LADBROKES H1 2012 AGENDA Financial Overview Ian Bull, Chief Financial Officer Review of operations Richard Glynn, Chief Executive Q&A 1
LADBROKES H1 GROUP PERFORMANCE SUMMARY Half yr ended 30 Jun 2012 £m 2011 £m B + W - Net revenue (1) 529.0 487.8 +8.4% Operating profit (1)(2) +11.0% 106.9 96.3 20.5 (4.0) n/a High Rollers (16.8) (15.7) -7.0% Finance costs 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% 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 2
GROUP OPERATING PROFIT 11% GROWTH DRIVEN BY UK & EUROPEAN RETAIL £4.2m £5.0m £(14.7)m £0.2m £15.9m £106.9m £96.3m H1 2011 PBIT UK Retail European Retail Telephone Digital Corporate H1 2012 PBIT Costs 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
UK RETAIL PROFITS GROWING BY 21% 7.1% 2.8% 2.4% 1.9% £(6.6)m £28.1m £(5.5)m £(4.4)m £4.7m £(0.4)m £91.3m £75.4m H1 2011 PBIT OTC Net GPT/Assoc Machines Net LFL Costs Machines New openings H1 2012 PBIT Revenue Inc Revenue costs 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
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 (1) Greyhound tracks accounts for £5.6 million of amounts staked (2011: £5.4 million) 5
UK RETAIL MACHINES GROWTH CONTINUES H1 ‘12 FY 2010 FY 2011 Machine net revenue up 20% for H1 Net revenue £256m £298m £168m GWPTW £970 in Q2 (up £47 on Q1) GWPTW 730 860 947 No. shops 2,083 2,103 2,137 Increased density adds £1.6m in H1 No. machines 7,953 8,050 8,247 £96m revenue added in last 2 yrs Density 3.82 3.83 3.86 % shop GW GW growth 60% 50% 50% 46% 43% 41% Machines growing part of mix 40% 23% 19% 15% Lowers impact of sporting results 20% 12% 3% Improves earnings reliability 0% H1 10 H2 10 H1 11 H2 11 H1 12 6
UK RETAIL PROFIT PER SHOP CONTINUES TO GROW +12% 60 77.3k 55 +21% 50 68.7k 45 41.7 56.9k 38.4 40 35.6 35.2 33.5 32.8 35 30 24.1 25 20 15 10 H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12 0.2% football margin Q3 EBIT per shop for up 12.5% 36% growth over past 2 years Only 1% of shops do not contribute H1 2010 excludes one off VAT credit of £3,200 per shop. Numbers excludes greyhound tracks and income from associates 7
UK RETAIL GROWING ESTATE FURTHER WITH < 3 YR PAYBACK No. Shops with 45% of the estate has a break % payback 300 break/lease expiry in yr clause or lease expiry within the YR5 175% next 3 years (38% of the total rent) 250 YR4 150% YR3 200 125% YR2 150 YR1 100% 100 75% 50 50% 0 25% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Pre '11 Post '22 0% 2007 2008 2009 2010 2011 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) 8
DIGITAL OPERATING PROFIT SPORTSBOOK MARGIN MAIN CAUSE OF Q2 SLOWDOWN £0.4m £(1.6)m £2.2m £4.3m £(14.7)m Q2 margin 1.3% < Q2 2011 £31.0m 3.4% margin in May = £4.2m NGR £(5.3)m £16.3m H1 '11 Q1 sports Q2 sports H1 gaming Poker Costs Exit & new H1 '12 territories 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 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 9
DIGITAL OPERATING COSTS INVESTING TO GROW £2.1m £1.7m £1.8m £3.9m H1‘11 H1‘12 £7.3m £71.5m £69.4m £54.7m £14.7m H1 '11 A&P IT related Depreciation Other H1'12 New territory H1 '12 opex Like for Like costs Total £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 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) 10
CAPEX INVESTING FOR GROWTH & INCREASED RETAIL EXPANSION £m Spend in H1 45 Expect 75 new shops in 2012 (+£3m) Balance remaining 50 Overrun on website, mobile and data warehouse (+£3m) Prelims FY 2012 guidance 95 Expecting circa £101m spend in ‘12 Extra shops 3 Digital overspend 3 Revised FY 2012 guidance 101 11
TAX, EPS & DIVIDEND DIVIDEND GROWTH REFLECTS INCREASE IN PROFIT Tax charge for FY 2012 expected at 5.3% Earnings per share H1 2012 EPS at expected FY tax rate 9.4p At expected FY tax rate (5%) 9.4p Tax expected to be 10% in 2013 & 2014 At normalised rate (10%) 8.9p EPS based on 10% rate is 8.9p Dividend policy is 2x covered by normalised earnings Interim dividend 4.3p up 10.3% All numbers exclude High Rollers 12
CASH FLOW STRONG CASH SUPPORTS GROWTH, DIVIDEND & DEBT REDUCTION H1 2012 EBITDA 154.0 EBITDA growth circa 30% year on year Interest (11.5) FY 2012 tax rate of 5.3% Tax (10.7) Capex (45.0) July 2012 bond (£131m) matured & paid Other 5.3 £225m 2017 bond remains Free cash flow 92.1 Dividend (35.2) £375m undrawn against 2016 RCF Debt reduction 56.9 Net debt : EBITDA 1.6x at period end Opening net debt 453.9 Closing net debt 397.0 Net debt : EBITDA calculated pre high Rollers 13
LADBROKES H1 2012 AGENDA Financial Overview Ian Bull, Chief Financial Officer Review of operations Richard Glynn, Chief Executive Q&A 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 100000 Total events up > 200% 80000 Football 60000 Total 40000 20000 0 2011 2012 2013 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 NGR Enhanced website & mobile experience Sustained actives growth Improved data Enhanced CRM Increased trading efficiency 23
UK RETAIL A GROWING BUSINESS ON THE UK HIGH STREET 12% 10% 8% 6% 4% 2% 0% 2010 11 H1 11 H2 12 H1 24
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