PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2013 25 FEBRUARY 2014 - - PowerPoint PPT Presentation

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PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2013 25 FEBRUARY 2014 - - PowerPoint PPT Presentation

PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2013 25 FEBRUARY 2014 DISCLAIMER Certain statements included or incorporated by reference within this presentation may constitute "forward looking statements" in respect of the operations,


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SLIDE 1

PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2013

25 FEBRUARY 2014

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SLIDE 2

2 DISCLAIMER

Certain statements included or incorporated by reference within this presentation may constitute "forward looking statements" in respect of the

  • perations, performance, prospects and/or financial condition of Ladbrokes plc (the “Company”). Generally, words such as “may”, “could”, “will”,

“expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward looking

  • statements. Such statements are inherently predictive and speculative and are based on the Company’s current expectations and beliefs concerning

future events and are subject to a number of known and unknown risks and uncertainties beyond the Company’s control that could cause actual future financial condition, performance or results to differ materially from any plans, goals and expectations referred to in these forward looking

  • statements. Such statements are also based on numerous assumptions regarding the Company’s present and future strategy and the environment in

which it operates, which may not be accurate. The Company undertakes no obligation to update any forward looking statements contained in this presentation or any other forward looking statements it may make, save in respect of any requirement under applicable law or regulation. Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers, representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty (expressed or implied), omissions, errors or misstatements in this presentation, or any other written

  • r oral statement provided.

Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotions in section 21 of the UK Financial Services and Markets Act 2000. In making this presentation available, the Company makes no recommendation to buy, sell or otherwise deal in shares of the Company or in any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of any such investment activity. This presentation may not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Company and is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation . Any recipients of this presentation outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction, and are treated as having represented that they are able to receive this presentation without contravention

  • f any law or regulation in the jurisdiction in which they reside or conduct business. In particular, the securities referred to in this presentation have not

been and will not be registered under the U.S. Securities Act of 1933 and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1933.

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SLIDE 3

Financial Overview Ian Bull, CFO Business Update Richard Glynn, CEO Q&A 3

Ladbrokes Preliminary Results

Agenda

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SLIDE 4

4

Group Performance Summary

Year ended 31 December 2013

Year ended 31 December FY13 £m FY12 £m B+/W-

Continuing operations before exceptional items (1) Excluding High Rollers (2) 2012 net revenue has been restated for the MGD/VAT impact to enable like for like comparison (3) Includes amortisation of acquisition related intangible assets of £4.0m in 2013 and £2.6m in 2012

Net revenue (1) 1,111.2 1,053.3 +5.5% Net revenue ADJ (1) (2) 1,111.2 1,117.7

  • 0.6%

Operating profit (1)(3) 138.3 206.1

  • 32.9%

Finance costs (25.0) (29.7) +15.8% Profit before tax (1) 113.3 176.4

  • 35.8%

Effective tax rate 5.1% 5.2% High Rollers 5.9 30.0 n/a Underlying EPS (1) 11.7p 18.4p

  • 36.4%

Dividend 8.9p 8.9p n/a Net Debt 398.6 386.9

  • 3.0%
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SLIDE 5

5

Group Operating Profit down 33%

  • UK Retail – net revenue flat(1),content cost and tax headwinds
  • Digital – reflects timing of investment ahead of revenue growth
  • European Retail – decline driven by Ireland
  • Telephone – £1.6m loss, stakes 30% lower post intro. of minimum stake per call
  • Corporate costs – bonus, share based payments and one-off credits

(1) Retail net revenue up 8.3% as reported, but down 0.3% after adjusting 2012 machine revenue to reflect 2013 move to MGD from VAT

£206.1m £138.3m £(46.8)m £(23.6)m £(4.6)m £(0.1)m £7.3m

FY12 EBIT UK Retail Digital European Retail Telephone Corp Costs, net savings FY13 EBIT

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SLIDE 6

£180.7m £133.9m £(1.4)m £(12.9)m £(9.1)m £(5.8)m £(18.2)m £0.6m

FY12 EBIT Gross profit MGD & VAT LFL Content costs Other LFL costs New shops costs SIS income FY13 EBIT

6

UK Retail Operating Profit

Net revenue broadly flat

(1), machine growth offset by OTC

OTC Gross win down 1.0% Stakes down 2.1% GW % up 0.2% ppts

  • OTC – gross win -1.0% driven by -7.2% in Q3 (soft margin across sector)
  • Operating costs – in line with H1 guidance at +6.6% (£13.8m cost savings)
  • Strong free cash flow – at £124.8m post £44.7m capex investment

(1) Reflects adjusted machine revenue which whilst up 20.2% as reported, was up only 1.2% after adjusting 2012 machine revenue to reflect 2013 move to MGD from VAT

+ 6.6% in line with guidance

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SLIDE 7

7

UK Retail Gross Win Stable

20 40 60 80 100

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413

OTC GW per shop Machine GW per shop 88 89 90 89 94 96 93 95 95 91 85 92

Machine Gross Win Growth Total machine gross win Machine gross win per shop per week H1 2013 3.2% (0.5)% Q3 2013 0.7% (5.0)% Q4 2013 2.6% (2.4)% FY13 2.4% (2.1)%

2013

  • Q3 had discernible impact
  • OTC staking broadly stable
  • Machine growth from more shops

2014

  • Q1 strong GW comparative

(18.9%)

  • New machines full benefit in H2
  • Optimise return from investment

in SSBTs, Wifi, content

  • YTD down due to sector wide

weak Jan results

Gross Win per Shop Analysis(1) (£’000)

(1) Analysis excludes greyhound tracks

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SLIDE 8

£(502.5)m £(517.4)m £(535.6)m £(9.1)m £(6.5)m £(5.9)m £(3.5)m £(3.7)m £(18.2)m £13.8m

FY12

  • perating

costs Content costs Staff costs Property costs Marketing costs Other Mitigating actions 2013 LFL Development FY13

  • perating

costs

8

UK Retail Costs – controlled despite headwinds

LFL up 3.0%

2013

  • Overall cost growth of 6.6% within guidance
  • c.£14m (2.8%) saved through action on resourcing, facilities, bonus

2014

  • Expecting c.5% total operating cost increase in 2014
  • c.2% relating to 2013 openings costs (incl. £5m of depreciation)
  • c.3% LFL inc. additional levy payment and SIS Irish racing pictures

Non annualised cost of FY12 + FY13 net openings

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SLIDE 9

2013

  • Recent openings contributing average £66k p.a. (IRR projected c.30%)
  • Estate quality improved
  • Impairment: prudent approach, shop by shop basis

2014

  • Lower growth expected in UK betting shop market – brands benefit from scale
  • Optimisation: reduce tail and focus on core – expect 40/50 closures
  • Retail capex reduction benefiting free cash flow

UK Retail 2014 – focus on optimisation

9

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SLIDE 10

£31.8m £11.5m £8.2m £(16.8)m £(1.2)m £(5.4)m £(3.3)m £3.1m

FY12 EBIT NGR Betting tax Depn Other Costs FY13 PBIT LFL Betdaq & Australia FY13 EBIT

10

Digital 2013 – profit decline revenue driven

  • LFL Revenue – down 9.4%(1) across sportsbook and gaming
  • LFL Operating costs – £147.1m(1) indicative of forward run rate
  • LFL Profit(1) – decline as expected
  • Marketing costs – at 28% of NGR

Australia £(2.9)m Betdaq £(0.4)m £16.8m or 9.4% down like-for-like £3.1m or 1.7% off inc. Aus/Betdaq

(1) Excludes Australia and Betdaq

Op.costs £147.1m(1) 1.6% up on 2012

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Digital – 2014 growth H2 weighted

Revenue

  • Full integration into Playtech systems not complete until Q2 – rev. benefit H2
  • Very high margin comp – 9.6% Q1 ’13
  • Well publicised sector losses from football and horseracing in January this year
  • Some benefit from World Cup (Q finals onwards fall into H2)
  • Modest growth expected for H1 2014 vs. H2 2013

Costs – run rate operating costs c £150m

  • Expecting to increase marketing in H1, FY c.25-30% of net revenue
  • Additional £7m depreciation in 2014
  • Cost of POC factored into plans at 15% of gross win from Dec 2014
  • Launch of Belgium online during H1 – expect small loss

Digital H1 2014 impact

  • Target sequential revenue growth vs H2 2013, EBITDA broadly similar

Note: Digital excludes Australia and Betdaq

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SLIDE 12

£20.2m £15.6m £(4.0)m £(0.6)m

FY12 EBIT Ireland Belgium Spain FY13 EBIT

12

European Retail

Lower 2013 profits driven by costs in Ireland

Ireland: Flat revenue, underlying costs +3.3%

(1), poor Cheltenham

Belgium: Solid after good growth in 2011/12 Spain: EBITDA positive, amounts staked +21% (+67% since 2010) 2014: Further start up losses in Spain c.£2-3m

Flat

(1) Constant currency basis

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13

Exceptional Costs

Playtech partnership the key driver

  • £34m Playtech related
  • Major changes in structure and resourcing
  • Impairment in UK Retail – prudent, shop

by shop basis

  • Other: transaction fees, shop sales and

closures

  • Cash cost £25.9m of which £13.0m in

2013

£m FY13 Business integration and restructuring 18.0 Impairment loss - Digital 15.8 Playtech related 33.8 Impairment loss - Retail licences 11.4 Other 6.4 Total - pre tax 51.6 Tax (5.5) Total - post tax 46.1

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Capital Expenditure

Lower spend post completion of investment phase

2013

  • Spend within guidance

2014

  • UK Retail optimisation
  • Digital: development spend

largely complete

  • Capex: £60-65m
  • Depn and Amortn : £75-80m

49 36 2013 2014

Retail Digital Other

£90m £60-65m

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15

Cashflow

Strong balance sheet & cashflow – dividend covered

2013

  • Net debt stable
  • Net debt : EBITDA(1)(3) 1.96x
  • Underlying cash tax rate: 2.4%

Strong liquidity

  • Bank facilities £540m exp. Dec 2016
  • Bond £225m due Mar 2017

2014

  • FCF enhanced by lower capex
  • Tax rate c.10%
  • Dividend commitment confirmed at

least 8.9p

(1) Excludes exceptional items (2) Covers cost of Betdaq, Playtech, Australia and Chronicle Bet agreements/transactions (3) Excludes High Rollers

£m FY13 EBITDA (1) 209.0 Net finance expense (23.5) Tax (2.9) Capex (89.6) Other 13.2 Cash inflow pre dividend and business combinations 106.2 Dividend (81.2) Business combinations (2) (36.7) Net debt mov't (11.7) Opening net debt (386.9) Closing net debt (398.6)

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16

2014 Guidance Items

Group

  • H1 EBIT sequentially ahead of H2 2013 but lower than H1 2013
  • Depreciation & amortisation c.£75-80m (UK Retail +£5m, Digital+£7m)
  • Corporate costs no higher than FY12 level
  • Capex – £60-65m
  • Underlying tax rate c.10%
  • Dividend commitment at least 8.9p confirmed
  • Number of ordinary shares in issue – c.920m

UK Retail

  • Estate optimisation: closure of 40-50 shops
  • Operating costs +c.5% (+3% LFL) incl. +£5m depreciation
  • SIS income zero (2012: £4.0m)

Digital

  • Drive digital revenue from the World Cup onwards
  • H1 2014 vs H2 2013: revenue ahead, EBITDA similar
  • Incl. +£7m depreciation

European Retail

  • Expansion in Spain – expect c.£2-3m further start up losses
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2013 Summary

  • 2013 financially disappointing, operational progress strong
  • UK Retail expansion complete – now focus on optimisation
  • Actions to limit cost growth continue across all divisions
  • Digital – significant operational changes
  • Strong cash generation and balance sheet underpins sustainable dividend
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SLIDE 18

Financial Overview Ian Bull, CFO Business Update Richard Glynn, CEO Q&A 18

Ladbrokes Preliminary Results

Agenda

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SLIDE 19

19

H2 2013 – operational delivery

UK Retail

  • SSBTs
  • Sky and Wifi across estate
  • More broadcast channels and control over content
  • New machine roll-out

Digital

  • Fully establish Ladbrokes Israel
  • Mobile roll out on Mobenga
  • Transition to Playtech for poker
  • Sports betting wallet into IMS
  • Transition to Playtech casino
  • Consistent back office and CRM across all products

Management structure

  • Clear division of responsibilities with specific deliverables

On track for Q2 2014 Underway

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Near term focus

Delivery of a competitive customer proposition

Building Competitive Offer

Brand Product Capability

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SLIDE 21

2013 2014

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Product

Mobilisation key to digital success

What are we doing?

  • Digital gambling will be >50% on mobile devices by 2017(1)
  • Simple, intuitive app launched on plan in Dec 2013 on Mobenga
  • Continuous cycle of improvement
  • Mobile development centre established. Chelsea Apps Factory partnership.

Tangible but early results(2)

  • Mobile actives +35%, amounts staked +93%
  • Sign ups +123%, iOS App downloads exceed 40% of FY13

Early signs are encouraging

(1) H2 Gambling Capital Nov 2013 (2) For the period 1 January to 23 February 2014

Mobile actives

To start betting on Sports

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Product

Enhancing desktop sports

Actions

  • Improving the basics – speed, navigation, access, latency
  • +90% improvement in page load times, +400% peak load capacity
  • Added functionality and better pricing
  • Live streaming added from January (Perform)
  • Ladbrokes Exchange added Q4 2013

2014

  • Defined plans to maintain momentum and ensure competitive offer
  • Actives continued to stabilise in January +2% vs Dec 2013

Improved experience Live streaming Better pricing

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Product

Ladbrokes Exchange a competitive advantage

  • A differentiated exchange product
  • Linked to Retail: exchange customers can deposit
  • r withdraw from any Ladbrokes shop
  • Ladbrokes ‘Red Box’: ability to cash out or hedge
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Product

Gaming migration

New poker launched in December 2013 Live dealer launched in January 2014

Complete gaming migration to Playtech platforms during Q2 2014

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Product

Retail enhancements

  • More content, more ways to bet mirrors digital flexibility in retail format
  • Sky TV/Wifi across estate enhances retail environment and dwell time
  • New machines to maintain competitive position – benefit from H2 onwards

73% 49%

Regular gamblers using retail Regular mobile gamblers using retail Retail a key part of mobile gamblers experience (1)

c.1,400 Easibet terminals (SSBTs) now in shops Over 9,000 Clarity cabinets rolling out by June

(1) Data source : GB Syndicated Gambling Research – Kantar – Oct to Dec 2013

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Capability

Strengthened team, clear accountability

DIGITAL RETAIL

  • Clear accountability at MD level and below
  • Simple structure, clear objectives
  • Enhanced experience and expertise – playing to our strengths

INTERNATIONAL

Jim Mullen Damian Cope Nick Rust

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Capability

Unlocking the value of our partnership with Playtech

Ladbrokes Israel: c.100 people, right skills Benefits flow from IMS IMS = single customer betting and gaming experience IMS = single customer wallet and view IMS = marketing campaigns based on live multi-product data Sportsbook integration with IMS on track for early Q2 Remaining products migrate early Q2

INTEGRATION ON TRACK FOR Q2 DELIVERY

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35 35 28 32 16 20 21 18 7 5 5 4 3 3 8 8 1 1 1 1 1 5 10 15 20 25 30 35 40 Q1 '10 Q1 '11 Q1 '12 Q1 '13 Ladbrokes William Hill Coral Betfred Tote Betfair

Source: TNS Omnibus (Q1 2006-13) Base: GB Adults 18+ 1900

Ladbrokes Brand

Still the most recognised betting brand

32% of adults mentioned Ladbrokes as 1st brand recalled

%

Spontaneous awareness 1st mention

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SLIDE 29

22 17 15 15 6 29 28 23 21 13 Ladbrokes William Hill Coral Betfred/Totesport Paddy Power Last 7 Days Last 12 Months

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Ladbrokes Brand

And the most used betting brand

Source: GB Syndicated Gambling Research – Kantar – Oct to Dec 2013

Retail or online brand usage amongst all retail or online core gamblers (recency) Oct – Dec 2013 % respondents using brand 51 45 38 36 19

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Ladbrokes Brand

Shop estate underpins inherent strength

% respondents using brand 21 17 16 12 2 39 35 31 25 11 Ladbrokes William Hill Coral Betfred/Totesport Paddy Power Last 7 Days Last 12 Months 13 37 47 52 In Q4’2013 60% of regular retail gamblers have been into Ladbrokes in the last 12 months to place a bet

  • r play on gaming machines. 21% of regular retail gamblers in Q4’2013 have been into Ladbrokes in the

last 7 days 60

Source: GB Syndicated Gambling Research – Kantar – Oct to Dec 2013

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Total Gambling Market

Multi-channel players high value

Total market (retail, online & mobile) c.6.9m people or 14% of 18+ population

Retail 5.4m people 79% of total market Use of other channels: 18% PC 17% Mobile 26% PC or Mobile Desktop 2.2m people 32% of total market Use of other channels: 44% retail 43% mobile 64% retail or mobile Mobile 1.6m people 24% of total market Use of other channels: 58% retail 58% PC 85% Retail / PC

  • Retail largest part of market and key part of overall gamblers experience
  • High proportion of cross channel usage, particularly within mobile

Retail

Desktop Mobile

1.7x more valuable

Source: GB Syndicated Gambling Research – Kantar – Oct to Dec 2013

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Ladbrokes 7.7%

William Hill 18.4% Bet 365 15.0% Betfair 13.6% Paddy Power 9.5% Sky Bet 6.9% Gamesys 6.1% 888 2.7% Other 20.1%

Growing Market Plus Strong Brand

Sources: GBGC, H2 and Gambling Data, 2012 (1) Growth over two years to 2015

UK sports & casino market share (NGR)

  • Total online market worth £2 billion
  • Market growth est.15% to 2015 (1)
  • Sportsbook and casino driving growth
  • Ladbrokes new sports and casino

products due in early 2014

Product + People + strong Brand = Opportunity

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  • POC tax – needs regulatory teeth
  • Evidenced based approach required
  • Focus on player not product
  • Social responsibility and gambling are synonymous to Ladbrokes
  • Responsible gambling at heart of our business
  • Accelerate use of Odds On loyalty card
  • Trial: All players staking in excess of £60 must register with Odds On to play
  • Develop algorithms to help identify problem gambling triggers
  • Executive remuneration linked to responsible gambling from 2015
  • In all territories where we operate
  • Shop related planning approach
  • We will continue to engage with local authorities and communities

Regulation

Leading on behalf of the industry

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International

Growing presence outside the UK

  • Leverage brand value where relevant and retail/digital expertise beyond the UK
  • Building further growth in existing territories
  • Retaining flexible approach to market entry

Belgium New products into retail in 2014 – SSBTs and virtual Digital services launching in H1 Australia Low cost entry into growing market – high Ladbrokes brand awareness Pleasing level of acquisition at competitive CPAs Spain Extended JV with Cirsa, with Sportium online launched in 2013 Continue retail expansion – Murcia & Galicia 2013, Catalunya expected 2014

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SLIDE 35

35 UK Retail

  • Estate optimisation
  • Reduce capex and focus on returns
  • Complete new machine roll out before the World Cup

Digital

  • Sports betting wallet into IMS
  • Transition to Playtech casino
  • Consistent back office and CRM across all products

H1 about operational delivery, H2 is about growth

Maintaining the momentum

Key Objectives for H1 2014

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36 Peter Erskine, Chairman Richard Glynn, CEO Ian Bull, CFO Nick Rust, MD Retail Jim Mullen, MD Digital Damian Cope, MD International

LADBROKES PRELIMINARY RESULTS Questions & Answers

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SLIDE 37

LADBROKES PRELIMINARY RESULTS

Appendices

37

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SLIDE 38

Year ended 31 December Net revenue Operating profit(1) 2013 £m 2012 £m Variance B(W) £m 2013 £m 2012 £m Variance B(W) £m UK Retail 800.9 739.5 61.4 133.9 180.7 (46.8) European Retail 128.8 126.2 2.6 15.6 20.2 (4.6) Digital(2) 175.0 178.1 (3.1) 8.2 31.8 (23.6) Core Telephone Betting 6.5 9.5 (3.0) (1.6) (1.5) (0.1) Corporate costs

  • (17.8)

(25.1) 7.3 Total 1,111.2 1,053.3 57.9 138.3 206.1 (67.8)

(1) Operating profit is before exceptional items (2) 2013 includes £9.7m net revenue and £0.4m operating loss from Betdaq & £4.0m net revenue and £2.9m operating loss from Australia

GROUP

Net revenue and operating profit (ex. High Rollers)

38

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SLIDE 39

Year ended 31 December Net revenue Gross win 2013 £m 2012 £m Variance B(W) % 2013 £m 2012 £m Variance B(W) % UK Retail 800.9 739.5 8.3 826.2 820.5 0.7 European Retail 128.8 126.2 2.1 130.9 128.5 1.9 Digital(1) 175.0 178.1 (1.7) 224.0 213.1 5.1 Core Telephone Betting 6.5 9.5 (31.6) 7.2 10.3 (30.1) Total 1,111.2 1,053.3 5.5 1,188.3 1,172.4 1.4

(1) 2013 includes £9.7m net revenue and £9.9m gross win from Betdaq & £4.0m net revenue and £7.4m gross win from Australia

GROUP

Net revenue and gross win (ex. High Rollers)

39

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SLIDE 40

Year ended 31 December 2013 £m 2012 (restated) £m Variance B(W) % UK Retail(1) 800.9 803.0 (0.3) European Retail(1) 128.8 127.1 1.3 Digital(2) 175.0 178.1 (1.7) Core Telephone Betting 6.5 9.5 (31.6) Total 1,111.2 1,117.7 (0.6)

(1) 2012 UK and European Retail net revenue has been restated to allow like for like comparison to 2013 UK and European Retail net revenue where MGD replaced VAT for Machines from 1 February 2013. MGD is deducted from net revenue whereas VAT was deducted from gross win to arrive at net revenue (2) 2013 includes £9.7m net revenue from Betdaq & £4.0m net revenue from Australia

GROUP

Net revenue (restated and ex. High Rollers)

40

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SLIDE 41

Year ended 31 December 2013 2012 Variance B(W)

OTC Gross win margin 16.9% 16.7% 0.2pp Like for like OTC amts staked decline (5.0)% (4.4)% (0.6)pp Like for like OTC net revenue (decline)/growth (4.4)% 2.1% (6.5)pp Like for like total costs (1) increase 3.0% 3.3% 0.3pp Like for like shop staff costs decrease (1.9)% (4.1)% 2.2pp Stake per slip (2) £8.58 £8.30 3.4% Average number of machines 8,874 8,345 6.3% Average weekly gross win per machine £913 £946 (3.5)% Average weekly machine gross win per shop £3,592 £3,670 (2.1)%

Like for like takes into account shop openings and closures (1) Excludes VAT on Machines, MGD, freebets and gross profits tax (2) Slips exclude machines

UK RETAIL

KPIs

41

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SLIDE 42

Year ended 31 December 2013 £m 2012 (1) £m Variance B(W)%

OTC gross win 403.6 407.8 (1.0) Machines gross win 422.6 412.7 2.4 Total gross win 826.2 820.5 0.7 OTC net revenue 392.5 399.6 (1.8) Machines net revenue 408.4 403.4 1.2 Total net revenue 800.9 803.0 (0.3) Associate income 4.0 3.4 17.6 Gross profits tax (59.0) (59.7) 1.2 Machine Gaming Duty/VAT (76.4) (63.5) (20.3) Staff costs (201.4) (197.7) (1.9) Property costs (2) (113.9) (103.5) (10.0) Content costs (3) (87.1) (74.7) (16.6) Other costs (inc. depn) (4) (133.2) (126.6) (5.2) Operating costs (535.6) (502.5) (6.6) Operating profit 133.9 180.7 (25.9)

(1) 2012 proforma to reflect the change from VAT on Machines to MGD (2) Rent, rates and utilities

UK RETAIL

P&L (ex. exceptional items)

42

(3) Pictures, data, levy, Sky TV (4) Depreciation = £35.6m (2012: £33.7m)

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SLIDE 43

Year ended 31 December 2013 2012 (1) OTC £m Machines £m Total £m OTC £m Machines £m Total £m Variance B(W)%

Gross win 403.6 422.6 826.2 407.8 412.7 820.5 0.7 Freebets (11.1) (8.9) (20.0) (8.2) (4.1) (12.3) (62.6) VAT

  • (5.3)

(5.3)

  • (5.2)

(5.2) (1.9) Net revenue 392.5 408.4 800.9 399.6 403.4 803.0 (0.3)

(1) 2012 proforma to reflect the change from VAT on Machines to MGD

UK RETAIL

Gross win adjustments

43

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SLIDE 44

Year ended 31 December 2013 £m % of net revenue 2012 £m % of net revenue B(W)% Net revenue 161.3 178.1 (9.4) Betting tax (2.7) 1.7 (1.5) 0.8 (80.0) Levy and licenses (0.9) 0.6 (0.9) 0.5

  • Staff costs

(25.0) 15.5 (25.9) 14.5 3.5 Software and geographical partners (1) (22.6) 14.0 (21.2) 11.9 (6.6) Marketing (including affiliates) (44.6) 27.7 (48.3) 27.1 7.7 Banking and chargebacks (6.8) 4.2 (6.5) 3.7 (4.6) Other costs (including depreciation) (2) (47.2) 29.3 (42.0) 23.6 (12.4) Operating costs (2) (147.1) 91.2 (144.8) 81.3 (1.6) Digital operating profit 11.5 7.1 31.8 17.9 (63.8) Betdaq operating loss (0.4) na

  • Australia operating loss

(2.9) na

  • Total Digital operating profit

8.2 na 31.8 17.9 (74.2)

(1) Payments to third party software and platform providers and geographical partners (2) Includes depreciation and amortisation of £19.4m in 2013 (£14.0m in 2012)

DIGITAL

P&L (ex. exceptional items)

44

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SLIDE 45

(1) A player who contributed to rake and/or placed a wager during the year (2) A new player who has registered and deposited funds during the year (3) Revenue per unique active player for the year

Year ended 31 December 2013 2012 Variance B(W) %

Total Digital Unique active players (1) (000s) 873 1,010 (13.6) Real money sign-ups (2) (000s) 445 548 (18.8) Sportsbook Gross win margin 7.9% 7.0% 0.9pp Unique active players (1) (000s) 661 764 (13.5) Average monthly active player days (000s) 861 1,018 (15.4) Yield per unique active player (£) (3) 111 102 8.8 Casino Unique active players (1) (000s) 200 280 (28.6) Average monthly active player days (000s) 136 171 (20.5) Yield per unique active player (£) (3) 235 199 18.1 Poker Unique active players (1) (000s) 53 80 (33.8) Average monthly active player days (000s) 99 143 (30.8) Yield per unique active player (£) (3) 142 135 5.2 Games Unique active players (1) (000s) 147 165 (10.9) Average monthly active player days (000s) 136 144 (5.6) Yield per unique active player (£) (3) 135 122 10.7 Bingo Unique active players (1) (000s) 73 90 (18.9) Average monthly active player days (000s) 99 111 (10.8) Yield per unique active player (£) (3) 163 151 7.9

DIGITAL

KPIs (ex. Australia and Betdaq)

45

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SLIDE 46

UK RETAIL AND DIGITAL

Quarterly figures

46

Q1 2013 vs. Q1 2012 Q2 2013 vs. Q2 2012 Q3 2013 vs. Q3 2012 Q4 2013 vs. Q4 2012 UK Retail OTC Stakes (11.2)% (5.8)% 5.1% 4.6% OTC GW Margin 1.7pp 1.6pp (2.0)pp (0.4)pp Machine Gross Win Growth 3.2% 3.2% 0.7% 2.5% Machine Gross Win per shop per week 0.3% (1.9)% (5.0)% (2.4)% Total Net Revenue YoY 5.2% 11.6% 5.1% 11.2% Total Net Revenue YoY (Restated)

(1)

(0.8)% 2.1% (3.9)% 1.6% Digital (2) Sportsbook Net Revenue 13.2% 5.7% (23.0)% (15.9)% Gaming Net Revenue (11.4)% (8.6)% (13.6)% (17.2)% Sportsbook Gross Win Margin 2.2pp 2.2pp (1.0)pp (0.3)pp

(1) Net revenue has been restated to allow for like for like comparison to 2013 UK and European Retail net revenue where MGD replaced VAT for Machines from 1 February

  • 2013. MGD is deducted from net revenue whereas VAT was deducted from gross win to arrive at net revenue

(2) Excludes Australia and Betdaq

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SLIDE 47

(1) 2012 proforma to reflect the change from VAT on Machines to MGD (2) Fair value adjustments, freebets and VAT

Year ended 31 December 2013 £m 2012 (1) £m Variance B(W)% Gross win 83.0 82.3 0.9 Adjustment to gross win (2) (2.1) (1.4) (50.0) Net revenue 80.9 80.9

  • Betting tax and Machine Gaming Duty

(8.4) (8.3) (1.2) Operating costs (62.3) (58.4) (6.7) Operating profit 10.2 14.2 (28.2) Constant currency amounts staked decrease (7.4)% (3.5)% n/a Constant currency gross win (decrease)/increase (1.8)% 5.5% n/a Shop numbers at the end of the period 295 292 1.0

IRELAND

P&L (ex. exceptional items)

47