Paddy Pow er Betfair plc 2017 Interim Results Financial & - PowerPoint PPT Presentation

Paddy Pow er Betfair plc 2017 Interim Results

Financial & Operating Review

3 Financial highlights Proforma 1  3% revenue growth in CC (Q1 +15%, Q2 -6%): YOY OY % % £m H1 2 2017 17 H1 2 2016 016 YOY OY % % CC CC 2 − Q2 net revenue margin 1.5% lower than prior year (adverse sports results and investment in Revenue 827 827 759 759 +9% +9% +3% +3% pricing & promotions) Cost of sales (189) (175) +8% +2% − Euro 2016 contributed £22m revenue to Q2 2016 Gro Gross profi fit 638 638 584 584 +9% +9% +4% +4% Operating costs (419) (403) +4% -3%  Operating costs down 3% in CC: Underlyin ing EBITDA 220 220 181 181 +21% +21% +20% +20% − Sales & marketing flat (ex-Euro 2016 +10%) EBITDA margin % 26.6% 23.8% +2.8% +3.7% − Other costs down 5%, due to merger synergies Depreciation & amortisation (40) (33) +20% +10%  Operating leverage led to 21% increase in Und nder erlying ng oper erating ng profit 180 180 148 148 +22% +22% +22% +22% EBITDA vs 9% revenue growth Separately disclosed items (75) (195) n/a n/a  Effective tax rate: 14.4% (H12016: 16.0%) Operating profit/(loss) 104 (48) n/a n/a Underlying earnings per share 181.1p 147.0p +23% Interim dividends per share 65p 52p +25% Net cash at end of period £87m £2m 1 Note throughout this presentation the H1 2016 comparatives and year-on-year (“YoY”) growth rates are shown on a “Proforma” basis for the Group as if the merger completed on 1 January 2016 2 Constant currency (“cc”) growth throughout this presentation is calculated by retranslating non-sterling denominated component of H1 2016 at H1 2017 exchange rates

4 Group EBITDA bridge EBITD TDA +£39m 9m / / +21% 1% £'m €22m revenue less taxes & marketing costs 17 15 39 4 2 220 220 183 183 181 181 H1 2016 EBITDA FX impact H1 2016 EBITDA CC Euro 2016 H1 Revenue growth* (ex Marketing cost Other cost growth H1 2017 EBITDA EBITDA Euro 2016) growth (ex Euro 2016) * EBITDA impact of revenue growth estimated using average H1 2017 cost of sales %

5 Online Proforma £m H1 2 2017 17 H1 2 2016 016 YOY OY % % Online sportsbook stakes 2,780 2,481 +12%  Total sportsbook stakes up 10%, or 15% excluding Euro 2016 Dial-a-bet sportsbook stakes 182 219 -17%  Sportsbook revenue -1% due to lower net revenue Total sportsbook stakes es 2,962 2, 962 2, 2,700 700 +10% +10% margin Sportsbook net revenue % 6.2% 6.7% -0.5%  Exchange & B2B revenue +3% Sports revenue 318 316 +1% Gaming revenue 120 124 -3%  Operating costs down 2%, reflecting: Total r rev evenue enue 439 439 440 440 Fla lat – the annualisation of merger synergies Cost of sales (97) (100) -4% – continued operating efficiencies Gross profi Gro fit 342 342 339 339 +1% +1% Sales & marketing (113) (108) +4% Product & technology (46) (58) -20% Operations (35) (33) +6% Total operating costs (194) (199) -2% FX FX Im Impact CC chan ange % Underlyin ing EBITDA 148 148 140 140 +6% +6% Revenue +£7m -2% Online division includes the UK/Ireland telephone (‘Dial-a-bet’) business EBITDA -£5m +9%

6 Australia H1 1 H1 1 A$ A$ £m YOY OY % % 2017 17 2016 016 YOY OY % %  Top-line growth notwithstanding a reduced Sportsbook s stakes es 1, 1,699 699 1, 1,259 259 +35% +35% +16% +16% contribution from in-play betting Sportsbook net revenue % 10.2% 10.3% -0.1% -0.1% – In-play contributed 8% of stakes & 3% Revenue 173 173 129 129 +34% +34% +15% +15% of revenues in H1 2017, versus 15% & 8% in H1 2016 when ‘Bet Live’ was Cost of sales (46) (32) +43% +23% available Gross Pr Gro Profit 127 127 97 97 +31% +31% +13% +13%  Continued cost discipline maintained ahead Sales & marketing (38) (34) +10% -5% of potential regulatory & tax changes Product & technology (13) (12) +5% -9% Operations (23) (20) +15% -2% Total operating costs (73) (66) +11% -5% Underlyin ing EBITDA 54 54 30 30 +77% +77% +52% +52%

7 Retail H1 1 H1 1  Good revenue growth in both estates: £m YOY OY % % 2017 17 2016 016 ― UK +6% Sportsbook s stakes es 934 934 851 851 +10% +10% ― Ireland +14% (+3% in constant currency) Sportsbook net revenue % 11.6% 11.6% Flat  Like-for-like KPIs in constant currency: Sportsbook revenue 108 100 +9% ― Sportsbook stakes +2% Machine gaming revenue 52 47 +10% ― Sportsbook revenue +2% Total r rev evenue enue 160 160 147 147 +9% +9% ― Machine gaming revenue +7% Cost of sales (34) (32) +5% ― Total revenue +3% Gro Gross Pr Profit 126 126 115 115 +10% +10% ― Opex +1% Operating costs (89) (84) +6%  7 new shops opened in H1 2017 (5 in the Underlyin ing EBITDA 37 37 31 31 +20% +20% UK & 2 in Ireland) Shops at period end 620 603 +3% FX FX Im Impact CC chan ange % Revenue +£6m +5% EBITDA +£2m +15%

8 US Proforma US$ $ £m H1 2 2017 17 H1 2 2016 016 YOY OY % % YOY % Y %  TVG revenues increased by 6% Sports revenue 46 38 +21% +6%  New Jersey casino now operating at Gaming revenue 9 5 +66% +46% breakeven EBITDA Total r rev evenue enue 55 55 43 43 +26% +26% +11% +11% Cost of sales (12) (10) +22% +7%  DRAFT incurred an EBITDA loss of £1m in H1 2017 Gro Gross profi fit 43 43 33 33 +28% +28% +12% +12% Operating costs (35) (27) +34% +19% Underlyin ing EBITDA 7. 7.2 6. 6.9 +5% +5% -11% 11%

9 Cash flow Proforma £m H1 20 1 2017 H1 2 2016 016 YOY OY % %  Underlying free cash flow Underlying EBITDA 220 181 +21% represented 113% of profit after Capex (50) (34) +47% tax Working capital 25 14 +79% Corporation tax paid (22) (21) +5% Underlyi Un ying fr free c cash fl sh flow 172 172 140 140 +23% +23% Cash flow from separately disclosed items (8) (63) n/a Free ee ca cash f flow 164 164 77 77 +113% +113% Dividends paid (95) (145) -34% DRAFT acquisition (14) - n/a Interest (0) (1) -47% Issue of shares 2 1 +175% Net Net incr ncrea ease/ e/(decr crea ease) e) in in c cash ash 57 57 (69) 69) n/a /a Net cash at start of period 36 84 -57% FX translation impact (6) (13) n/a Net Net ca cash a at end end o of p per eriod 87 87 2

10 Financial guidance & regulatory update Financ ncial g guidanc nce Full year 2017 underlying EBITDA expected to be between £445m and £465m, including • Full Y Year ar 2 2017 Pr Profit its the impact of DRAFT acquisition (EBITDA losses of US$20m forecast) Cape Capex Full-year 2017 capex now expected to be approximately £90m • Effective t tax ax rat ate Full-year 2017 underlying effective tax rate expected to be between 13% and 15% • At current spot rates FX impact on H2 2017 EBITDA not material • FX FX Excluding Australia & US, the rest of the Group’s EBITDA is c.90% GBP denominated • Regulat ator ory u update Horse Betting Levy extension to online from 25 April 2017 (c. £10m annual impact) • UK UK Online gaming POCT change effective from 1 August 2017 (c.£6m annual impact) • Government’s Review of Gaming Machines & Social Responsibility Measures ongoing • 15% South Australian POCT effective from July 2017 (impacts 7% of Australian revenues) • Federal POCT under review • Austra rali lia TV advertising restrictions to apply from March 2018 • Government’s credit betting ban & series of consumer protection measures to be • implemented (impact on PPB not expected to be material)

Business Review

Strong foundations, compounded by investment, drives 12 growth & returns Foundations o of long ng-term erm succe ccess: Su Subs bstan antial ial Leading Le ng Dif iffer eren entiat iated ed Disti stincti tive sca cale le cap apabil abilit ities ies produ ducts bra rand nds Further r increa reasi sing e g efficien ency & & competitiven enes ess b by: Inves estin ing in in cap apabil abilit ities ies Investing ng i in n cus custome mer r propo position Competitiveness ased ased Efficiency cy Increase Increase Technology Product Brands Digital Marketing Customer Pricing & Customer Risk & Trading Operations Promotions Service Genera erating p profits f from exist sting m markets t to dri rive: Investment in in n new w gr growt wth oppor ortunities Shareh reholder r der ret eturns (organic and/or via acquisition)

Investing in Capabilities 13 Integrated European online platform on track for Q4 completion • Build once for deployment across multiple brands / channels / jurisdictions Impro rove ves • Increased in-house spend % lowers cost of development efficie iciency ncy • Harmonises operational tools & processes across operations • Materially reduced effort to add new brands / enter new markets Facil acilit itat ates • Higher ROI allows more development resources to be employed investment in nt in in • Increases pace of product releases cu custom omer • Facilitates differentiation, with IP retained pr propo oposition