Fortuna Entertainment Group NV Investor Presentation October 2012
WILFRED WALSH Fortuna Entertainment Group NV Chairman of the Management Board Wilf Walsh acts as Chairman of the Management Board. In 2009, he became Vice Chairman, responsible for corporate strategy, and in 2010 he helped Fortuna secure its listings on the Prague and Warsaw stock exchanges. Wilf is also a Non-Executive director of Europe s largest integrated betting and gaming company, Gala Coral. He previously acted as the Gala Coral CEO, during which time the company successfully executed two private equity transactions. He holds a number of other Non Executive and consultancy roles primarily in the UK. 2
Fortuna - Leading regulated CEE betting & lottery operator cont. Pop. 38.2 million 49k registered users No. 1 market position (32%) Retail & Online 14% Group Amounts Staked Pop. 10.5 million 175k registered users No. 2 market position (30%) Retail & Online & Lottery 56% Group Amounts Staked Pop. 5.4 million 59k registered users No. 2 market position (30%) Retail & Online 29% Group Amounts Staked 3
Fortuna - Leading regulated CEE betting & lottery operator Leading sports betting company in Central Europe No. 1 licensed market player in Poland, No. 2 in Czech Republic and in Slovakia, off-shore platform in Malta Providing retail and on-line betting in all three countries (in Poland since Jan 2012) No. 2 player in the Czech lottery market since July 2011 67% owned by private equity, market cap EUR 190 MM, P/E 14 Highly cash generative business & dividend Low leverage business debt/equity ratio 0.7 Net debt/ebitda 0.86 at of June 30, 2012 Dividend policy assuming 70%-100% payout (over 6% dividend yield) Growing market Single digit market growth in mature markets at the back of rising popularity of on-line betting Double digit growth in Poland due to liberalization on regulated on-line betting Big sport events present acquisition opportunities of new customers (EURO 2012) Instant scratch cards new distribution channels (Czech Post) Innovative products Consistent track record of launching innovative products across regions New products such as mobile betting applications, on the move products Live betting, numerical games, virtual horseracing, etc. *Based on the results of Polish bookmakers for 1Q2010 published by the Polish Association of Bookmakers **As of 2009 Y/E 4
CEE regulatory environment Key legislation Lottery Act (No. 202/1990 Coll.) covering numeric lotteries, gambling games, betting games, casinos, etc. Act on Gambling Games covering also betting games New gambling law since 1 January 2010 covering games of chance, betting and gambling machines Regulatory body Ministry of Finance and local financial authorities Municipalities to regulate shops on their territories Ministry of Finance Municipalities have to allow operation of betting shops in their territory Ministry of Agriculture has to allow betting on Slovak horse racing Ministry of Finance Licenses Licenses are awarded for a maximum period of 10 years Betting licenses are issued for 5 years License for betting organizing issued for 6 years for a specified number of betting shops Statutory requirements Operator must have its registered office in the Czech Republic and not be entirely or partly owned by a foreign entity or individual(s) Persons below 18 years of age must not participate in any betting game Certain minimum registered capital required Security deposits on a special bank account required to secure payments of winnings etc. An operator must be a Slovak legal entity with share capital of at least EUR 331,939 owned by Slovak, EU or OECD member entities Security deposit on a bank account required to secure payments of winnings etc. An operator must be a Polish legal entity with share capital of at least PLN 2 million Obligatory collateral (banking or insurance guarantee, cash deposit or mortgage) Betting organizers should obtain consents of Polish organizers of the competitions, on which bets are accepted Taxation/ Fees Changes to betting taxation introduced from Jan 2012. Betting tax on turnover (GW) of 20% and newly applied corporate income tax of 19% Taxation of 5.5% on Amounts Staked for fixed-odds betting and 1% for horse racing betting 12% withholding tax on Amounts Staked (10% under the previous law) Advertising Advertising is allowed for licensed operators Advertising is allowed for licensed operators; no special rules Advertising is restricted; only presentation of sponsor s name and logo is acceptable (only for licensed operators). Advertising inside shop is allowed Online betting Not specifically regulated; in December 2008 first licences issued by the MinFin Online betting is allowed since 2007, though not specifically regulated Regulated by law adopted in 2011, first licences issued in January 2012 Separate registration from retail betting Prohibited activities Operating and mediation of foreign lotteries and participation in foreign lotteries, collection of bets for participation in foreign lotteries Operating and mediation of foreign games and offering of participation on games operated by a foreign company 5
Market Strategy 6
No. 1 player in on-line across CEE Focus on innovation driving recruitment, retention and reactivation Improved content, look and feel, functionality and navigation In-play betting and live streaming of sport events Mobile and tablet applications in progress Innovative marketing and affiliate program New CRM system Radio Fortuna and other extensive added value customer benefits State of art trading liability management 7
Transforming access wherever and whenever customers want to bet Retail CZ 582 SK 426 PL 463 On-line ifortuna.cz (2009), ifortuna.sk (2007), efortuna.pl (2012) On the Move 8
On-line is becoming the key profit driver spearheaded by in play live betting Interactive in-play betting will become the dominant on-line segment going forward Fortuna offers more live games through streaming and more betting opportunities per game Increased betting churn, driving volumes and customer loyalty Improving trading liability/ profit protection and proprietary algorithms for odds making Deals with Perform/Sportsman - leading edge content providers 9
Reinforcing no. 2 position in Czech lottery market Optimizing distribution network New marketing and PR strategy for 2012 Fixed cost addapting to results SUPERLOTO launched in May 2012 Break-even 1H 2013 Contract with the Czech Post to support scratch cards distribution Sazka revival has grown the market back to its original size 10
Financial highlights H1 2012 Group Total (incl. high rollers) Amounts Staked EUR 229.1 million (+9.6%) Gross Win EUR 55.1 million (+15.2%) New accounts 56.316 (+78.7%) EBITDA EUR 10.1 million (-14.7%) due to loss in lottery and change in taxation in CZ Net profit EUR 5.6 million (-34.9%) due to higher finance costs and corporate income tax Dividend of EUR 0.23 per share paid (6.5% dividend yield) 240,0 220,0 200,0 180,0 15,0 10,0 5,0 0,0-5,0 Amount Staked +9.6% 10,0 0,8 219,1 208,2 H1 11 H1 12 Amount Staked lottery Amount Staked sports betting EBITDA 12,9 13,1-14.7% -1,0-3,0 H1 11 H1 12 EBITDA sports betting EBITDA lottery Source: Calculated based on FEG consolidated unaudited financial results for H1 2012 and Company information FX rates used for translation: average ČNB andnational Bank of Poland 11
Outlook for the rest of 2012 Building on record breaking 2011 performance: Q3 has started well and management anticipates strong performance to the year-end Improving sports betting mobile and on-the-move platform Strengthen no. 1 market position of efortuna.pl Controlling lottery costs to deliver anticipated profits coupled with revenue opportunity of the Czech Post deal Operating with social responsibility in regulated markets with political acceptance of sports betting as a social/leisure activity 12
IR calendar & contacts Event Date Q3 2012 Interim Report November 8, 2012 IR Contacts Klára Klímová IR Consultant e-mail: klara.klimova@fortunaeg.nl www.fortunagroup.eu 13
Appendix: Financial Performance in H1 2012 14
Group profitability retained through product mix Amounts Staked Gross Win 240 220 200 180 0,8 208,2 +9.6% 10,0 219,1 H1 11 H1 12 Amount Staked lottery Amount Staked sports betting Gross Win by Channel 60 55 50 45 40 +15.2% 4,9 0,4 47,4 50,2 H1 11 H1 12 Gross Win sports betting Gross Win lottery Gross Win & Profit Margins 60 40 20 4,9 0,4 14,6 17,8 32,8 32,4 30,0% 20,0% 10,0% 22,9% 24,1% 18,1% 18,4% H1 11 H1 12 0 H1 2011 H1 2012 Gross Profit margin Gross Win Margin GW retail GW online GW lottery Source: Calculated based on FEG consolidated unaudited financial results for H1 2012 and Company information FX rates used for translation: average ČNB and National Bank of Poland 15
High rollers effect Sports betting excluding high rollers Amounts Staked EUR 219.1 mil. (+ 10.5%) Gross Win EUR 50.2 mil. (+10.2%) Gross Win on-line EUR 17.8 mil. (+40.6%) Gross Win retail EUR 32.4 mil. (-1.5%) Sports betting including high rollers Amounts Staked EUR 219.1 mil. (+ 5.2%) Gross Win EUR 50.2 mil. (+5.8%) Gross Win from on-line EUR 17.8 mil. (+21.8%) EBITDA EUR 13.1 mil. (+2.3%) 240 220 200 180 70 50 30 10-10 Amounts Staked* +10.5% 9,9 219,1 198,3 H1 11 H1 12 AS ex. high rollers AS high rollers Gross Win by Channel* +40.6% 2,0 12,6 17,8-1.5% 32,9 32,4-0,1 H1 2011 H1 2012 GW retail ex. high rollers GW online ex. high rollers Source: Calculated based on FEG consolidated unaudited financial results for H1 2012 and Company information FX rates used for translation: average ČNB and National Bank of Poland * Financial results in 2011 exclude high rollers 16
Sports betting by country Amounts Staked* (excluding highrollers) Gross Win* (excluding highrollers) H1 2011(ex. Malta) H1 2012(ex. Malta) H1 2011(ex. Malta) H1 2012(ex. Malta) PL 12,8% SK 32,2% CR 55,0% PL 15,2% SK 30,1% CR 54,7% PL 20,5% SK 31,5% CR 48,0% PL 23,7% SK 31,1% CR 45,2% In EUR MM H1 2012 H1 2011 % Czech Republic* 118.7 107.9 10.1% Slovakia* 65.2 63.1 3.4% Poland 32.9 25.1 31.1% Malta 2.2 2.1 2.0% In EUR MM H1 2012 H1 2011 % Czech Republic* 22.7 21.8 3.7% Slovakia* 15.6 14.3 9.2% Poland 11.9 9.3 27.2% Malta 0.1 0.1 (16.5%) Source: Calculated based on FEG consolidated unaudited financial results for H1 2012 and Company information FX rates used for translation: average ČNB and National Bank of Poland * Financial results in 2011 exclude high rollers 17
Sports betting by channel and country Czech Republic* Slovakia* Poland 100% 80% 7,8 10,2 100% 80% 4,7 6,3 100% 80% 1,3 60% 40% 20% 14 12,5 60% 40% 20% 9,6 9,3 60% 40% 20% 9,3 10,6 0% H1 2011 H1 2012 0% H1 2011 H1 2012 0% H1 2011 H1 2012 GW retail GW online GW retail GW online GW retail GW online CZ 06/30 2012 06/30 2011 % SK 06/30 2012 06/30 2011 % PL 06/30 2012 06/30 2011 % Fortuna outlets 360 389 (7.5%) Fortuna outlets 254 255 0% Fortuna outlets 378 374 1.1% Partners 328 248 32.3% Partners 172 155 11% Partners 85 10 750% Proportion of on-line and live betting has increased in each country after high rollers exclusion Poland growing both on-line and retail due to 1. availability of licensed on-line betting, 2. acquisition of new retail outlets from Tipsport PL and 3. acquisition of new customers for EURO championship Czech Republic double digit growth in on-line betting and optimization of retail network in favour of partner outlets Source: Calculated based on FEG consolidated unaudited financial results for H1 2012 and Company information FX rates used for translation: average ČNB and National Bank of Poland * Financial results in 2011 exclude high rollers 18
Disclaimer This document has been prepared by Fortuna Entertainment Group N.V:. (the Company ) solely for use at the Presentation. Any forward looking statements concerning future economic and financial performance of the Company contained in this Presentation are based on assumptions and expectations of future development of factors having a material influence on the future economic and financial performance of the Company. These factors include, but are not limited to, the legal environment, the future macroeconomic situation, the market competition, the future demand for betting services. The actual development of these factors, however, may be different. Consequently, the actual future financial performance of the Company could materially differ from that expressed in any forward looking statements contained in this Presentation. Although the Company makes every effort to provide accurate information, we cannot accept liability for any misprints or other errors. In preparation of this document we used certain publicly available data. While the sources we used are generally regarded as reliable we did not verify their content. Fortuna does not accept any responsibility for using any such information. This document is provided for information and as a matter of record only. It does not constitute an offer to sell or a solicitation of an offer to buy or sell securities or other financial instruments in any jurisdictions or any advice or recommendation with respect to such securities or other financial instruments of the Company. The distribution of this document in certain jurisdictions may be restricted by law. This document may not be used for, or in connection with, and does not constitute, any offer to sell, or an invitation to purchase, any securities or other financial instruments of the Company in any jurisdiction in which such offer or invitation would be unlawful. Persons in possession of this document are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. 19