PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER FEBRUARY 2013

Transcription

1 PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER FEBRUARY

2 HIGHLIGHTS MOMENTUM IN ALL KEY AREAS Investment in business driving performance A strong set of results Continuing to grow retail profit Investment in trading starting to pay back Ongoing development on track Development heavy lifting largely done Sportsbook rollout progressing well Q1 launch Mobile platform development on track Opportunities for future growth Investing in retail Actions to enhance CRM - early positive signs; more to do Further trading improvements Building on performance in European Retail Betdaq 2

3 LADBROKES PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2012 Financial Overview Ian Bull, CFO Review of operations Richard Glynn, CEO Q&A 3

4 LADBROKES YEAR END 2012 GROUP PERFORMANCE SUMMARY Year ended 31 December 2012 m 2011 m B+/W- Net revenue (1) 1, % Operating profit (1)(2) % Finance costs (29.7) (32.8) +9.5% Profit before tax (1) % High Rollers 30.0 (3.2) n/a Underlying EPS (1) 18.4p 15.3p +20.3% Dividend 8.9p 7.8p +14.1% Net Debt 386.9m 453.9m m Continuing operations before exceptional items (1) Excluding High Rollers (2) Includes amortisation of customer relationships of 2.6m in both 2012 and

5 GROUP OPERATING PROFIT RETAIL DRIVES STRONG PROFIT PERFORMANCE UP 8% 2.5m 6.8m (20.6)m 28.4m (1.9)m 206.1m 190.9m 2011 PBIT UK Retail European Retail Telephone Digital Corp Costs 2012 PBIT UK Retail up 18.6% driven by OTC and machines Growth in excess of 50% in European businesses Digital reflecting cost of investment Group operating profit up by 8.0% 5

6 UK RETAIL GROWTH ACROSS BUSINESS, COSTS WELL CONTROLLED 14.7m 41.5m 1.6% (7.6)m 1.7% (7.9)m 2.3% (11.1)m (1.2)m 152.3m 5.6% 180.7m 2011 PBIT OTC net rev Machine net rev LFL Costs Machines New openings costs GPT/Assoc Inc 2012 PBIT OTC benefiting from strong sporting results, particularly in Q4 Trading investment also a key driver Machines growth 13.9% for the year Costs growth less than guidance, despite higher number of openings Content costs expected to increase 2013 LFL, plus 45% more openings 6

7 m UK RETAIL CUSTOMER RESILIENCE 2012 Var SPS (1) ( ) 8.30 (0.4%) Slips (1) (m) 289 (2.4%) Stakes (1) ( m) 2,398 (2.8%) Gross Win ( m) % GW margin (1) % 16.7% + 1.1pp Q1 '10 Q2 '10 Quarterly amounts staked Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Horse & Football Total Continued stability in OTC activity Horseracing cancellations significantly up (underlying stakes down 1.7%) Consistent GW growth across year Strong sporting results, particularly H2 (expect impact on stakes) Trading changes key to sustainable margin increase + some staking decline (1) Analysis excludes greyhound tracks. 7

8 GW m UK RETAIL SHOP GROWTH FROM OTC & MACHINES 2012 Var Machine net revenue 340m +13.9% Gross win up in OTC & machines GWPTW ( ) % GW per shop week ( ) 3, % Ave. no. machines 8, Density per shop OTC Machines 52m gross win increase Density uplift adds 5m GW per shop up 11.5% Expect density circa 3.92 in 2013 OTC seeing growth Rate of machine growth will decline Overall shop GW a new high 8

9 UK RETAIL PROFIT PER SHOP GROWTH FOR LAST 3 YEARS k 66.3k 70.9k 82.0k In 2010 excludes impact of the 6.7 million VAT credit ( 3,200 per shop). Analysis excludes greyhound tracks and income from associate. 9

10 % Payback UK RETAIL COMPELLING ROI FROM INVESTMENT IN SHOPS No. Shops with break/lease expiry in yr 250% Circa 40% IRR 200% 2011 shops 84% paid back 150% 100% 50% 0% 2.4 yrs Yr1 Yr2 Yr3 Yr4 Yr5 More efficient shop fit Availability of attractive sites 69 net openings in net openings in

11 EUROPEAN RETAIL A GROWING CONTRIBUTION TO GROUP PROFIT Strong despite poor economy Ireland 14.2m +54.3% 150 bps increase in GW% Reduction in costs Belgium 8.4m +27.3% Full year of GPT (from turnover tax) Costs well controlled Spain ( 2.4m) N/A Sportium amounts staked > 100m 3m JV EBITDA in Madrid EBITDA breakeven for JV 11

12 DIGITAL OPERATING COSTS INVESTING IN DIGITAL TO GROW REVENUES 5.1m 5.2m 5.7m 6.0m 12.2m 136.5m 142.2m 108.0m 28.5m FY '11 A&P IT related opex Depreciation Other FY' 12 Like for Like New territories FY '12 Total Operating costs in line with guidance A&P 24% (excludes new territories) of NGR expect to rise with revenue Depreciation reflects investment in capex expect to increase in 2013 Majority of incremental Opex investment complete Digital operating costs for 2012 and 2011 exclude amortisation charge of 2.6m 12

13 DIGITAL OPERATING PROFIT ENCOURAGING GROWTH IN SPORTSBOOK (29.4)m 14.4% 43.5% 11.8m 4.8m (2.7)m (9.8)m 55.0m 4.7m 34.4m FY '11 Costs H1 sports H2 sports Gaming Poker Exit/new territories FY '12 Strong growth in sportsbook net revenue increase H2 benefit from favourable results, though trading key to sustainable uplift Slots product drives gaming benefit of new content Exit from Greece/Cyprus/Poland plus start up costs in new territories Digital profits 2012 and 2011 exclude amortisation charge of 2.6m Gaming includes; Casino, Games & Bingo Exit & new territories includes lost profit for territories exited in addition to net operating losses from Spain, Denmark and South Africa 13

14 CAPEX INVESTING IN STRONG RETAIL RETURNS (18)m 6m 5m 102m 95m FY '12 Group IT Increased shops International Plan '13 Digital heavy lifting largely done More shops planned for 2013 Investing more in international growth opportunities Overall spend reduced 14

15 TAX, EPS & DIVIDEND DIVIDEND GROWTH REFLECTS INCREASE IN PROFIT Earnings per share FY 2012 Var At FY tax rate (5.2%) 18.4p +20.3% At normalised rate (10%) 17.5p +14.4% Dividend per share 8.9p +14.1% One off tax credit in H1 Tax charge in % (as guided) Expect rate to rise to circa 10% for next two years Dividend 2x covered by normalised earnings All numbers exclude High Rollers 15

16 CASH FLOW CASH FUNDS INVESTMENT, DIVIDEND AND DEBT REDUCTION m 2012 EBITDA Net finance expense (32.7) Tax (5.2) Capex (102.3) Other (9.9) Free cash flow Dividend (74.0) Debt reduction 67.0 Free cash flow up circa 30% Net debt : EBITDA 1.5x (1.3x inc HR) July 2012 bond ( 131m) now paid 225m 2017 bond still in place 416m undrawn against RCF to 2016 Opening net debt (453.9) Closing net debt (386.9) 16

17 PRELIMINARY RESULTS 2012 REVIEW OF OPERATIONS & DEVELOPMENT Financial Overview Ian Bull, CFO Review of operations Richard Glynn, CEO Q&A 17

18 INVESTING TO GROW PLATFORM NOW SCALABLE & FLEXIBLE 18

19 INVESTING TO GROW PROGRESS AGAINST SEQUENCED DEVELOPMENT Majority of the heavy lifting completed... redefined core technology architecture increased flexibility of core supplier relationships built proprietary trading platform expanded product range rollout of new sportsbook and mobile platforms CRM to grow customer value 19

20 INVESTING TO GROW REMAINING PIECES PROGRESSING redefined core technology architecture increased flexibility of core supplier relationships built proprietary trading platform expanded product range rollout of new sportsbook and mobile platforms CRM to grow customer value 20

21 INVESTING TO GROW REMAINING PIECES PROGRESSING redefined core technology architecture increased flexibility of core supplier relationships built proprietary trading platform expanded product range rollout of new sportsbook and mobile platforms CRM to grow customer value 21

22 TRADING DEVELOPMENTS FOUNDATION FOR GROWTH DELIVERED ONGOING Fundamental to growth of sportsbook More markets, more automation, improved algorithms, better insight Optimising margin to minimise downside & maximise upside Enables more meaningful measurement of performance Improved quality of earnings through better liability management 2013 New fieldbook real time management of liabilities Intelligent refinement of prices More data feeds trade more on Ladbrokes platform Automation of US sports Sustainable margin improvement... 22

23 TRADING DEVELOPMENTS IMPROVED LIABILITY MANAGEMENT Ave. weekly loss to unprofitable customers 2011 H H % improvement Reducing the level of unprofitable staking New client risk team understanding customer behaviours Expecting benefit to continue in H1 23

24 TRADING DEVELOPMENTS CONSISTENT INCREASE IN MARGIN EXPECTANCY Horseracing bps Jun 12 Aug 12 Oct 12 Dec 12 Jan 13 NOTE - Chart rebased to 100 shows movement in combined Digital & sportsbook horseracing margin Tangible benefit since trading enhancements began Margin expectancy is pre the impact of results Less volatility better quality earnings over time Not a specific target provides pricing/value flexibility 24

25 TRADING DEVELOPMENTS CONSISTENT INCREASE IN MARGIN EXPECTANCY 130 Football bps Aug 12 Sept 12 Oct 12 Nov 12 Dec 12 Jan 13 NOTE - Chart rebased to 100 shows movement in combined Digital & sportsbook football margin Benefits Retail and Digital channels Expecting continued and sustainable benefit over time Extending to other products during

26 IMPROVING CUSTOMER EXPERIENCE BETTER ON VALUE & IMPROVED EARNINGS MIX More value promotions Rewarding customer loyalty Promoting higher margin products Significant growth in multiples 68% of retail football stakes up from 61% 30% of digital football stakes up from 27% 26

27 DIGITAL SPORTSBOOK ON TRACK FOR Q1 DELIVERY All UK customers by end Q1 Dynamic presentation of expanded product offer More prominent BIP Fewer clicks to bet More personalised experience 27

28 IMPROVING CUSTOMER EXPERIENCE NEW CONTENT DRIVES ACTIVITY Games in new games in 2012 (7 new suppliers) IGT games from Dec already 25% of slots mix Realistic & Evolution already 45% of mobile GW Newer content delivering 3x more gross win 49% 32% 71% 62% 63% 48% 27k BIP events 2011, 70k in 2012 BIP staking up 38% (football up 62%) 2013 focus on tennis and US sports Football Other Sports Total H H BIP % of total turnover Excluding all racing product 28

29 MOBILE PLATFORM ON TRACK FOR Q2 DELIVERY New mobile operating platform on track Platform facilitates multi product development Quick to market execution Target specific customer usage Multiple apps in H1 and into H2 Racing centre Kammy App Coupon App Bet in Play App 29

30 CUSTOMER DEVELOPMENT DEVELOPMENT OF CRM IS KEY FOCUS Superior platforms Improved Superior platforms product Optimise rewards Data & CRM Grow customer value PROGRESSED FOCUS Logical progression to this point Activity focussed on customer journey Aligning rewards with customer behaviour Active Data warehouse will add insight Working closer with all our suppliers 30

31 BETDAQ OPTION TO DIFFERENTIATE IN SPORTS BETTING Enhance Betdaq liquidity Grow Betdaq coverage 20% - 30% of Ladbrokes customers use an exchange Better value option for exchange bettors Dedicated technology resource Improve Betdaq functionality Improve Betdaq marketing Launch Ladbrokes exchange Selected laying into exchange Expand range of events and depth of markets Customer experience - multiples, cash out, tablet Targeted marketing campaign Option to control technology 31

32 UK RETAIL CONTINUING TO PERFORM UK Retail net revenue m a record year Net revenue 13% growth since 09 OTC growth Machines growth 32

33 UK RETAIL OTC ACTIVITY RESILIENT 800 Footfall 12 v 11 Olympics Jan'11 Apr'11 Jul'11 Oct'11 Jan'12 Apr'12 Jul'12 Oct'12 OTC impacted by Olympics Footfall excluding Jul-Aug (0.5%) Staking (1.7%) adjusted for lost racing and Euros Underlying margin improvement 33

34 UK RETAIL MACHINES GROWTH DRIVEN BY SEVERAL FACTORS 100% What has driven the growth? Mix benefit 5m Density 5m New shops 13m Gross win up 14% in 2012 Increased density (3.88) adds 5m Gross win per shop p.w 3.7k up 12% Slots growth driving mix benefit 50% Core 29m Strong pipeline of (exclusive) slots content Density exit rate 3.89 expect this to rise 0% 52m increase in gross win Yield mngt. trials through Odds On +ve New generation cabinet rollout starts Q4 34

35 UK RETAIL EXCLUSIVITY DRIVES HIGHER GROWTH Exclusive multi channel slot from Mazooma Simultaneous launch in Digital Retail gross win 120% > average new game Digital gross win 65% > average new slot 1m combined gross win in only 4 weeks More exclusive B3 launches planned in

36 UK RETAIL FURTHER EVOLUTION OF MACHINES CABINET Lara terminal Current terminal Widescreen Test Prototype 1 Next gen Q Ladbrokes owned First 19" dual screen Trialled 2006 Launched 2007 Barcrest only content Rev share Sci Games Multi vendor content Launched " screens 21.5" screens Launched September terminal trial 23" screens Advertising "top box" 6 shop Trial Dec 12 23" screens Integrated "Top Box" V-Deck button panel Foreign language play Trial 2013 Full estate in

37 UK RETAIL EVOLVING SHOPS & DEVELOPING FUTURE FORMATS Emphasis on customer interaction More accessible Bet in Play New video walls Sky into majority of shops in H1 Increased SSBT offer Localised focus on marketplace 100 net new openings planned Looking at under served markets 37

38 INTERNATIONAL GROWING OPPORTUNITIES OUTSIDE THE UK Market leader in Madrid and Aragon Now cash +ve in established regions Expect further expansion in 2013 More than 50% profit growth in 2012 Well controlled cost base Margin benefits and increased shop hours in 2013 Clear market leader growing profit strongly Expect to introduce machines New points of sale in Wallonia Continued solid performance in Hunan Approval for Jiangsu (#1 lottery province) expected Development of new games progressing 38

39 REGULATION UPDATE ON CURRENT DEVELOPMENTS Rate of Machine Games Duty Draft bill on offshore regulation effective enforcement key Triennal review of stakes and prizes recommends status quo Evidence based review on B2 games 39

40 OUTLOOK MOMENTUM CONTINUING, AGENDA FOR GROWTH Investment starting to drive performance Expect trading enhancement to drive sustainable benefits Headwinds in UK Retail but expansion financially compelling European opportunities for growth CRM key to Digital net revenue development underway Momentum in Ladbrokes continuing 40

41 YEAR ENDED 31 DECEMBER 2012 APPENDICES 41

42 GROUP NET REVENUE & OPERATING PROFIT (EXCLUDING HIGH ROLLERS) Year ended 31 December 2012 m Net revenue Operating profit (1) 2011 m Variance B(W) m 2012 m 2011 m Variance B(W) m UK Retail European Retail Digital (2) (20.6) Core Telephone Betting (1.5) (4.0) 2.5 Corporate costs (25.1) (23.2) (1.9) Total 1, (1) Operating profit is before exceptional items (2) Digital operating profit shown after deducting amortisation charge of 2.6 million in 2012 and in

43 GROUP NET REVENUE & GROSS WIN (EXCLUDING HIGH ROLLERS) Year ended 31 December Net revenue Gross win 2012 m 2011 m Variance B(W) % 2012 m 2011 m Variance B(W) % UK Retail European Retail Digital Core Telephone Betting Total 1, , ,

44 UK RETAIL KPIs Year ended 31 December 2012 m 2011 m Variance B(W)% OTC Gross win margin 16.7% 15.6% 1.1pp Like for like OTC amts staked decline (4.4)% (0.6)% (3.8)pp Like for like OTC net revenue growth/(decline) 2.1% (7.0)% 9.1pp Like for like total costs (1) increase 3.3% 0.9% 2.4pp Like for like shop staff costs decrease (4.1)% (2.9)% (1.2)pp Stake per slip (2) (0.4) Average number of machines 8,345 8, Average weekly gross win per machine Like for like takes into account shop openings and closures (1) Excludes VAT, Freebets and Gross profits tax (2) Slips exclude machines 44

45 UK RETAIL RESULTS Year ended 31 December 2012 m 2011 m Variance B(W)% OTC gross win Machines gross win Total gross win OTC net revenue Machines net revenue Total net revenue Associate income Gross profits tax (59.7) (57.5) (3.8) Staff costs (197.7) (198.7) 0.5 Property costs (1) (103.5) (97.7) (5.9) Content costs (2) (74.7) (66.6) (12.2) Other costs (inc. depn) (3) (126.6) (112.9) (12.1) Operating costs (502.5) (475.9) (5.6) Operating profit (1) Rent, rates and utilities (2) Pictures, data, levy, Sky (3) Depreciation = 33.7m (2011: 35.7m) 45

46 UK RETAIL ADJUSTMENTS TO GROSS WIN Year ended December OTC Machines Total OTC Machines Total Total variance m m m m m m B(W)% Gross win Freebets (8.2) (4.1) (12.3) (7.9) (2.4) (10.3) (19.4) VAT - (68.7) (68.7) - (60.1) (60.1) (14.3) Net revenue

47 UK RETAIL PROFORMA IMPACT OF MACHINE GAMES DUTY Proforma H1 H m m FY 2012 m H m Actual H m FY 2012 m Var FY 2012 m Machines gross win Freebets (1.1) (3.0) (4.1) (1.1) (3.0) (4.1) - VAT (33.8) (34.9) (68.7) 68.7 Net revenue Machine Games Duty (40.6) (41.9) (82.5) (82.5) Gross profit (13.8) Impact of MGD below gross profit line is not material with positive impact on AMLD and negative impact on VAT broadly equal 47

48 UK RETAIL MACHINES DENSITY AND GROSS WIN PER SHOP Year ended 31 December Variance B/(W) % Machine gross win ( m) Machine density Gross win per terminal per week ( ) Gross win per shop per week ( ) 3,670 3,

49 IRELAND RESULTS Year ended 31 December 2012 m 2011 m Variance B(W)% Gross win Adjustment to gross win (1) (2.3) (2.2) (4.5) Net revenue Betting tax (7.4) (7.9) 6.3 Other costs (58.4) (62.1) 6.0 Operating profit Constant currency amounts staked (decrease)/increase (3.5)% 9.1% n/a Constant currency gross win increase 5.5% 0.7% n/a Shop numbers at the end of the year (1) Fair value adjustments, freebets and VAT 49

50 DIGITAL RESULTS Year ended 31 December 2012 m 2011 m B(W)% Net revenue Betting tax (1.5) (0.4) (275.0) Levy and licenses (0.9) (0.8) (12.5) Staff costs (25.9) (22.5) (15.1) Software and geographical partners (1) (21.2) (21.0) (1.0) Marketing (including affiliates) (48.3) (30.4) (58.9) Banking and chargebacks (6.5) (6.4) (1.6) Depreciation and amortisation (14.0) (8.5) (64.7) Other costs (28.0) (21.0) (33.3) Total operating costs (144.8) (110.6) (30.9) Total Digital operating profit (2) (39.3) (1) Payments to third party software and platform providers and geographical partners (2) Digital operating profit pre amortisation of customer relationships operating profit of 34.4 million versus 55.0 million in

51 DIGITAL KPIs Year ended 31 December B(W) % Unique active players (1) (000s) Real money sign-ups (2) (000s) Cost per acquisition (3) Adjusted cost per acquisition (4) 1, (5.4) (28.9) (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) Total of all online and offline marketing spend, all CPA affiliate expenses and all bonus costs (except those relating to revenue share affiliates) divided by the aggregate real money sign-ups from all sources except those through revenue share affiliates (4) As per cost per acquisition, but excluding any marketing costs attributed to CRM activity 51

52 DIGITAL PRODUCT KPIs Year ended 31 December Variance B(W) % Sportsbook Gross win margin 7.0% 6.0% 1.0pp Unique active players (000s) Average monthly active player days (000s) (2) 1, Yield per unique active player ( ) (1) Casino Unique active players (000s) Average monthly active player days (000s) Yield per unique active player ( ) (1) (16.7) Poker Unique active players (000s) (3.6) Average monthly active player days (000s) (20.1) Yield per unique active player ( ) (1) (21.1) Games Unique active players (000s) Average monthly active player days (000s) Yield per unique active player ( ) (1) Bingo Unique active players (000s) (1.1) Average monthly active player days (000s) (3.5) Yield per unique active player ( ) (1) (1.3) (1) Revenue per unique active player for the year 52

53 EUROPEAN FOOTBALL CHAMPIONSHIPS H H Total Amounts staked m m m UK Retail European Retail Digital Core Telephone Betting Total H H Total Margin Gross win m m m % UK Retail % European Retail % Digital % Core Telephone Betting (0.2) - (0.2) (5.3)% Total % 53

54 EXCEPTIONAL ITEMS (PREVIOUSLY NON-TRADING ITEMS) Year ended 31 December 2012 m 2011 m Loss on closure of shops (1) (3.8) (1.9) Spanish retrospective online gaming taxes (2) (2.2) - Unrealised gains on derivatives Impairment loss - (10.9) Business restructuring costs - (4.4) Corporate transaction costs - (2.6) Interest rates swaps termination costs - (0.5) Total (3) (5.7) (20.3) (1) The 3.8 million loss on closure of shops is made up of a 1.8 million loss on closure of UK Retail shops (2011: 1.2 million) and a 2.0 million loss on closure of European Retail shops (2011: 0.7 million). These include a loss on disposal of intangible assets of 1.8 million (2011: 0.3 million), a loss on disposal of property, plant and equipment of 0.5 million (2011: 0.6 million) and cost accruals of 1.5 million (2011: 1.0 million). (2) Spain issued online gaming licences for all products (except slots) effective from 1 June 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 selfassessment 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. (3) Continuing operations before tax (2012 tax credit million, 2011 tax credit - 1.6m). 54