modelling and customer lifetime management

• Work to develop ‘end to end’ customer

experience management

RETAIL PRICING/TRADING DIGITAL INTERNATIONAL CUSTOMER REGULATION

page 48

INTERNATIONAL Developing outside the UK European Sportsbook A foothold in the US Growing offer in China

• Licensed in Denmark
• Awaiting approval in Spain
• Will invest to grow market position

page 49

INTERNATIONAL Developing outside the UK European Sportsbook A foothold in the US Growing offer in China

• B2B sportsbook technology provider
• Strategic position in exciting market
• Signs of regulatory tailwinds

page 50

INTERNATIONAL Developing outside the UK European Sportsbook A foothold in the US Growing offer in China

• JV with AGTech
• Lucky Racing game launched July ’11
• 1,500 shops in Hunan province
• Looking to expand offer and geography

page 51

REGULATION Regulatory leadership

• Budget 2012
• Machine Games Duty
• Taxation of remote gambling operators
• Long term levy solution

page 52

page 53

H1 2011 H2 2011 H1 2012 H2 2012

Global Draw rollout Website search introduced New Microgaming contract New trading platform Consistent investment in marketing Growing BIP in football and other sports Odds On machines Sportsbook website New mobile platform Margin management tools New website for gaming Yield management tools

Retail Digital Trading

SUMMARY Progressing on milestones, more still to come

Done/progressing Imminent Still to come New shop formats Online campaign management

Trading Update – 1 January 2012 to 7 February 2012

page 54

• Group net revenue up 14.7%
• UK Retail net revenue up 13.0%
• Strong growth in OTC and machines
• Continued double digit growth in Digital actives and sign ups
• Digital net revenue up 13.1%
• High Rollers profit of £0.6 million

Appendices

page 55

page 56

Betting and Gaming (excluding High Rollers)

Net revenue Operating profit Year ended 31 December 2011 £m 2010 £m Variance B(W) £m 2011 £m 2010 £m Variance B(W) £m UK Retail 683.3 665.2 18.1 152.3 149.1 3.2 European Retail 124.1 125.8 (1.7) 13.4 13.9 (0.5) Digital 163.4 169.4 (6.0) 55.0 62.7 (7.7) Core Telephone Betting 9.5 16.2 (6.7) (4.0) (0.4) (3.6) Corporate costs

• (23.2)

(23.0) (0.2) Total 980.3 976.6 3.7 193.5 202.3 (8.8)

Operating profit is before non-trading items and amortisation of customer relationships

page 57

Betting and Gaming (excluding High Rollers)

Net revenue Gross win Year ended 31 December 2011 £m 2010 £m Variance B(W) % 2011 £m 2010 £m Variance B(W) % UK Retail 683.3 665.2 2.7 753.7 719.8 4.7 European Retail 124.1 125.8 (1.4) 126.3 128.0 (1.3) Digital 163.4 169.4 (3.5) 192.7 192.5 (0.1) Core Telephone Betting 9.5 16.2 (41.4) 9.9 16.4 (39.6) Total 980.3 976.6 0.4 1,082.6 1,056.7 2.5

page 58

UK Retail – KPIs

Year ended 31 December 2011 2010 Variance B(W) % OTC Gross win margin 15.6% 16.7% (1.1%) Like for like OTC amts staked decline (0.6)% (7.7)% Like for like OTC net revenue decline (7.0)% (1.1)% Like for like total costs (1) increase 0.9% 0.5% Like for like shop staff costs decrease (2.9)% (1.9)% Stake per slip (2) £8.33 £8.36 (0.4) Average number of machines 8,050 7,953 1.2 Average weekly gross win per machine £860 £730 17.8

Like for like takes into account shop openings and closures and the 2010 VAT tax credit (1) Excludes VAT, Freebets and Gross profits tax (2) Slips exclude machines

page 59

UK Retail – Results

Year ended 31 December 2011 £m 2010 £m Variance B(W) % OTC gross win 392.8 417.0 (5.8) Machines gross win 360.9 302.8 19.2 Total gross win 753.7 719.8 4.7 OTC net revenue 384.9 409.2 (5.9) Machines net revenue 298.4 256.0 16.6 Total net revenue 683.3 665.2 2.7 Associate income 2.4 3.8 (36.8) Gross profits tax (57.5) (61.2) 6.0 Staff costs (198.7) (199.6) 0.5 Property costs (1) (97.7) (93.7) (4.3) Content costs (2) (66.6) (66.2) (0.6) Other costs (3) (112.9) (99.2) (13.8) Operating costs (475.9) (458.7) (3.7) Operating profit 152.3 149.1 2.1

(1) Rent, rates and utilities (2) Pictures, data, levy, Sky (3) Includes one off VAT credit of £6.7 million in 2010

page 60

UK Retail – Adjustments to gross win

2011 2010 Year ended 31 December OTC £m Machines £m Total £m OTC £m Machines £m Total £m Variance B(W)% Gross win 392.8 360.9 753.7 417.0 302.8 719.8 4.7 Freebets (7.9) (2.4) (10.3) (7.8) (1.8) (9.6) (7.3) VAT

• (60.1)

(60.1)

• (45.0)

(45.0) (33.6) Net revenue 384.9 298.4 683.3 409.2 256.0 665.2 2.7 Gross win growth 11 v 10 % / 10 v 09 % (5.8) 19.2 4.7 (2.4) 7.2 1.4 Revenue growth 11 v 10 % / 10 v 09 % (5.9) 16.6 2.7 (0.8) 4.8 1.3

page 61

Ireland

Year ended 31 December 2011 £m 2010 £m Variance B(W) % Gross win 81.4 79.9 1.9 Adjustments to gross win (1) (2.2) (2.2)

• Net revenue

79.2 77.7 1.9 Betting tax (7.9) (7.4) (6.8) Other costs (62.1) (59.4) (4.5) Operating profit 9.2 10.9 (15.6) Constant Currency amounts staked increase/(decrease) 9.1 (4.9)% Constant Currency gross win increase/(decrease) 0.7 (4.5)% Shop numbers at the end of the year 292 286

(1) Fair value adjustments, freebets and VAT

page 62

Digital – Results

(1) Adjustments for free bets, promotions and bonuses (2) Payments to third party software and platform providers and geographical partners (3) Does not include the amortisation charge of £2.6m in 2011 in relation to the £40.5m intangible asset (customer relationships) acquired upon the Sponsio acquisition in 2007

Year ended 31 December 2011 £m % age of net revenue 2010 £m % age of net revenue Variance B(W) % Gross win 192.7 192.5 0.1 Fair value adjustments (1) (29.3) (23.1) (26.8) Net revenue 163.4 169.4 (3.5) Betting tax (0.4) 0.2

• Levy and licences

(0.8) 0.5 (0.9) 0.5 11.1% Staff costs (22.5) 13.8 (22.3) 13.2 (0.9)% Software & geographical partners (2) (21.0) 12.9 (20.9) 12.3 (0.5)% Marketing (inc. affiliates) (30.4) 18.6 (31.9) 18.8 4.7% Banking and chargebacks (6.4) 3.9 (7.7) 4.6 16.9% Others costs (inc. depn) (3) (26.9) 16.4 (23.0) 13.6 (17.0)% Operating costs(3) (108.0) 66.1 (106.7) 63.0 (1.2)% Operating profit(3) 55.0 33.7 62.7 37.0 (12.3)%

page 63

Digital – Net revenue

Year ended 31 December

2011 £m 2010 £m

Variance B(W) % Sportsbook 61.7 65.1 (5.2) Casino 56.9 55.3 2.9 Poker 14.2 18.8 (24.5) Bingo 14.0 13.7 2.2 Games 16.6 16.5 0.6 Net revenue 163.4 169.4 (3.5)

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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 (4) As per cost per acquisition, but excluding any marketing costs attributed to CRM activity

Year ended 31 December 2011 2010 B(W) % Unique active players (1) (000s) 878 799 9.9 Real money sign-ups (2) (000s) 435 392 11.0 Cost per acquisition (3) £149 £149

• Adjusted cost per acquisition (4)

£83 £91 8.8

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Digital – KPIs

(1) Revenue per unique active player for the year

Year ended 31 December 2011 2010 Variance B(W) % Sportsbook Gross win margin 6.0% 6.5% (0.5%) pts Unique active players (000s) 636 572 11.2 Average monthly active player days (000s) 925 872 6.1 Yield per unique active player (£) (1) 97 114 (14.9) Casino Unique active players (000s) 238 208 14.4 Average monthly active player days (000s) 154 148 4.1 Yield per unique active player (£) (1) 239 266 (10.2) Poker Unique active players (000s) 83 99 (16.2) Average monthly active player days (000s) 179 226 (20.8) Yield per unique active player (£) (1) 171 191 (10.5) Games Unique active players (000s) 146 139 5.0 Average monthly active player days (000s) 127 125 1.6 Yield per unique active player (£) (1) 113 118 (4.2) Bingo Unique active players (000s) 91 98 (7.1) Average monthly active player days (000s) 115 128 (10.2) Yield per unique active player (£) (1) 153 140 9.3

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Core Telephone Betting – Results(ex HR)

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

Year ended 31 December 2011 £m % age of net revenue 2010 £m % age of net revenue Variance B(W) % Gross win 9.9 16.4 (39.6) Fair value adjustments (0.4) (0.2) Net revenue 9.5 16.2 (41.4) Gross profits tax (1.4) (2.5) 44.0 Levy (0.4) 4.2 (0.8) 4.9 Staff costs (5.3) 55.8 (7.2) 44.4 Direct operating costs (1) (1.6) 16.8 (1.7) 10.5 Others costs (inc. marketing & depn) (4.8) 50.5 (4.4) 27.2 Operating costs (12.1) (14.1) 14.2 Operating loss (4.0) (0.4)