42
1 Financial Overview Ian Bull, Chief Financial Officer Review of operations Richard Glynn, Chief Executive Q&A LADBROKES H1 2012 AGENDA
1
Financial Overview
Ian Bull, Chief Financial Officer
Review of operations
Richard Glynn, Chief Executive
Q&A
LADBROKES H1 2012 AGENDA
Continuing operations before exceptional items
(1) Excluding High Rollers
(2) Includes amortisation of customer relationships of £1.3m in both 2012 and 2011
(3) Underlying EPS excludes impact of High Rollers and is based upon expected full year tax charge of 5.3% in 2012
Net revenue (1) 529.0 487.8 +8.4%
Operating profit (1)(2) 106.9 96.3 +11.0%
High Rollers 20.5 (4.0) n/a
Finance costs (16.8) (15.7) -7.0%
Profit before tax 110.6 76.6 +44.4%
Underlying EPS (3) 9.4p 7.5p +25.3%
Dividend 4.3p 3.9p +10.3%
Net Debt 397.0 449.4 +11.7%
Half yr ended 30 Jun 2012 £m 2011 £m B+W-
LADBROKES H1 GROUP PERFORMANCE SUMMARY
2
£96.3m
£106.9m
£(14.7)m
£15.9m
£5.0m
£4.2m
£0.2m
H1 2011 PBIT UK Retail European Retail Telephone Digital CorporateCosts
H1 2012 PBIT
GROUP OPERATING PROFIT 11% GROWTH DRIVEN BY UK & EUROPEAN RETAIL
Revenue growth driving the bottom line
UK Retail driven by machines & OTC growth
Ireland up 76% and Belgium up 80% driving European Retail
Disciplined operation of core telephone
Digital driven largely by investment year over year
3
£75.4m
£91.3m
£(0.4)m
£(6.6)m £(5.5)m
£(4.4)m £4.7m
£28.1m
H1 2011 PBIT OTC NetRevenue
GPT/AssocInc
Machines NetRevenue
LFL Costs Machines New openingscosts
H1 2012 PBIT
UK RETAIL PROFITS GROWING BY 21%
Growth in OTC net revenue (includes £3.2m Euros)
Staking and margin up on 2011
Machines net revenue up 20.1%
Costs expected to be up circa 6% (higher machine growth & more shops)
4
2.4% 1.9%
2.8%
7.1%
UK RETAIL RESILIENCE OF OTC CONTINUES
H1 2012 H1 2011 Var
Stake per slip (£) 8.50 8.25 3.0%
Slips (m) 147.3 150.6 (2.2%)
Amts staked (1) (£m) 1,257.2 1,248.5 + 0.7%
GW margin% 16.2% 16.0% + 0.2%
Continued stability in OTC activity
Amounts staked up (Euros replaces lost horseracing)
Margin 16.2% (17.2% Q1 & 15.3% Q2) up 0.2% points YOY
Q2 margin decline driven by last month of Premier league and Euros
5
(1) Greyhound tracks accounts for £5.6 million of amounts staked (2011: £5.4 million)
FY 2010 FY 2011 H1 ‘12
Net revenue £256m £298m £168m
GWPTW 730 860 947
No. shops 2,083 2,103 2,137
No. machines 7,953 8,050 8,247
Density 3.82 3.83 3.86
UK RETAIL MACHINES GROWTH CONTINUES
Machine net revenue up 20% for H1
GWPTW £970 in Q2 (up £47 on Q1)
Increased density adds £1.6m in H1
£96m revenue added in last 2 yrs
Machines growing part of mix
Lowers impact of sporting results
Improves earnings reliability
41% 43% 46%
50% 50%
3%
12% 15%
23% 19%
0%
20%
40%
60%
H1 10 H2 10 H1 11 H2 11 H1 12
% shop GW GW growth
6
UK RETAIL PROFIT PER SHOP CONTINUES TO GROW
EBIT per shop for up 12.5%
36% growth over past 2 years
Only 1% of shops do not contribute
38.4
24.1
32.8 33.5 35.2 35.6
41.7
10
15
20
25
30
35
40
45
50
55
60
H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12
+21% 77.3k
68.7k
56.9k
0.2% football margin Q3
+12%
7
H1 2010 excludes one off VAT credit of £3,200 per shop. Numbers excludes greyhound tracks and income from associates
UK RETAIL GROWING ESTATE FURTHER WITH < 3 YR PAYBACK
Shop estate is flexible, growing profitability and with attractive ROI
Average payback on openings < 3 yrs
25 openings to date (2 closures) – expecting 75 new shops in 2012 (60 net)
0
50
100
150
200
250
300
Pre
'11
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Po
st '2
2
45% of the estate has a break
clause or lease expiry within the
next 3 years (38% of the total rent)
No. Shops with
break/lease expiry in yr
0%
25%
50%
75%
100%
125%
150%
175%
2007 2008 2009 2010 2011
% payback
YR5
YR4
YR3
YR2
YR1
8
£31.0m
£16.3m
£(1.6)m
£(14.7)m
£(5.3)m
£4.3m
£0.4m
£2.2m
H1 '11 Q1 sports Q2 sports H1 gaming Poker Costs Exit & newterritories
H1 '12
DIGITAL OPERATING PROFIT SPORTSBOOK MARGIN MAIN CAUSE OF Q2 SLOWDOWN
May was lowest sportsbook margin since August 2009
Total NGR Q1 +5.9% (s’book 22.4%) - Q2 NGR +0.2% (s’book flat)
No improvement in poker rate of decline
Q2 margin 1.3% < Q2 2011
3.4% margin in May
= £4.2m NGR
9
Digital profit for H1 2012 of £15.0 million (H1 2011: £29.7 million) including amortisation charge of £1.3 million (2011 H1: £1.3 million)
Exit & new territories includes ‘lost’ NGR for territories exited in addition to net operating losses from Spain & Denmark
DIGITAL OPERATING COSTS INVESTING TO GROW
10
H1‘11 H1‘12
£54.7m
£69.4m £71.5m £7.3m
£3.9m
£1.8m £1.7m
£2.1m
H1 '11 A&P IT relatedopex
Depreciation Other H1'12Like for Like
New territorycosts
H1 '12Total
£16.8m increase in operating costs (£14.7m in ‘existing territories’)
A&P (excluding new territories) 25% of NGR H1 (H1 2011 17%)
IT costs driven by expansion of product & development of trading & website
Increased depreciation reflects capex invested in 2011
Expect H2 costs similar to H1
£14.7m
Digital costs for H1 2012 of £72.8 million (H1 2011: £56.0 million) including amortisation charge of £1.3 million (H1 2011: £1.3 million)
CAPEX INVESTING FOR GROWTH & INCREASED RETAIL EXPANSION
£m
Spend in H1 45
Balance remaining 50
Prelims FY 2012 guidance 95
Extra shops 3
Digital overspend 3
Revised FY 2012 guidance 101
Expect 75 new shops in 2012 (+£3m)
Overrun on website, mobile and data
warehouse (+£3m)
Expecting circa £101m spend in ‘12
11
TAX, EPS & DIVIDEND DIVIDEND GROWTH REFLECTS INCREASE IN PROFIT
Earnings per share H1 2012
At expected FY tax rate (5%) 9.4p
At normalised rate (10%) 8.9p
Tax charge for FY 2012 expected at 5.3%
EPS at expected FY tax rate 9.4p
Tax expected to be 10% in 2013 & 2014
EPS based on 10% rate is 8.9p
Dividend policy is 2x covered by
normalised earnings
Interim dividend 4.3p up 10.3%
12
All numbers exclude High Rollers
CASH FLOW STRONG CASH SUPPORTS GROWTH, DIVIDEND & DEBT REDUCTION
EBITDA growth circa 30% year on year
FY 2012 tax rate of 5.3%
July 2012 bond (£131m) matured & paid
£225m 2017 bond remains
£375m undrawn against 2016 RCF
Net debt : EBITDA 1.6x at period end
H1 2012
EBITDA 154.0
Interest (11.5)
Tax (10.7)
Capex (45.0)
Other 5.3
Free cash flow 92.1
Dividend (35.2)
Debt reduction 56.9
Opening net debt 453.9
Closing net debt 397.0
13
Net debt : EBITDA calculated pre high Rollers
Financial Overview
Ian Bull, Chief Financial Officer
Review of operations
Richard Glynn, Chief Executive
Q&A
LADBROKES H1 2012 AGENDA
14
GROUP PERFORMANCE STRONG GROWTH IN H1
Strong group performance in H1
Digital profit decline more than expected
Retail business resilient – growing both machines & OTC
Over 20% growth in UK Retail EBIT
Ahead in European Retail
Group EBIT ahead 11%
Cash and balance sheet robust
15
DIGITAL DEVELOPMENTS TECHNOLOGY DELIVERY IN H2
Management changes increase Digital focus & accountability
Sportsbook delivered in Q4
Customer migration starts Q4
Mobile delivery follows closely as based on same technology
Data warehouse now active for trading – deployed to
marketing teams Q4
Ongoing further upgrades to trading capability
16
DELIVERY OF TECHNOLOGY IN H2 IMPROVED WEBSITE & MOBILE PLATFORM
Personalise – offers, customer preferences
Promote higher margin product
Encourage multiple betting
Improved showcase of product
A better experience for our customers
Hybris learns & adapts
17
MARKETING PLATFORM TRAFFIC & CONVERSION
Consistent brand marketing
Enhanced ‘search engine’ & affiliate
marketing
Better and more product (BIP/Games)
Improved customer journeys
Growth in actives
18
MARKETING PLATFORM CUSTOMER DEVELOPMENT STARTS WITH DATA
Access consistent cross channel data
(from Data Warehouse)
Build customer predictive models
Intervene...right time, right message,
right value
Maximise lifetime value
19
PRODUCT DEVELOPMENT WE ARE GROWING OUR GAMING CONTENT
Open platform approach is enabler
2010 – Global Draw
2011 – Microgaming, Ash, Blueprint
H1 – Realistic, Openbet, Cryptologic
H2 – IGT, Probability, Mazooma, Playtech
20
PRODUCT DEVELOPMENT CONTINUING TO EXPAND SPORTSBOOK PRODUCT
0
20000
40000
60000
80000
100000
2011 2012 2013
Football
Total
Total events up > 200%
90,000 markets by end of 2013
Adding opportunities to bet 24hrs a day
BIP now 58% of sportsbook stakes
Ladbrokes a market leader
21
CAPABILITY DEVELOPMENT FURTHER ENHANCING TRADING & LIABILITY MANAGEMENT
Trading transformation program
More automation
More data in real-time
More reliable
More control
More still to come in H2 and beyond
22
DIGITAL DEVELOPMENT BRINGING IT ALL TOGETHER
What we are doing will drive NGR
More product development
Better product presentation
Enhanced website & mobile experience
Sustained actives growth
Improved data
Enhanced CRM
Increased trading efficiency
NGR
23
UK RETAIL A GROWING BUSINESS ON THE UK HIGH STREET
0%
2%
4%
6%
8%
10%
12%
2010 11 H1 11 H2 12 H1
24
UK RETAIL TREND OF STABILITY IN OTC
50
60
70
80
90
100
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Slips (m)
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2010YR -01PRD
2010YR -06PRD
2010YR -11PRD
2011YR -04PRD
2011YR -09PRD
2012YR -02PRD
OTC footfall
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
0
100
200
300
400
500
600
700
800
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Stakes £k Stakes growth %
25
5.0
6.0
7.0
8.0
9.0
10.0
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Stake per slip £
UK RETAIL MACHINES KEEP ON GROWING
699
746 723
751
791
850 866
930 923
970
500
600
700
800
900
1,000
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1'12 Q2'12
GWPTW £947 for H1 – this is £957 in shops where density has not changed
37% of the estate already achieving average > £1,000
39%
increase
over the
period
26
UK RETAIL GROWING ALL CATEGORIES OF GAMES
Roulette & cards circa 70% of total gross win
Newer versions drive demand
Strong growth in B3 slots with focus on new content
12.9% 10.3%
30.7%
0%
5%
10%
15%
20%
25%
30%
35% Roulette
Cards
B3 Slots
2.0%
2.5%
3.0%
3.5%
4.0%
1 3 5 7 9 11 13 15 17 19 21 23 25
Gross win growth by game type
Overall machines margin
Core roulette margin
B3s driving machine margin higher
27
UK RETAIL ODDS ON KEY ENABLER OF YIELD MANAGEMENT
Area exclusive to
Odds On customers
Personalised screens
games & messages
28
UK RETAIL FURTHER MACHINES OPPORTUNITIES
Yield management
Utilisation rates offer potential upside
Focus on ‘day parts’ producing strong results (Sunday evenings up 60%)
Further to go on density
Targeted approach to competition driving growth rates > estate average
GWPTW % total estate % Utilisation
< £500 per shop 15% 14%
£501-£1000 48% 18%
£1001-£2000 34% 27%
> £2000 3% 41%
29
Balance sheet strength supports growth
and shareholder returns
UK Retail performance underpins growth
Digital delayed but confident in delivery
Focussed on technology delivery in H2
IN SUMMARY REINVIGORATION OF LADBROKES WELL UNDERWAY
30
H1 2012 APPENDICES
31
Half year ended 30 June Net revenue Operating profit
2012 £m
2011 £m
Variance B(W) £m
2012 £m
2011 £m
Variance B(W) £m
UK Retail 370.5 337.7 32.8 91.3 75.4 15.9
European Retail 63.9 60.5 3.4 10.3 5.3 5.0
Digital 88.3 85.7 2.6 15.0 29.7 (14.7)
Core Telephone Betting 6.3 3.9 2.4 0.9 (3.3) 4.2
Corporate costs - - - (10.6) (10.8) 0.2
Total 529.0 487.8 41.2 106.9 96.3 10.6
Operating profit is before exceptional items
BETTING & GAMING (EXCLUDING HIGH ROLLERS)
32
BETTING & GAMING (EXCLUDING HIGH ROLLERS)
Half year ended 30 June Net revenue Gross win
2012 £m
2011 £m
Variance B(W) %
2012 £m
2011 £m
Variance B(W) %
UK Retail 370.5 337.7 9.7 409.7 372.4 10.0
European Retail 63.9 60.5 5.6 65.1 61.7 5.5
Digital 88.3 85.7 3.0 107.4 99.1 8.4
Core Telephone Betting 6.3 3.9 61.5 6.6 4.1 61.0
Total 529.0 487.8 8.4 588.8 537.3 9.6
33
UK Retail KPIs
Half year ended 30 June 2012 2011 Variance B(W) %
OTC Gross win margin 16.2% 16.0% 0.2 pt
Like for like OTC amts staked decline (0.7)% (3.5)% 2.8 pt
Like for like OTC net revenue growth/(decline) 1.1% (5.4)%
Like for like total costs (1) increase 5.2% 2.0%
Like for like shop staff costs decrease (3.5)% (3.2)%
Stake per slip (2) £8.50 £8.25 3.0
Average number of machines 8,247 8,019 2.8
Average weekly gross win per machine £947 £821 15.3
Like for like takes into account shop openings and closures
(1) Excludes VAT, Freebets and Gross profits tax
(2) Slips exclude machines
34
UK RETAIL FULL P&L
Half year ended 30 June 2012
£m
2011
£m
Variance
B(W)%
OTC gross win 206.7 202.2 2.2
Machines gross win 203.0 170.2 19.3
Total gross win 409.7 372.4 10.0
OTC net revenue 202.4 197.7 2.4
Machines net revenue 168.1 140.0 20.1
Total net revenue 370.5 337.7 9.7
Associate income 1.6 1.2 33.3
Gross profits tax (30.4) (29.6) (2.7)
Staff costs (99.1) (99.0) (0.1)
Property costs (1) (51.4) (48.9) (5.1)
Content costs (2) (36.4) (31.1) (17.0)
Other costs (inc. depn) (3) (63.5) (54.9) (15.7)
Operating costs (250.4) (233.9) (7.1)
Operating profit 91.3 75.4 (21.1)
(1) Rent, rates and utilities (2) Pictures, data, levy, Sky (3) Depreciation = £16.6m (2011: £18.1m)
35
UK RETAIL ADJUSTEMENTS TO GROSS WIN
Half year ended 30 June 2012 2011
OTC £m
Machines £m
Total £m
OTC £m
Machines £m
Total £m
Variance B(W)%
Gross win 206.7 203.0 409.7 202.2 170.2 372.4 10.0
Freebets (4.3) (1.1) (5.4) (4.5) (1.8) (6.3) 14.3
VAT - (33.8) (33.8) - (28.4) (28.4) (19.0)
Net revenue 202.4 168.1 370.5 197.7 140.0 337.7 9.7
36
IRELAND FULL P&L
(1) Fair value adjustments, freebets and VAT
Half year ended 30 June 2012
£m
2011
£m
Variance
B(W)%
Gross win 41.7 39.8 4.8
Adjustment to gross win (1) (1.2) (1.2) -
Net revenue 40.5 38.6 4.9
Betting tax (3.8) (4.1) 7.3
Other costs (30.0) (30.7) 2.3
Operating profit 6.7 3.8 76.3
Constant currency amounts staked (decrease)/increase (3.3)% 9.5%
Constant currency gross win increase/(decrease) 8.9% (3.4)%
Shop numbers at the end of the period 293 294
37
DIGITAL FULL P&L
•(1) Payments to third party software and platform providers and geographical partners
•(2) Includes depreciation of £4.8m in 2012 (£2.8m in 2011).
Half year ended 30 June 2012
£m
% of net
revenue
2011
£m
% of net
revenue
B(W)%
Net revenue 88.3 85.7 3.0
Betting tax (0.5) 0.6 - - n/a
Levy and licenses (0.4) 0.4 (0.4) 0.5 -
Staff costs (12.6) 14.3 (12.0) 14.0 (5.0)
Software and geographical partners (1) (11.2) 12.7 (10.9) 12.7 (2.8)
Marketing (including affiliates) (24.6) 27.9 (14.9) 17.4 (65.1)
Banking and chargebacks (3.5) 3.9 (3.1) 3.6 (12.9)
Other costs (including depreciation) (2) (19.2) 21.8 (13.4) 15.6 (43.3)
Operating costs (71.5) 81.0 (54.7) 63.8 (30.7)
Amortisation of customer relationships (1.3) 1.4 (1.3) 1.5 -
Total operating costs (72.8) 82.4 (56.0) 65.3 (30.0)
Total Digital operating profit 15.0 17.0 29.7 34.7 (49.5)
38
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
Half year ended 30 June 2012 2011 B(W) %
Unique active players (1) (000s) 746 614 21.5
Real money sign-ups (2) (000s) 342 249 37.3
Cost per acquisition (3) £129 £124 (4.0)
39
DIGITAL KPIs
(1) Revenue per unique active player for the year
Half year ended 30 June 2012 2011 Variance B(W) %
Sportsbook Gross win margin 6.2% 6.6% (0.4) pt
Unique active players (000s) 583 471 23.8
Average monthly active player days (000s) 1,141 939 21.5
Yield per unique active player (£) (1) 64 72 (11.1)
Casino Unique active players (000s) 199 132 50.8
Average monthly active player days (000s) 190 146 30.1
Yield per unique active player (£) (1) 145 219 (33.8)
Poker Unique active players (000s) 55 59 (6.8)
Average monthly active player days (000s) 154 189 (18.5)
Yield per unique active player (£) (1) 102 126 (19.0)
Games Unique active players (000s) 105 91 15.4
Average monthly active player days (000s) 146 124 17.7
Yield per unique active player (£) (1) 90 94 (4.3)
Bingo Unique active players (000s) 60 54 11.1
Average monthly active player days (000s) 115 114 0.9
Yield per unique active player (£) (1) 118 133 (11.3)
40
EUROS 2012
AMOUNTS STAKED AND GROSS WIN
41
Gross win H1 2012 £m
H2 2012 £m
Total £m
Margin
UK Retail 3.2 2.7 5.9 19.7%
European Retail 1.0 0.2 1.2 16.0%
Digital 1.2 0.9 2.1 10.0%
Core Telephone Betting (0.2) - (0.2) (5.3)%
Total 5.2 3.8 9.0 14.6%
Amounts staked H1 2012 £m
H2 2012 £m
Total £m
UK Retail 28.0 2.1 30.1
European Retail 6.9 0.6 7.5
Digital 18.8 2.1 20.9
Core Telephone Betting 2.6 0.4 3.0
Total 56.3 5.2 61.5
EXCEPTIONAL ITEMS
42
Half year ended 30 June 2012 2011
£m £m
Spanish retrospective online gaming taxes (1) (2.2) -
Loss on closure of shops (2) (1.5) (1.1)
Business restructuring costs - (1.9)
Corporate transaction costs - (1.3)
Interest rate swaps termination costs - (0.5)
Total (3) (3.7) (4.8)
(1) Spain issued online gaming licences for all products (except slots) effective from 1 June 2012. The Spanish tax authority has
required that online operators with customers in Spain pay taxes retrospectively under two historic laws that previously were not
applied to offshore online gaming. Having completed a self-assessment in accordance with the Spanish tax authority’s
requirements, the Group has incurred costs of £2.2 million (including surcharges, interest and related professional fees) in relation
to these retrospective taxes.
(2) The £1.5 million loss on closure of shops is made up of a £0.6 million loss on closure of UK Retail shops (30 June 2011: £0.9
million) and a £0.9 million loss on closure of European Retail shops (30 June 2011: £0.2 million). These include a loss on disposal
of intangible assets of £0.5 million (30 June 2011: £0.1 million), a loss on disposal of property, plant and equipment of £0.2 million
(30 June 2011: £0.5 million) and cost accruals of £0.8 million (30 June 2011: £0.5 million).
(3) Continuing operations before tax (2012 tax credit - £0.2 million, 2011 tax credit - £0.6m).
