INTERIM RESULTS HALF YEAR ENDED 30 JUNE 2013

Transcription

1 INTERIM RESULTS HALF YEAR ENDED 30 JUNE 2013

2 OVERVIEW Results impacted by... Slower machine growth than expected, recent performance volatile MGD and content costs circa 9m in H1 Retail expansion remains compelling Sustainable and reliable, enduring customer appeal Positive underlying metrics and healthy payback on new shops Digital integration progressing well Key foundations in place, clear plan for operational delivery Joint incentive to grow Digital earnings Strong foundations will drive future performance Key drivers of earnings growth established Balance sheet strength a platform for growth 1

3 OVERVIEW Results impacted by... Slower machine growth than expected, recent performance volatile (0.5)% LFL movement for H1 (+3.2% inc new shops) YOY var in machine GW per shop 4.0% 2.0% 0.0% (2.0%) (4.0%) (6.0%) (8.0%) (10.0%) 2.7% 1.2% Jan Feb Mar Apr (0.0%) May Jun Jul (0.6%) (0.2%) (5.5%) (9.2%) 2

4 OVERVIEW Results impacted by... Slower machine growth than expected, recent performance volatile MGD and content costs circa 9m in H1 Retail expansion remains compelling Sustainable and reliable, enduring customer appeal Positive underlying metrics and healthy payback on new shops Digital integration progressing well Key foundations in place, clear plan for operational delivery Joint incentive to grow Digital earnings Strong foundations will drive future performance Key drivers of earnings growth established Balance sheet strength a platform for growth 3

5 LADBROKES INTERIM RESULTS HALF YEAR ENDED 30 JUNE 2013 Financial Overview Ian Bull, CFO Review of operations Richard Glynn, CEO Q&A 4

6 LADBROKES HALF YEAR END 2013 GROUP PERFORMANCE SUMMARY Half Year ended 30 June B+/W- Net revenue (1) % Net revenue ADJ (1) (2) % Operating profit (1)(3) % Finance costs (12.2) (16.8) +27.4% Profit before tax (1) % High Rollers Underlying EPS (1) (4) 7.2p 9.4p -23.4% Dividend 4.3p 4.3p - Net Debt (5) 375.5m 386.9m m 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. The 2012 reported net revenue was 529.0m (3) Includes amortisation of acquisition related intangible assets of 1.7m in 2013 and 1.3m in 2012 (4) Underlying EPS excludes impact of High Rollers and is based upon expected full year tax charge of 10% in 2013 (2012: 5.2%) (5) 2012 comparison in position at 31 Dec

7 GROUP OPERATING PROFIT DECLINE PRIMARILY IN UK RETAIL (18.1)m 106.9m (0.6)m (0.5)m (4.2)m 2.2m 85.7m 2012 H1 PBIT UK Retail European Retail Telephone Digital Corp Costs 2013 H1 PBIT UK Retail down 18.1m circa 50% from increased tax and content inflation Digital decline as anticipated balance of profit in H2 Corporate costs lower due to reduced bonus payments 6

8 Q1 : 11.6m Q2 : 0.9m (exc. Euros) UK RETAIL TOTAL NET REVENUE UP, COST GUIDANCE LOWERED (12.5)m 17.0m + 2.7m (3.2)m 6.5m (5.1)m (6.0)m 5.9% increase (8.5)m 2.5% increase 91.3m (6.3)m Net rev (LFL tax basis) up 0.7% 73.2m 2012 H1 PBIT OTC stakes OTC margin Euros GW Machine GW Freebets/GPT MGD New shop costs LFL costs 2013 H1 PBIT Impact of OTC decline largely Q1 (horseracing cancellations play a part) OTC stakes (11.2%) Q1 and (5.8%) Q2 margin up 1.6 % points to 17.8% Machines gross win up 3.2%, net revenue (comparable) up 1.3% Total retail net revenue ahead 0.7% (down 2.5% on LFL basis) 7

9 UK RETAIL TOTAL NET REVENUE UP, COST GUIDANCE LOWERED 91.3m 2.7m Consolidated net revenue position (6.0)m 5.9% increase (8.5)m 2.5% increase (6.3)m Includes 2.5m of LFL content inflation 73.2m 2012 H1 PBIT Net revenue MGD New shop costs LFL costs 2013 H1 PBIT New machine taxation impact 6.0m in H1 (MGD net of VAT) Operating costs up 5.9% for the period LFL costs up 2.5% with 1.0% driven by LFL increase in racing picture rights Expect operating costs for full year to be up circa 7% Benefit from 73 net openings in H1 comes in H2 8

10 UK RETAIL MACHINE GROWTH SLOWER THAN EXPECTED 5.0% 0.0% (5.0%) (10.0%) (15.0%) +2.0% (6.5%) (3.2%) (5.4%) Jun wk1 Jun wk2 Jun wk3 Jun wk4 Jul wk1 Jul wk2 Jul wk3 Jul wk4 (2.5%) (4.4%) (7.3%) (8.0%) (6.7%) (10.0%) (10.0%) Gross win per shop Gross win per shop Excludes Euro effect (20.0%) Versus Euro driven footfall (17.1%) H1 ended 30 June Var Machine gross win () % GW per shop per week ( ) 3,636 3, % Ave. no. machines 8,725 8, % Density per shop Slowdown in growth across market Growth from addition of machines only LFL movement inconsistent across period June and July down 5.5% and 9.2% June/July affected by one off factors, which obscure underlying rate 9

11 UK RETAIL PAYBACK PROFILE OF AVERAGE SHOPS Net cash outflow s 100,000 50,000 - (50,000) (100,000) (150,000) (200,000) GW Per Shop EBITDA Per Shop Net Cash Outflow Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 100,000 80,000 60,000 40,000 20,000 - GW & Ebitda per shop s Chart shows average performance for shops opened in 2010 Cash payback in less than 3 years Shops take at least first quarter to establish themselves Expect more in H2 from H1 openings (and those from Q4 2012) 10

12 UK RETAIL FOOTFALL RESILIENCE, WEATHER IMPACTS JULY 600 Average 450k p.w 500 Euros Ave. footfall 000s p.w July data suggests 10% - 15% decline - Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Jul'13 Odds On data shows no overall change in footfall trend Stability corroborated by recent TNS data* July showing obvious impact of hot weather * TNS Omnibus Jan % betting shop regulars express intention to visit same or more often over next 12 months 11

13 Gross win per shop k UK RETAIL RESILIENCE IN GW PER SHOP : 0% 2103 : +1% 2151 : +2% Average shop no s & YOY increase % Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 OTC GW per shop Machine GW per shop OTC gross win stable on per shop basis Machines GW has driven growth over that time Overall shop GW stable Expansion of shop estate not cannibalising existing business (1) Analysis excludes greyhound tracks. 12

14 DIGITAL OPERATING PROFIT IN LINE WITH REVISED EXPECTATIONS 3.7m (3.7)m (1.4)m 15.0m (2.5)m (0.3)m 10.8m 2012 H1 PBIT Sports Gaming Poker Costs & Duty Betdaq 2013 H1 PBIT Sportsbook growth offset by gaming and poker Confident in trading developments 8.5% GW% is 2% points > Staking decline from removal of bad business, customer transition & HVC Costs as planned expected to be in line with guidance for FY Expect 2014 costs (pre depn) flat on like for like revenues. Additional 6/7m depreciation from annualisation and Playtech integration Gaming includes; Casino, Games & Bingo 13

15 TRADING DEVELOPMENTS CONSISTENT INCREASE IN GW% MARGIN All sportsbetting Year on year margin variance 4% 3% 2% 1% 0% -1% -2% -3% Variance in combined UK Retail and Digital GW % 3.0% 2.2% 1.9% 1.0% -0.1% -0.6% 0.0% Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13-0.5% -1.0% -2.8% Start of trading initiatives Improved client risk management and trading function overhaul Reworking of pricing strategy - focussing on right customers Beginning to see +ve impact of increased margin expectancy Expect sustainable improvement over long term 14

16 EXCEPTIONAL COSTS MAJORITY RELATE TO PLAYTECH AGREEMENT Exceptional charges Business integration 6.4 Impairment loss 9.2 Playtech related 15.6 Other 6.2 H1 Total 21.8 Full year estimate Cash 26 Non cash m incurred in H1 in relation to Playtech Asset write down in mobile with move to Mobenga Removal of duplication between London & Israel Final part of transition Other shop closures, corporate transaction fees Existing supplier discussions +ve but ongoing Estimate circa 11m H2-33m for full year Total 33 15

17 CASH FLOW STRONG CASHFLOW PROVIDES FLEXIBILITY 2013 EBITDA (1) Net finance expense (11.5) Tax (1.7) Capex (41.8) Business combinations (2) (19.4) Other 9.0 Free cash flow 53.3 Dividend (41.9) Debt reduction 11.4 Opening net debt (386.9) Closing net debt (375.5) FY capex unchanged at 95m (incl any Playtech integration) Further debt reduction over period Net debt : EBITDA (1)(3) 1.6x Revised med term target 1.3x -1.5x 352m undrawn against RCF to m bonds in place to 2017 Dividend cover reduced until earnings recover (1) Excludes exceptional items (2) Covers cash cost of Betdaq and Playtech agreements/transactions (3) Excludes High Rollers 16

18 LADBROKES INTERIM RESULTS HALF YEAR ENDED 30 JUNE 2013 Financial Overview Ian Bull, CFO Review of operations Richard Glynn, CEO Q&A 17

19 DIGITAL PLAYTECH AGREEMENT KEY DETAILS Began 1 May 2013 (ending 2017) Agreement addresses three key areas Product / IMS Data & insight Marketing services/consultancy PEOPLE a key part of the deal Ladbrokes Israel wholly owned Expertise and experience Superior product suite with consistent back office and single wallet Tooling and capability to drive CRM increased lifetime value 18

20 DIGITAL SYSTEMS BUILDING ON INVESTMENTS TO DATE Bingo Poker Casino Games 3 rd party plug ins & Apps Sportsbook Playtech Micro Micro Micro & 3rd party Mobile MFuse Ladbrokes API Middleware Openbet Trading Platform Realtime Fieldbook (Liability management) Active Data Warehouse (Real time data) 19

21 DIGITAL SYSTEMS HOW IT ALL FITS TOGETHER 20

22 DIGITAL PARTNERSHIP CLEAR STRUCTURE, CLEAR OBJECTIVES Ladbrokes Digital board protocols, review, strategy Consultancy London Israel Manila Gibraltar Sportsbook marketing Digital operations management Frontline customer services Sportsbook bet acceptance Trading expertise Odds Advisory Sportsbook product development Marketing planning & spend Promotional activity Customer development Fraud management Payment processing Sportsbook risk management & trading decisions VIP customer management 21

23 DIGITAL PARTNERSHIP PROGRESS TO DATE PEOPLE Ladbrokes Israel in Tel Aviv now with 60+ employees Expect 100 by end 2013 Removing duplication across business PRODUCT Playtech casino (Vegas) launched on Ladbrokes.com and mobile Recent Net Entertainment agreement more suppliers, more games Foundation Mobenga release for new customers Both plug into Intelligent Management System (IMS) New Openbet agreement facilitates IMS for sportsbook 22

24 DIGITAL PRIORITIES INTERIM BENEFITS & KEY DELIVERABLES SOME INTERIM BENEFITS Enhanced acquisition affiliates/seo/ppc Upweight VIP / HVC management Campaign effectiveness Vegas gaming STILL TO BE DELIVERED Transition to Playtech for poker and casino (positive discussions ongoing) Develop & launch Mobenga offer for ALL customers Integrate sportbetting wallet into IMS Leverage consistent back office and CRM across all products Focussed on delivery and full integration 23

25 UK RETAIL RESILIENT, ENDURING APPEAL, STRONG CASH FLOW 80% 60% 40% 20% 0% Ladbrokes shops age profile % 44% 36% 39% 30% 27% 23% 14% New Entry point 1 for new customers 62% 41% 40% 40% 38% 59% 6-20 yrs 60% 60% Digital Retail Younger age profile Appeal of football & machines Integral part of betting experience Still 40% of first bets Stable footfall and gross win per shop demonstrates longevity & appeal Good returns from new shops and refurbishments IRR c. 30% on new New customers defined as those who started betting in a shop or online within the last year. Data drawn from TNS Omnibus and Kantar Sport Online brand metrics survey. Demographics data from TNS Omnibus. 24

26 UK RETAIL INVESTING TO MAINTAIN MARKET LEADERSHIP NOW Q C. 40% increase in gross win per shop since 09 Evolving & increasingly competitive marketplace Technology drives customer expectations Ongoing development of software will enable smarter customer campaigns Series of initiatives ahead complete new cabinet rollout in Q

27 UK RETAIL EVOLVING OUR SHOPS MORE CONTENT, MORE CHOICE Enhanced product delivery Sky, SSBTs, WiFi 1,550 SSBTs during Q3 target BIP More content than competition 5 channels from Sept Full control over broadcast output Enables localised content - relevant to customer 600 marketplace managers to deliver local strategies A localised approach to promotions Self service terminals now rolling out Promoting where and when we choose 26

28 UK RETAIL AGGRESSIVE ON VALUE, SENSIBLE ON PRICE Trading developments mean we can compete Aggressive pricing on right events at right times Delivering value for recreational customers Clear promotional messaging Promotional innovation Better insight into customer segmentation 27

29 INTERNATIONAL PRAGMATIC APPROACH DRIVING OPPORTUNITIES Continuing to monitor new market opportunities Playtech enables faster.com growth Flexible approach includes JV, partnership or acquisition Spanish model low investment, partnership with Cirsa Leading operator in Spain and Latin America Sportium c. 600 outlets, LFL growth despite economy Launching in Catalonia (Barcelona) early 2014 Sportium now launching online Leveraging strength of retail brand Spanish launch in H2 Mexican launch early

30 SUMMARY FOCUSING ON H2 DELIVERY UK Retail evolving offer to drive growth New machine rollout SSBTs SKY across estate More broadcast channels, more control over content Digital meeting key milestones Mobile rollout on Mobenga Sportsbook CRM & single wallet Migrate remaining gaming products Fully establish Ladbrokes Israel Growth in 2014 and beyond 29

31 INTERIM RESULTS 2013 Financial Overview Ian Bull, CFO Review of operations Richard Glynn, CEO Q&A 30

32 LADBROKES HALF YEAR ENDED 2013 APPENDICES 31

33 LADBROKES HALF YEAR END 2013 NET REVENUE AND OPERATING PROFIT Half Year ended 30 June Net revenue Operating profit (1) Variance B(W) Variance B(W) UK Retail (18.1) European Retail (0.6) Digital (2) (4.2) Core Telephone Betting (1.4) (0.5) Corporate costs (8.4) (10.6) 2.2 Total (21.2) (1) Operating profit is before exceptional items (2) 2013 includes 3.9m net revenue and 0.3m operating loss from Betdaq 32

34 LADBROKES HALF YEAR END 2013 NET REVENUE AND GROSS WIN Half Year ended 30 June Net revenue Gross win Variance B(W) % Variance B(W) % UK Retail European Retail Digital (1) Core Telephone Betting (22.2) (19.7) Total (1) 2013 includes 3.9m net revenue and 4.0m gross win from Betdaq 33

35 LADBROKES HALF YEAR END 2013 RESTATED UK RETAIL NET REVENUE Half Year ended 30 June 2013 Net revenue 2012 (restated) Variance B(W) % UK Retail (1) European Retail Digital (2) Core Telephone Betting (22.2) Total (1) 2012 UK and European Retail net revenue has been restated to allow like for like comparison s as to 2013 UK and European Retail net revenue where MGD replaced VAT for Machines from 1 st February MGD is deducted from net revenue whereas VAT was deducted from gross win to arrive at net revenue (2) 2013 includes 3.9m net revenue and 4.0m gross win from Betdaq 34

36 EPS RECONCILIATION CONTINUING, EX HR & REPORTED 35

37 UK RETAIL LIKE FOR LIKE COMPARISONS AND KPIs Half Year ended 30 June Variance B(W) OTC Gross win margin 17.8% 16.2% 1.6pp Like for like OTC amts staked decline (10.9)% (0.7)% (10.2pp) Like for like OTC net revenue (decline)/growth (2.4)% 1.1% Like for like total costs (1) increase 2.5% 5.2% Like for like shop staff costs decrease (3.7)% (3.5)% Stake per slip (2) (4.5)% Average number of machines 8,725 8, % Average weekly gross win per machine (1.9)% Average weekly machine gross win per shop 3,636 3,653 (0.5)% 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 36

38 UK RETAIL FULL P&L Half Year ended 30 June (1) 2012 proforma to reflect the change from VAT on Machines to Machine Games Duty (2) Rent, rates and utilities (3) Pictures, data, levy, Sky (4) Depreciation = 17.7m (2012: 16.6m) (1) 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 (30.3) (30.4) 0.3 Machine Games Duty (34.6) (28.6) (21.0) Staff costs (100.5) (99.1) (1.4) Property costs (2) (56.0) (51.4) (8.9) Content costs (3) (43.1) (36.4) (18.4) Other costs (inc. depn) (4) (65.6) (63.5) (3.3) Operating costs (265.2) (250.4) (5.9) Operating profit (19.8) 37

39 UK RETAIL GROSS WIN ADJUSTMENTS Half Year ended 30 June (1) OTC Machines Total OTC Machines Total Variance B(W)% Gross win Freebets (5.5) (4.9) (10.4) (4.3) (1.1) (5.4) (92.6) VAT - (5.4) (5.4) - (5.2) (5.2) (3.8) Net revenue (1) 2012 proforma to reflect the change from VAT on Machines to Machine Games Duty 38

40 IRELAND P&L Half Year ended 30 June (1) Variance B(W)% Gross win Adjustment to gross win (2) (1.3) (0.8) (62.5) Net revenue Betting tax (4.3) (4.2) (2.4) Other costs (30.7) (30.0) (2.3) Operating profit (6.0) Constant currency amounts staked decrease (6.1%) (3.3%) Constant currency gross win increase - 8.9% Shop numbers at the end of the period (1) 2012 proforma to reflect the change from VAT on Machines to Machine Games Duty (2) Fair value adjustments, freebets and VAT 39

41 DIGITAL FULL P&L Half Year ended 30 June 2013 % of net revenue 2012 % of net revenue B(W)% Net revenue Betting tax (1.6) 1.8 (0.5) 0.6 (220.0) Levy and licenses (0.5) 0.5 (0.4) 0.4 (25.0) Staff costs (14.0) 15.4 (12.6) Software and geographical partners (1) (11.7) 12.9 (11.2) 12.7 (4.5) Marketing (including affiliates) (26.4) 29.1 (24.6) 27.9 (7.3) Banking and chargebacks (3.5) 3.9 (3.5) Other costs (including depreciation) (2) (20.6) 22.7 (19.2) 21.8 (7.3) Operating costs (76.7) 84.5 (71.5) 81.0 (7.3) Amortisation of acquisition related intangibles (1.7) 1.8 (1.3) 1.4 (30.8) Total operating costs (78.4) 86.3 (72.8) 82.4 (7.7) Total Digital operating profit (28.0) (1) Payments to third party software and platform providers and geographical partners (2) Includes depreciation of 6.1m in 2013 ( 4.8m in 2012) 40

42 DIGITAL KPIs Half Year ended 30 June B(W) % Unique active players (1) (000s) (13.7) Real money sign-ups (2) (000s) (19.9) (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 41

43 DIGITAL KPIs Half Year ended 30 June Variance B(W) % Sportsbook Gross win margin 8.5% 6.2% 2.3pp Unique active players (000s) (15.3) Average monthly active player days (000s) 913 1,141 (20.0) Yield per unique active player ( ) (1) Casino Unique active players (000s) (22.1) Average monthly active player days (000s) (19.5) Yield per unique active player ( ) (1) Poker Unique active players (000s) (25.5) Average monthly active player days (000s) (28.6) Yield per unique active player ( ) (1) Games Unique active players (000s) (4.8) Average monthly active player days (000s) (4.1) Yield per unique active player ( ) (1) Bingo Unique active players (000s) (11.7) Average monthly active player days (000s) (11.3) Yield per unique active player ( ) (1) (3.4) (1) Revenue per unique active player for the half year 42