Flutter Entertainment Plc Preliminary Results 2019 27 February 2020 - PowerPoint PPT Presentation

Flutter Entertainment Plc Preliminary Results 2019 27 February 2020

Introduction Peter Jackson, Group CEO 2

Today’s agenda • Introduction • Financial review • Operating review − US market and FanDuel − PPB − Sportsbet • Combination with The Stars Group • Q+A 3

Introduction • Transformational year for Group as we progress 4 pillar strategy − Proposed combination with The Stars Group − Acquisition of Adjarabet, market leader in Georgia − Leadership position in US sports betting and gaming market • Underlying business performing well − Good momentum in both Paddy Power and Adjarabet − UK retail benefitting from shop closures − Strong execution in Sportsbet, largely offsetting tax changes − US exceeding expectations • Responsible gambling (RG) initiatives impacting PPB Online growth; underlying KPIs reassuring 4

Building a sustainable business through RG initiatives • Pivotal time for sector on responsible gambling and regulation • Customer affordability is key to future regulation • Encouraging a “race to the top” on responsible gambling • As an operator − Improving technology globally (i.e. CAAP) to identify customers who may need protection − Expanding teams to enhance the quality and frequency of customer interaction − Continuously raising standards and insisting our business partners do likewise • As an industry − Collaborating through the newly formed Betting and Gaming Council − Working with the Gambling Commission in 3 areas (VIP code, advertising technology and game design) Putting RG at the heart of everything we do 5

Financial Review Jonathan Hill, CFO 6

Key financial highlights 2019 2018 YOY% • Strong revenue increase driven by Revenue Revenue 2,140 1,873 +14% good organic growth, US sports betting expansion and acquisition of Underlying EBITDA (Pre-IFRS 16) 385 451 -15% Adjarabet Underlying Profit before tax 266 357 -25% • Lower underlying EBITDA due to tax Profitability Reported Profit before tax 136 219 -38% and regulatory changes Underlying Earnings per share 303p 379p -20% − +12% excluding £107m impact Earnings per share 183p 242p -24% − Includes £26m of additional US investment losses Financial Net debt £265m £162m • Dividend maintained at 200p per position Net debt / LTM EBITDA 0.7x 0.4x share Shareholder Dividend per share 200p 200p returns 7

EBITDA bridge – proforma group (ex US) Underlying EBITDA +£52m / +14% • Revenue growth reflects 18 (107) good momentum in (3) 14 (14) Sportsbet and Adjarabet 52 • Sales and marketing lower given absence of World Cup • Other operating cost 426 465 374 growth of 3% (proforma) • Total Group (ex US) EBITDA 9% lower due to taxes and regulatory changes 2018 EBITDA FX impact Adjarabet 2018 Regulation/tax Adjusted 2018 Revenue Sales and Other operating 2019 Proforma changes Proforma growth marketing costs EBITDA 2 1 EBITDA 1 The impact of regulation/tax changes includes increase in Australian point of consumption taxes and product fees, UK online remote gaming duty, Irish betting duty and reduction in FOBT machine staking limits 2 EBITDA impact of revenue growth estimated using average 2019 cost of sales % 8

Group P&L summary 2019 £m 2019 Pre-IFRS 16 2018 YOY % • IFRS16 impact of £1m on PBT Revenue 2,140 2,140 1,873 +14% Gross profit 1,490 1,490 1,403 +6% • D&A increase reflects product Underlying EBITDA 425 385 451 -15% investment and US expansion Depreciation & amortisation (145) (108) (90) +19% • Higher interest cost due to higher Underlying operating profit 281 277 360 -23% average debt position and IFRS 16 Underlying net interest (14) (9) (4) +294%¹ • SDIs relate to amortisation of Separately disclosed items acquired intangibles and Stars (131) (131) (138) -5%¹ combination expenses (SDIs) Profit before tax 136 137 219 -38%¹ • Non-controlling interest comprises earnings attributable to FanDuel and Tax (24) (38) -38%¹ Adjarabet minorities Profit after tax 112 181 -38%¹ Non-controlling interest 32 21 +56%¹ Profit attributable to equity 144 201 -29%¹ holders of the company 1 YOY % growth shown on a post-IFRS 16 basis 9

PPB Online 2019 2018 YOY £m, Pre-IFRS 16 • Stakes 1% lower (ex World Cup) reflecting Sportsbook stakes 5,184 5,453 -5% reduced low value staking following roll-out of Sportsbook net revenue margin 8.1% 7.7% +40bps country specific pricing Sports revenue 666 678 -2% • Expected margin improved by 90bps, offset by Gaming revenue 340 270 +26% less favourable sports results Total revenue 1,006 948 +6% Cost of sales (283) (231) +23% • Cost of sales increase primarily driven by Cost of sales as a % of net revenue 28.1% 24.4% +380bps incremental UK and Irish taxes Gross profit 723 717 +1% • Sales and marketing includes World Cup spend in Sales & marketing costs (240) (242) -1% prior year Contribution 483 475 +2% • Other operating costs include Adjarabet and Other operating costs (176) (158) +11% investment in product, technology and RG Underlying EBITDA 307 316 -3% measures EBITDA margin 30.5% 33.4% -280bps 10

Australia 2019 2018 YOY YOY CC £m, Pre-IFRS 16 • Revenue growth from Sportsbook stakes 4,298 4,308 Flat +3% − Active customer growth (+9% ex Sportsbook net revenue margin 10.4% 9.4% +100bps +100bps Revenue 446 403 +11% +14% World Cup) − Increase in expected margin of Cost of sales (182) (121) +50% +54% 90bps Cost of sales as a % of net revenue 40.7% 30.1% +1060bps +1070bps Gross profit 264 282 -6% -3% • Cost of sales reflects c. £50m YOY Sales & marketing costs (73) (82) -11% -9% impact of POC/product fee increases Contribution 191 199 -4% -1% • Reduction in sales and marketing with Other operating costs (67) (62) +7% +9% shift to targeted generosity (in net Underlying EBITDA 125 137 -9% -6% revenue margin) EBITDA margin 28.0% 34.0% -600bps -590bps • EBITDA growth 49% excluding tax/regulatory changes 11

US 2019 2018 YOY US$ YOY £m, Pre-IFRS 16, Proforma 1 • Sports growth driven by Sportsbook stakes 2,326 423 +450% +446% – Sportsbook revenue of £102m Sportsbook net revenue margin 4.4% 2.6% +180bps +180bps – Margin improvement aided by Sports revenue 325 216 +51% +45% geographic diversification and risk Gaming revenue 51 20 +160% +149% and trading enhancements Total revenue 376 236 +60% +54% – DFS / TVG revenues +4% Cost of sales (116) (50) +132% +124% • New Jersey gaming revenue materially Cost of sales as a % of net revenue 30.8% 21.2% +960bps +960bps benefitting from cross-sell Gross profit 261 186 +40% +35% • Increased marketing to acquire sports Sales & marketing costs (145) (95) +53% +47% betting customers Contribution 115 91 +27% +22% • Other operating costs increase as we Other operating costs (156) (106) +47% +42% expand our operating capabilities Underlying EBITDA (40) (15) n/a n/a – Team grew by >300 people to 1,000 1 Proforma results include the FanDuel fantasy sports business as if it had always been part of the Group 12

Retail 2019 2018 YOY £m, Pre-IFRS 16 • Sports revenue growth Sportsbook stakes 1,793 1,779 +1% − UK +7%, driven by an increase in stakes Sportsbook net revenue margin 12.8% 12.5% +30bps − Ireland +2% Sports revenue 230 222 +4% Gaming revenue 82 110 -25% • Gaming revenue -34% since introduction of staking limits, materially improved since Total revenue 312 331 -6% competitor closures in October (Q4 -21%) Cost of sales (70) (73) -5% • Underlying EBITDA reflects £34m impact from Cost of sales as a % of net revenue 22.4% 22.1% +30bps FOBT staking limits and Irish betting duty Gross profit 242 258 -6% Sales & marketing costs (7) (7) +4% • Expect to take further market share as competitors close shops Contribution 235 252 -7% Other operating costs (182) (180) +1% Underlying EBITDA 53 72 -26% EBITDA margin 17.1% 21.6% -450bps 13

Cash flow 2019 2018 £m, Pre-IFRS 16 • Capex increase reflects online product Underlying EBITDA 385 451 development and additional US market access Capex (136) (107) investment Working capital 86 (38) Corporation tax (41) (60) • Working capital benefitted from Underlying free cash flow 295 247 − Expansion of US business Cash flow from separately disclosed items (SDI) (13) (1) − Increase in gambling taxes Free cash flow 282 246 − Material prepayments in 2018 (c. £30m) Dividends paid (156) (169) Share buyback (87) (415) • Cash flow from SDI relates to combination with Acquisitions (2019 Adjarabet; 2018 FanDuel) (102) (71) Stars Legacy Greek and German tax (40) - • Returned £243m to shareholders Interest and other borrowing costs (7) (4) Net proceeds from issue of new shares 4 10 Other 3 - Net decrease in cash (104) (403) Net (debt)/cash at start of year (162) 244 Foreign currency exchange translation 1 (2) Net debt at year end (265) (162) 14