PRELIMINARY RESULTS Year ended 31 December 2014 Ladbrokes plc 26 - - PowerPoint PPT Presentation

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PRELIMINARY RESULTS Year ended 31 December 2014 Ladbrokes plc 26 - - PowerPoint PPT Presentation

PRELIMINARY RESULTS Year ended 31 December 2014 Ladbrokes plc 26 February 2015 Disclaimer Certain statements included or incorporated by reference within this presentation may constitute "forward looking statements" in respect of the


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SLIDE 1

PRELIMINARY RESULTS Year ended 31 December 2014

Ladbrokes plc 26 February 2015

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SLIDE 2

Disclaimer

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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 of 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

INTRODUCTION Peter Erskine, Chairman

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SLIDE 4

AGENDA

Financial Overview Ian Bull, CFO Operational Review Richard Glynn, CEO Q&A

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SLIDE 5

5

Group Financial Performance Summary

Year ended 31 December 2014 2013 Variance £m £m

Before exceptional items (1) Excluding High Rollers (2) Includes amortisation of acquisition related intangible assets of £5.6m in FY14 and £4.0m in FY13 (3) 2013 net revenue has been adjusted to reflect the change from VAT to MGD on 1 February 2013

Net revenue

(1)(3)

1,158.9 1,116.6 +3.8% Operating profit

(1)(2)

125.4 138.3 (9.3)% Finance costs (27.4) (25.0) (9.6)% Profit before tax

(1)

98.0 113.3 (13.5)% Effective tax rate 5.0% 5.1% High Rollers 14.2 5.9 +141% Underlying EPS

(1)

10.1p 11.7p (13.7)% Dividend 8.9p 8.9p Net debt 419.2 398.6 (5.2)%

  • 2014 – year of exceptional football:
  • Q1 Football
  • A good World Cup
  • Boxing Day alone costs c.£8 million
  • H2 operating profit: +30%, H2 growth
  • bjectives delivered
  • Tax: lower than guidance
  • 2014 DPS: 8.9p per share as committed
  • High Rollers: strong contribution in H1
  • Net debt: broadly stable
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SLIDE 6

Group Operating Profit

KPIs on track; Digital back to growth; 2014 industry-wide results

6

  • Overall
  • UK Retail: significantly impacted by Boxing Day losses
  • Digital: strong mobile, Gaming back to growth, y-o-y EBIT growth supported by Australia
  • European Retail: good progress in Belgium and Spain, Ireland remains challenging
  • Depreciation and amortisation: £77.7m, in middle of guidance range
  • Corporate costs: £22.9m, better than guidance
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SLIDE 7

7

  • OTC Staking broadly stable: -1.4%; football +29% (+12% ex. W’Cup)
  • OTC Gross win margin: 16.4% (-0.5pps)
  • Machines: strong in H2 driven by slots (gross win Q3 +4.9%; Q4 +5.9%)
  • Cost targets exceeded: op. costs +2.7%. H2 savings plan delivered c.£3m.
  • SIS: contributes £1.2m in H2
  • Estate optimisation(2): 89 shops closed; exceptional cost £26.9m (cash £12.1m(3)); c.60 to close in 2015

(1) Excludes Boxing Day loss (2) Shops closed in 2014 generated operating loss of £1.1m with net revenue of £6.2m (3) 2014 cash costs £4.9m and future cash costs £7.2m

UK Retail Operating Profit

Underlying OTC stable, machines and costs ahead of guidance

£133.9m £125.2m £119.3m £(5.3)m £(3.4)m £(5.9)m £(0.9)m £(17.4)m £18.3m

FY13 EBIT Boxing Day loss GPT & MGD Adjusted OTC margin (1) OTC staking/freebets Machines revenue Costs/SIS FY14 EBIT

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SLIDE 8

UK Retail

Gross win per shop trends remain resilient

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  • 2014: after tough Q1 results, gross win per shop exceeds or achieves 5 year average in last

three quarters driven by machine growth and effective estate optimisation

  • 2015: target increased football staking. Expect further, gradual decline in traditional products.

Target margins of c.16.5-17.0%

  • Resilient cash generation continues: operating FCF(2) of c.£138.0m (FY13: £124.8m)

(1) Analysis excludes greyhound tracks (2) Operating FCF = EBITDA before exceptional items – Capex

84 86 88 89 90 89 94 96 93 95 91 95 85 92 86 94 91 91 OTC GW per shop (1) (£000) Machine GW per shop (£000)

Average = 91

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SLIDE 9

0.7% 2.5% 2.2% 1.5% 4.9% 5.9%

  • 5.0%
  • 2.4%
  • 1.1%

0.4% 6.5% 9.8%

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

Machine GW yoy growth Machine GW per shop per week yoy growth

UK Retail Estate Gross Win

Machine growth remains strong and improved social responsibility

Machine investment delivering growth

  • Q3 and Q4 deliver growth ahead of our

expectations

  • Non roulette B3 (lower stake) slot products key

driver (+24% yoy in H2); roulette stable

  • 14Q4 mix: non B2 now 38% of machine gross

win (13Q4: 34%) FY15

  • Higher MGD from 1 March 2015
  • DCMS regulations to impact on £50+ B2 games

from April 2015

  • Target revenue growth of c.5% excluding DCMS

impact

  • DCMS guidance: mid single digit impact on B2

spend from April 2015

9

ABB Code implementation/ Clarity roll-out

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SLIDE 10

10

Adverse Results

When are exceptional results exceptional?

2014 a year with several weeks of large losses

  • Large wins and losses normal part of our

business as we saw in H1 football

  • Boxing Day loss – truly exceptional at 11

standard deviations from average. Too late in FY14 to benefit from recycling

  • Impacted UK OTC margins by around 1 ppt in

Q4, resulted in a FY 2014 GW margin of 16.4% below our target range of 16.5-17.0%

  • We recovered well from losses in 14Q1 as

customers recycled winnings into football betting

  • Digital recycling faster than in Retail
  • Industry-wide football loss in week 3 and week 8
  • f 2015

Boxing Day 2014

10s Football Daily Gross Win/Loss Frequency 2009-2014

138 days of >£1m win

OTC Gross Win Margin Trends

18.9% 16.9% 14.9% 17.1% 16.2% 16.5% 17.0% 15.6% 16.9%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 14 ex. Boxing Day loss

Average = 16.6%

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SLIDE 11

UK Retail

Costs performance better than guidance, more savings in 2015

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Year ended 31 December 2014 £m 2013 (1) £m Variance Staff 200.5 201.4 (0.4)% Property 115.8 113.9 +1.7% Content 96.8 87.1 +11.1% Depreciation 39.3 35.6 +10.4% Other 97.8 97.6 +0.2% Operating Costs 550.2 535.6 +2.7%

  • Trend better than Feb 2014 guidance of +c.5%
  • Staff costs – more effective scheduling
  • Rental – renewals better than reflected in our

plans

  • Content – voluntary levy increase, Sky roll-out

and normal inflationary increases

  • 2015 guidance:
  • Benefit from FY14/15 shop closures, operating

costs will decline by c.1-2%

  • Like for like increase of c.1-2%
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SLIDE 12

Digital Net Revenue Growth +23%

Sportsbook staking strong; Gaming growth in Q4; Australia on track

  • Sportsbook: overall staking +32% driven by mobile actives and good World Cup
  • Gaming: return to growth during H2 (Q3: flat; Q4: +9.3%), good active growth in Q4
  • Exchanges: revenue growth 36% driven by Betdaq
  • Australia: significant growth as we maintain momentum and develop market share
  • Regulated markets: FY 2014 92% of Digital NGR

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Q4 return to growth +£1.9m

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SLIDE 13

Digital Operating Profit growth +71%

Revenue growth and strong cost control

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  • H2 operating profit: returned to growth (14H2: £11.0m, 13H2: £(2.6)m)
  • Digital Costs(1): marketing spend c.27% of NGR; good cost control; depreciation in line with guidance
  • 2015 POC: 90-95% of Sportsbook/Gaming NGR UK based
  • Exchanges: revenue growth delivers positive EBIT contribution in H2
  • International investments: Ladbrokes.be and Sportium.es in line with guidance; Australia profitable

(1) Ladbrokes.com

£8.2m £14.0m £(6.3)m £(2.1)m £(2.3)m £8.9m £1.0m £1.1m £5.5m

FY13 EBIT Sportsbook & Gaming NGR Operating costs/GPT D&A POC Exchanges yoy EBIT Australia yoy EBIT Other Regulated yoy EBIT FY14 EBIT

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SLIDE 14

Digital – Ladbrokes Australia

Strong performance, attractive returns

(1) Statutory data - Ladbrokes Australia acquired in September 2013; Betstar acquired in April 2014 (2) 2013 Pro forma data includes Ladbrokes Australia, Bookmaker.com for full 12 months in 2013 and Betstar in 2013 for equivalent period to 2014 ownership period (3) Based on 2014 statutory EBITDA of AUD8.4m

  • Entered Australia Q3 2013
  • Focus on growing market share with emphasis
  • n retail customers
  • On track with acquisition plan. Betstar cost

synergies delivered in 6 weeks

  • Strong staking growth, good cost control and

normalised Spring Carnival results delivered improvement in PBIT

  • Attractively priced entry into a growth market

enhanced through Betstar acquisition in April

  • Agreed to acquire remaining contingent vendor

payments at significant discount in Dec 2014

  • Total entry cost of Australia AUD78.7m – implies

c.9.4x EBITDA(3) multiple

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31 December 2014 AUDm 2013 AUDm(1) Var. 2013 Pro forma AUDm(2) Var. Staking 928.4 258.5 +259% 745.6 +25% Gross win 83.3 13.0 +541% 35.5 +135% Gross win margin 9.0% 5.0% +4ppts 4.8% +4.2ppts Net revenue 63.2 6.9 +816% 25.2 +151% Operating costs (58.5) (11.8) (396)% (41.1) (42)% Operating profit 4.7 (4.9) 196% (15.9) +130% Actives 81.9k 32.1k 155% 43.5k +88%

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SLIDE 15

European Retail

Good progress in Belgium and Spain, RoI remains tough

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  • Belgium: investment in new products driving growth, good cost control
  • Spain: strong revenue growth, roll-out in Catalunya completed. EBITDA positive
  • Ireland: Northern Ireland similar trends to UK Retail; RoI aggressive competition; RoI business under
  • perational review by International team

Year ended 31 December 2014 2013 Variance Gross Win Belgium (€m) 62.3 56.5 +10% Spain JV(1) (€m) 21.3 13.8 +54% Ireland (£m) 73.0 83.0 (12)% EBIT Belgium (€m) 12.0 9.9 +21% Spain JV(1) (€m) (1.2) (3.5) +66% Ireland (£m) 4.4 10.2 (57)% European Retail (£m - reported) 13.0 15.6 (17)%

(1) Being 50% of Sportium JV gross win and EBIT

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SLIDE 16

Cashflow and Exceptional Items

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  • Capex in line with guidance
  • UK Retail £20.6m; Digital £29.4m; Europe/other £9.9m
  • 2015: capex at similar level for the group
  • Other
  • Pension payments, investment in joint ventures and

working capital adjustments not expected to recur in 2015

  • Exceptional cashflow
  • £17.9m includes £13.0m for FY13 and £4.9m for FY14
  • 2014 P&L exceptional charge £74.5m includes:
  • UK and Irish licence impairment £20.8m
  • UK and Irish shop closures: £30.7m
  • European VAT provision - £5.7m
  • Software impairment of £23.1m as we transition to

Mobenga in H2 2015

  • Cashflow: FY14 £4.9m, FY15 £10.5m ; FY16 on:£5.0m

(1) Excludes exceptional items, includes high rollers (2) Covers cost of Betstar and earnout settlement in respect of Bookmaker

£m 2014 EBITDA (1) 217.3 Net finance expense (26.4) Tax (2.1) Capex (59.9) Other (26.8) Operating free cash flow 102.1 Dividend (81.4) Acquisitions (2) (23.4) Exceptional items (17.9) Net debt movement (20.6) Opening net debt (398.6) Closing net debt (419.2) Net Debt / EBITDA(1) 1.9x

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SLIDE 17

2015 Financial Guidance Summary

Group

  • Depreciation & amortisation c.£80-82m (UK Retail flat; Digital +£3-4m; Europe +£1m)
  • Corporate costs c.£23-25m
  • Capex – £60-65m
  • Underlying tax rate c.10%
  • 2015 dividend: Board currently intends to pay 8.9p

UK Retail

  • Estate optimisation: c.60 shops to close in 2015
  • OTC gross win margin target range 16.5-17.0%
  • Machines revenue growth c.5% excluding a mid single digit DCMS impact on B2 from April
  • Operating costs down c.1-2% (+1-2% LFL); depreciation flat; SIS income £2-4m

Digital

  • Ladbrokes.com
  • Lower marketing intensity than 2014
  • Flow through at c.55-60% rate as 2014 ex. POC
  • POC – assume 90-95% of Ladbrokes.com is UK
  • Grey market impact – c.£6m on NGR and c.£3m on EBIT
  • Australia – target strong double digit revenue growth; invest in market share; target mid-single digit profitability
  • Belgium and Sportium online - lower start up losses
  • Launch in LatAm with Sportium small impact

European Retail

  • Spain continued small EBIT loss as we roll out into smaller regions

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SLIDE 18

Summary

Tough H1; Good W’Cup; H2 operating profit growth objective delivered

  • UK Retail: Stable GW despite tough OTC results, good machines, SSBT and cost performance
  • Digital: turnaround building financial momentum Q3 into Q4, strong mobile sportsbook, Gaming positive
  • Europe: improving performance in Belgium and Spain, RoI challenging
  • FCF/Balance sheet: strong cash generation and sound balance sheet
  • FY 2015 : significant externally imposed headwinds (POC, MGD). Q4 KPIs and current trading metrics give

confidence in generating continued underlying growth, subject to a normal run of sporting results and no further adverse regulation/taxes

  • Current trading to 24 February:
  • Net Revenue +1.5%: Adverse impact from wk 3 and wk 8 football; losses to a small number of larger

customers

  • UK Retail: OTC staking trends as Q4 and stable margins; machines good growth
  • Ladbrokes.com: underlying customer metrics good
  • Australia: strong growth, supported by Betstar acquisition
  • Dividend: currently intend to maintain at 8.9p for 2015

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SLIDE 19

AGENDA

Financial Overview Ian Bull, CFO Operational Review Richard Glynn, CEO Q&A

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SLIDE 20

We have delivered on all of our Operational Objectives

20 Result: Ladbrokes fundamentally stronger and more competitive

FY13 FY14 UK Retail

  • 2014 Estate optimisation
  • Focus on football, margins
  • Clarity roll-out pre World Cup
  • 1,730 SSBT roll out pre World Cup

Digital

  • Single customer wallet on IMS
  • Transition to Playtech casino and bingo
  • Consistent back office and CRM across all products
  • Integrate Ladbrokes Exchange
  • Establish Ladbrokes Israel
  • Establish Ladbrokes Mobile Centre of Excellence
  • Attract senior talent

International

  • Australia: establish and increase presence (Betstar)
  • Launch Belgium online
  • SSBT roll out in Belgium
  • Expand Sportium into Catalunya
  • Launch Sportium online

Trading

  • Enhance proprietary trading capability
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SLIDE 21

Long Term Initiatives are working

UK Retail competitiveness

  • Football: clear and relevant offer, continuous focus on growth
  • SSBTs: more ways to bet, more markets, more to come
  • New Clarity machines: more games, more features
  • Racing: reinforcing market leadership
  • Costs: maintain focus on capex/opex efficiency

Digital growth

  • Sportsbook: market leading Mobile product; tablet in 14Q4
  • Gaming: best in class Casino & Gaming offers
  • IMS: improved customer experience, targeted/relevant offers
  • Ladbrokes Israel: effective and intelligent marketing

International growth

  • Australia: acquired challenger brands at attractive price
  • Belgium: a new offer in OTC with SSBTs, Virtual
  • Spain: leading market positions established

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Regulation

  • Major steps forward led by Ladbrokes

Multi-channel

  • Launched in Spain and Belgium alongside UK and Ireland

Trading

  • Proprietary trading platform investment; more products
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SLIDE 22

Competitive in Digital

Mobile sportsbook: strong customer response

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Mobile Sportsbook Staking Q4 14 FY 14 Mobile Sportsbook Actives Q4 14 FY 14 +110% +114% +62% +45%

  • Continuous product innovation
  • Mobile now 63% (Q4) of digital staking
  • Mobile is driving strong overall sportsbook staking growth (FY14 +32%, Q4: +30%)
  • Momentum continues in 2015
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SLIDE 23

Competitive in Digital

Better offer across Digital Formats

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Dec 14 New Tablet app/site launch

  • Building on mobile success on stable Mobenga platform
  • Harmonised customer experience
  • Video streaming, In-Play betting, cross-sell
  • Early response positive, share of mobile NGR +6ppts

Evolving Desktop offer

  • Desktop secondary to mobile
  • Customer experience driven by mobile product
  • Next generation Desktop product, harmonised with overall

Ladbrokes digital offer

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SLIDE 24
  • 8%

3% 57%

  • 23%
  • 5%

7%

Q2 Q3 Q4

Actives Revenue

Ladbrokes Israel fully engaged

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  • Games:

– products ready for market in Q1 14 – Ladbrokes Israel engages and delivers growth from Q2

  • Casino:

– transitioned Casino to Playtech in April – Ladbrokes Israel engages and delivers growth from Q3

  • IMS from April 2014:

– key enabler for Ladbrokes Israel and Gaming growth – allows efficient utilisation of digital marketing expertise – gives customers single wallet functionality

Competitive in Digital

Returning Gaming to Growth

Casino Games Impacted by HVC losses

  • 8%

28% 21% 31%

  • 9%

8% 31% 43%

Q1 Q2 Q3 Q4

Actives Revenue

Ladbrokes Israel fully engaged

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SLIDE 25

Improving Competitiveness in UK Retail

Key objectives

  • Driving Football OTC growth:
  • clear and relevant offer, continuous focus on growth
  • SSBTs: key for football, more ways to bet, more markets, more to come
  • Addressing Racing OTC trends:
  • reinforcing market leadership
  • enhance attractiveness of product
  • Upgrading our Trading capabilities
  • Enhanced machine offer:
  • more games, more features
  • drive more B3/lower stakes content
  • enhanced social responsibility standards
  • Costs: maintain focus on capex/opex efficiency

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SLIDE 26

Improving Competitiveness in UK Retail

Driving Football OTC growth: retail offer

  • Growing football staking and multiples key
  • World Cup: staking growth on 2010 – a competitive offer

in competitive market

  • Product innovation: “TPTT” coupons 0% => 35% in 13

weeks; “Price Boost”; better in store content

  • SSBTs key to maintaining momentum
  • Continuous focus on multiples
  • Good progress but a multi-year strategy

FY 14 Football staking growth World Cup 2014 on 2010 Football as a %

  • f staking yoy

(ex. W’Cup)

26

+29% +8% +2pps

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SLIDE 27

wk 1 wk 3 wk 5 wk 7 wk 9 wk 11 wk 13 wk 15 wk 17 wk 19 wk 21 wk 23 wk 25 wk 27 wk 29 wk 31 wk 33 wk 35 wk 37 wk 39 wk 41 wk 43 wk 45 wk 47 wk 49 wk 51 '15 wk 1 '15 wk 3 '15 wk 5 '15 wk 7

SSBT weekly per terminal stakes (£)

Improving Competitiveness in UK Retail

Driving football: SSBTs delivering , more in shops in 2015

  • Staking has grown throughout 2014 and in Q4 rose above World Cup peaks
  • Supporting key elements of OTC strategy:
  • Grow football : 80% of staking and 90% of GW
  • Multiples: 45% staking is 4+ selections; 15% is 9+
  • Increased product offer: 40% is in-play
  • Deploying >2,000 more SSBTs across the estate in 2015; BGT agreement

27

World Cup

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SLIDE 28

Improving Competitiveness in UK Retail

Addressing Racing OTC trends

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  • Industry saw challenging trends in 2014
  • Happy Hour – targeting customer with targeted offer at key times
  • Clear positioning to customer– best price guarantee
  • Q3 impacted by World Cup substitution. Q4 trends improving but more to do

Racing metrics Q4 vs. Q3 yoy change in slippage Lunchtime Staking(1)

+4.2pps +14.6%

Q3 yoy change in staking

  • 14.4%

(1) Since introduction of Happy Hour initiative to 13 Jan 2015 vs. same weeks in prior year

  • 7.7%

Q4 yoy change in staking

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SLIDE 29

29

Improving Competitiveness in UK Retail

Trading and Exchange capabilities

Mer Mercu cury

Mercury:

  • Sustained development of our proprietary platform
  • OTC margins trending towards upper end of 15-17% historic range
  • Sportsbook margins consistently c.8%
  • Better in-play margins, by 2ppts

Exchanges:

  • Product differentiators
  • Betdaq growth and liquidity improving
  • FY14 Exchange revenue +36%
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SLIDE 30

Wk 4 Wk 8 Wk 12 Wk 16 Wk 20 Wk 24 Wk 28 Wk 32 Wk 36 Wk 40 Wk 44 Wk 48 Wk 52 '15 Wk 4

Machine GW - 4 week moving avg yoy growth

Non-Roulette Roulette Total

30

  • Growth better than expected, driven by lower stake B3
  • Non B2 play now c.38% gross win
  • Market leading GWPTPW (14Q4: £996; 13Q4: £915)
  • ABB Code introduced and set limits rolled out
  • £50+ staking regulations: customer analytics and staff education underway

Improving Competitiveness in UK Retail

New machine offer and enhanced social responsibility standards

Summer 13 comps weak ABB Code/ Clarity roll-out

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SLIDE 31

Regulation

Leading the debate – creating a sustainable future

31

  • Social responsibility key to a sustainable Ladbrokes and Industry
  • Major steps forward by Ladbrokes
  • Independent Board Committee defining SR standards, establishing performance

benchmarks and link to pay

  • Senet Group established with leading industry partners – already defining new

behaviours

  • ABB Code implemented
  • New DCMS regulations in 2015
  • Ladbrokes ready for new rules
  • There will an impact but we are already well prepared and the playing field is level
  • There is a cost – further c.60 shop closures in UK in 2015
  • Stability needed to allow new measures to be delivered, evaluated and improved
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SLIDE 32

International Diversification

Investing in Belgium

Increased investment in customer offer

  • SSBTs now rolled out and performing well
  • Virtual betting introduced – Belgium first
  • Multichannel: launched digital/mobile via Ladbrokes.be – April

Financial benefits(1)

  • Retail: stakes +15%; SSBTs Q4 c.13% of stakes
  • Retail net revenue +10%; EBIT +21%
  • Football staking +31%; Q4 +23%
  • Digital sportsbook staking c.9% of total sportsbook in Q4

More to come

  • Continued investment in Belgium’s no. 1 OTC estate
  • Steady retail growth driven by product innovation
  • Continued investment in digital offering, mobile focus

(1) Constant currency growth rates on prior year period

32

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SLIDE 33

33

Regional retail expansion plus digital growth

  • No. 1 market position in regions of Madrid & Catalunya
  • 1,192 outlets across 10 regions
  • Multichannel: consolidated digital under Sportium brand

Financial benefits(1)(2)

  • Strong revenue growth in both retail & digital channels
  • Retail: staking €223m +47%; net revenue: €42.6m +54%
  • Digital: first full year NGR €8.1m, actives: 79k

More to come

  • Small EBIT loss in 2015 as we roll out into smaller regions
  • Mature regions already profitable and still growing
  • Expanding Sportium brand into Latam with Cirsa

International Diversification

Spain now developing scale

(1) 100% JV basis (2) Constant currency growth rates on prior year period

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SLIDE 34

International Diversification

Australia’s digital challenger is delivering

34

  • Innovation led, digital challenger strategy
  • Attractive entry price
  • Betstar integration complete, synergies delivered
  • EBIT positive for the first time
  • Strong KPIs throughout 2014

Actives Staking Revenue Pro forma Growth FY14(1)

+88% +25% +151%

International Diversification continues: FY14 non-UK NGR c.14%

(1) 2013 Pro forma data includes Ladbrokes Australia, Bookmaker.com for full 12 months in 2013 and Betstar in 2013 for equivalent period to 2014 ownership period

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SLIDE 35

35

Maintaining Our Competitive Edge

Operational objectives for 2015

Competitiveness in UK Retail

  • Football – drive staking growth to re-shape OTC mix and grow margins, SSBTs key
  • Racing – build on leadership position
  • Machines – deliver growth from Clarity machines and SSBTs; smooth DCMS implementation
  • Costs – maintain cost efficiency, deliver Retail HQ cost savings

Maintaining our momentum in Digital

  • Sportsbook – maintain mobile innovation, deliver on tablets, evolve desktop
  • Gaming – build momentum in casino and games; improve cross-sell
  • Costs – disciplined marketing approach, focused investment in capability
  • Multi-channel – foundations in UK, Ireland, Spain, Belgium, product trials underway

Driving International Diversification

  • Belgium and Spain – build from no. 1 retail market positions
  • Australia – maintain growth, innovation and drive market share
  • RoI – International team undertaking a fundamental review in Q1
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SLIDE 36

36

Summary

Focused execution, Ladbrokes’ competitive, Profit Growth in H2

  • All operational objectives delivered on time and on plan
  • Competitive Ladbrokes by the World Cup
  • Return to profit growth in H2 2014
  • Clear plans for 2015: More to do to but Ladbrokes is on track
  • Platform for profitable growth established

Ladbrokes is competitive, customers are responding

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SLIDE 37

AGENDA

Financial Overview Ian Bull, CFO Operational Review Richard Glynn, CEO Q&A

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SLIDE 38

Appendices

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SLIDE 39

Year ended 31 December Gross win Net revenue (re-stated) (1) Operating profit(2) 2014 £m 2013 £m Variance £m 2014 £m 2013 £m Variance £m 2014 £m 2013 £m Variance £m UK Retail

824.2 826.2 (2.0) 811.5 806.2 +5.3 119.3 133.9 (14.6)

Digital

288.3 224.0 +64.3 215.1 175.0 +40.1 14.0 8.2 +5.8

European Retail

122.9 130.9 (8.0) 122.1 128.9 (6.8) 13.0 15.6 (2.6)

Telephone Betting

11.6 7.2 +4.4 10.2 6.5 +3.7 2.0 (1.6) +3.6

Corporate costs

  • (22.9)

(17.8) (5.1)

Total

1,247.0 1,188.3 +58.7 1,158.9 1,116.6 +42.3 125.4 138.3 (12.9)

(1) UK Retail net revenue unadjusted for MGD: FY 2013 £800.9m; European Retail net revenue unadjusted for MGD: FY 2013 £128.8m; Total net revenue unadjusted £1,117.7m (2) Operating profit is before exceptional items

Group

Net revenue and operating profit (ex. High Rollers)

39

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SLIDE 40

Year ended 31 December 2014 2013 Variance

OTC Gross win margin 16.4% 16.9% (0.5)pps Like for like OTC amts staked decline (2.3)% (5.0)% +2.7pps Like for like OTC net revenue decline (4.2)% (4.4)% +0.2pps Like for like total costs (1) increase 2.3% 3.0% +0.7pps Like for like shop staff costs increase/ (decrease) 0.2% (1.9)% (2.1)pps Stake per slip (2) £8.72 £8.58 +1.6% Average number of machines 8,966 8,874 +1.0% Average weekly gross win per machine £937 £913 +2.6% Average weekly machine gross win per shop £3,722 £3,592 +3.6%

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

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SLIDE 41

Year ended 31 December 2014 £m 2013 (1) £m Variance

OTC gross win 386.3 403.6 (4.3)% Machines gross win 437.9 422.6 +3.6% Total gross win 824.2 826.2 (0.2)% OTC net revenue 379.5 392.5 (3.3)% Machines net revenue 432.0 413.7 +4.4% Total net revenue 811.5 806.2 +0.7% Associate income 1.2 4.0 (70.0)% Gross profits tax (56.9) (59.0) +3.6% Machine Gaming Duty/VAT (86.3) (81.7) (5.6)% Staff costs (200.5) (201.4) +0.4% Property costs (2) (115.8) (113.9) (1.7)% Content costs (3) (96.8) (87.1) (11.1)% Other costs (inc. depn) (4) (137.1) (133.2) (2.9)% Operating costs (550.2) (535.6) (2.7)% Operating profit 119.3 133.9 (10.9)%

(1) 2013 adjusted to reflect the change from VAT on Machines to MGD (2) Rent, rates and utilities

UK Retail

P&L (ex. exceptional items)

(3) Pictures, data, levy, Sky TV (4) Depreciation = £39.3m (2013: £35.6m)

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SLIDE 42

Year ended 31 December 2014 2013 (1) OTC £m Machines £m Total £m OTC £m Machines £m Total £m Variance

Gross win 386.3 437.9 824.2 403.6 422.6 826.2 (0.2)% Freebets (6.8) (5.9) (12.7) (11.1) (8.9) (20.0) +36.5% Net revenue 379.5 432.0 811.5 392.5 413.7 806.2 +0.7%

(1) 2013 adjusted to reflect the change from VAT on Machines to MGD

UK Retail

Gross win adjustments

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SLIDE 43

Year ended 31 December 2014 £m % of net revenue 2013 £m % of net revenue Variance Net revenue 178.5 166.1 +7.5% Betting tax (1.1) 0.6 (0.9) 0.5 (22.2)% POC tax (2.1) 1.2 0.0

  • Levy and licenses

(0.9) 0.5 (0.9) 0.5

  • Staff costs

(29.0) 16.2 (27.5) 16.6 (5.5)% Software and geographical partners (1) (18.2) 10.2 (24.2) 14.6 +24.8% Marketing (including affiliates) (46.5) 26.1 (40.5) 24.4 (14.8)% Banking and chargebacks (6.7) 3.8 (6.7) 4.0

  • Other costs (including depreciation and amortn) (2)

(56.7) 31.8 (50.7) 30.5 (11.8)% Operating costs (2) (158.0) 88.5 (150.5) 90.6 (5.0)% Digital EBITDA 44.5 32.4 +37.3% Digital operating profit 17.3 14.7 +17.7%

(1) Payments to third party software and platform providers and geographical partners (2) Includes depreciation of £23.4m (£14.1m in 2013) and amortisation of acquired intangibles of £3.8m (2013:£3.6m)

Digital – Ladbrokes.com & Exchanges

P&L (ex. exceptional items)

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SLIDE 44

(1) Includes depreciation of £0.3m (£0.1m in 2013) and amortisation of acquired intangibles of £1.7m (2013:£0.4m)

Digital - Australia

P&L (ex. exceptional items)

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Year ended 31 December 2014 £m 2013 £m Variance Gross win 45.5 7.4 514.9% Net revenue 34.6 4.0 +765.0% Operating costs(1) (32.0) (6.9) (363.8)% Operating profit 2.6 (2.9) +189.7%

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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 2014 2013 Variance

Total Digital Unique active players (1) (000s) 960 839 +14.4% Real money sign-ups (2) (000s) 586 418 +40.2% Sportsbook Gross win margin 7.8% 8.1% (0.3)pp Unique active players (1) (000s) 788 629 25.3% Average monthly active player days (000s) 1,039 847 +22.7% Yield per unique active player (£) (3) 108 111 (2.7)% Casino Unique active players (1) (000s) 211 222 (5.0)% Average monthly active player days (000s) 135 136 (0.7)% Yield per unique active player (£) (3) 204 215 (5.1)% Poker Unique active players (1) (000s) 30 50 (40.0)% Average monthly active player days (000s) 51 99 (48.5)% Yield per unique active player (£) (3) 101 137 (26.3)% Games Unique active players (1) (000s) 173 147 +17.7% Average monthly active player days (000s) 146 135 +8.1% Yield per unique active player (£) (3) 135 135

  • Bingo

Unique active players (1) (000s) 65 73 (11.0)% Average monthly active player days (000s) 90 99 (9.1)% Yield per unique active player (£) (3) 170 163 +4.3%

Digital

KPIs - Ladbrokes.com

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SLIDE 46

UK Retail and Digital

Quarterly figures

Q1 2014 vs. Q1 2013 Q2 2014 vs. Q2 2013 Q3 2014 vs. Q3 2013 Q4 2014 vs. Q4 2013 UK Retail OTC Stakes +8.5% +1.8% (7.9)% (6.8)% OTC GW Margin 16.2% (2.7)pp 16.5% (0.4)pp 17.0% +2.1pp 15.6% (1.5)pp Machine Gross Win Growth +2.2% +1.5% +4.9% +5.9% Machine Gross Win per shop per week (1.1)% +0.4% +6.5% +9.8% Total Net Revenue YoY (Restated)

(1)

(2.3)% +1.5% +6.0% (2.4)% Digital Sportsbook Net Revenue (15.4)% +63.1% +58.3% (7.0)% Gaming Net Revenue (15.5)% (18.6)%

  • +9.3%

Sportsbook Gross Win Margin 6.5% (3.5)pp 9.1% +1.4pp 8.9% +2.2pp 6.5% (1.7)pp

(1) Net revenue has been restated to allow for like for like comparison to 2013 UK Retail 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

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SLIDE 47

(1) 2013 proforma to reflect the change from VAT on Machines to MGD (2) Fair value adjustments, freebets and VAT

Year ended 31 December 2014 £m 2013 (1) £m Variance Gross win 73.0 83.0 (12.0)% Net revenue 72.2 81.0 (10.9)% Betting tax and Machine Gaming Duty (7.7) (8.5) +9.4% Operating costs (60.1) (62.3) +3.5% Operating profit 4.4 10.2 (56.9)% Constant currency amounts staked decrease (4.5)% (7.4)% Constant currency gross win decrease (8.7)% (1.8)% Shop numbers at the end of the period 275 295 (20)

Ireland

P&L (ex. exceptional items)

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SLIDE 48

48

(1) Growth vs. 2010 (on a comparable market basis for Digital) (2) Sportium JV revenues on 50% basis

World Cup – H1 and H2 analysis

Stakes Growth(1) Gross win Gross win Stakes Growth(1) Gross win Gross win £m £m margin £m £m margin Ladbrokes Group 81.4

+15%

18.5 22.7% 33.9

+44%

9.5 28.0% UK Retail 33.7

(2)%

8.5 25.2% 14.1 +40% 4.6 32.6% European Retail

  • Ireland

3.5 (8)% 1.0 28.6% 1.3 (13)% 0.4 30.8%

  • Belgium

3.9 +144% 1.3 33.3% 2.0 +186% 0.9 45.0%

  • Spain(2)

3.4 +183% 1.1 31.1% 1.8 +125% 0.6 33.3% Digital

  • Ladbrokes.com

31.2 +24% 5.8 18.6% 12.4 +44% 2.3 18.5%

  • Australia

1.1 na 0.1 9.1% 0.7 na 0.1 14.3%

  • Belgium

0.4 na 0.1 25.0% 0.2 na

  • -
  • Spain(2)

1.5 na 0.2 13.3% 0.6 na 0.2 33.3%

  • Betdaq

na na 0.2 na na na 0.1 na Telephone 2.7 (43)% 0.2 7.4% 0.8 (58)% 0.3 37.5% 42.3% 18.7% H1 H2