Preliminary results Year ended 31 December 2011 Richard Glynn, Chief Executive Ian Bull, Chief Financial Officer
Today’s line up Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A
Highlights: on plan to deliver Positive retail momentum Strong growth in machines Q4 £930 GWPTW Resilience in OTC - flat staking in 2011 Robust cost control - 2012 initiatives in place Digital positioned to grow Momentum in Digital KPIs Net revenue impacted by poker & Q4 sportsbook Investments on track and delivering New website live in coming weeks Mobile growing strongly - 2012 a year of innovation Building international presence Spain & Denmark, US acquisition, Lucky Racing in China Continued investment in 2012 Developments will converge in H2 Growing Digital revenues across 2012 page 2
Today’s line up Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A page 3
Summary of performance 2011 £m 2010 £m B + W - Year ended 31 Dec 980.3 976.6 +0.4% Net revenue -4.3% Operating profit 193.5 202.3 -3.2 5.0 n/a High Rollers -2.6 - n/a Amortisation -32.8 -34.0 +3.5% Finance costs Finance income (HMRC) - 20.0 n/a Profit before tax 154.9 193.3 -19.9% -18.4 -35.6 +48.3% Tax Tax income (HMRC) - 261.9 n/a 136.5 419.6 -67.5% Profit after tax Underlying EPS (1) 15.3p 15.2p +0.7% Dividend 7.8p 7.6p +2.6% 453.9 492.0 +7.7% Net Debt Continuing operations before non-trading items page 4 (1) Underlying EPS excludes impact of High Rollers and HMRC benefit in the comparative year
Group – Underlying profit broadly flat £(6.9)m £9.9m £(8.1)m £0.3m £(3.6)m £(0.4)m £202.3m £194.2m £193.5m FY 2010 2010 FY 2010 UK Digital European Telephone Corporate FY 2011 PBIT VAT PBIT ADJ Retail Retail Betting Costs PBIT Credit Profit excluding one off VAT credit in 2010 down 0.4% UK Retail resilient in OTC, strong in machines, disciplined on costs Digital driven by H2 marketing investment , poker and Q4 sports results World Cup generated £17.3m in 2010 (£11.3m UK Retail, £3.0m Digital) page 5
UK Retail – Underlying profit growth of 7% £(10.5)m £(1.4)m £(6.7)m £42.4m £(24.3)m £152.3m £149.1m £142.4m £3.7m FY 2010 2010 Adjusted OTC Gross Profits Machines Operating Associate FY 2011 PBIT VAT 2010 Net Tax revenue Costs Income PBIT Credit Revenue Consistent trend in OTC staking H2 margin 1.2% points less than average (1) and 1.9% less than 2010 Machines net revenue growth of 16.6% Overall costs up 0.9% excluding new openings/closures & VAT credit page 6 5 year average (2007-2011) Gross win margin – 16.5% (1)
UK Retail - Stability in staking, results impact performance 2011 2010 Var % Amounts Staked (£m) 2,466 2,451 +0.6% No. of slips (m) 296 293 +1.0% Stability in OTC activity Stake per slip (£) 8.33 8.36 -0.4% H2 margin impact driven by football and horseracing 18.0% 17.2% 16.7% 17.0% FY margin 0.9% points off 5 year 16.3% 16.0% average (1) 16.0% 15.6% 15.3% Euros uplift in H1 2012 15.0% 14.0% Half 1 Half 2 FY 2011 GW Margin 2010 GW Margin page 7 5 year average (2007-2011) Gross win margin – 16.5%. Analysis excludes greyhound tracks (1)
UK Retail – Machines growth accelerating through 2011 400 19% 360.9 16% 350 19% 13% 10% 302.8 GW up 15% H1 and 23% H2 £m 300 282.5 7% 7% 4% Margin growth from better mix 250 (1%) 1% -2% Growth initiatives for 2012 200 -5% 2009 2010 2011 Strong Q4 GWPTW of £930 2009 2010 2011 Average no of machines 7,892 7,953 8,050 Gross Win (£m) 282.5 302.8 360.9 GWPTW (£) 685 730 860 Machines margin (%) 3.2% 3.3% 3.4% page 8
UK Retail – Robust control of costs Like for like cost increase of 0.9% Costs up only 1.8% 500 490 475.9 4.3 480 6.2 467.3 6.7 470 462.4 458.7 LFL 460 450 440 430 FY 2008 FY 2009 FY 2010 VAT Credit Openings Other FY 2011 costs costs costs and costs closures Disciplined cost control 3.7% absolute cost increase YOY, 1.3% from openings/closures Like for like cost increase only 0.9%, despite 7% opening hours increase page 9
UK Retail – Cost saving initiatives underway for 2012 3% LFL excluding openings Increase of 1% 2% (4)% 5% 2% 2011 Cost Mitigating Machines New shops 2012 pressures action Cost headwinds for 2012 - pay review (pay freeze last 2 years) and content Initiative to evolve staff structure drives material saving Guidance for 2012 - 3% LFL costs and 5% overall page 10
UK Retail – growing profit per shop £‘000/shop 2009 2010 2011 Var to ‘09 Average number of shops 2,090 2,083 2,103 +13 60 openings planned in 2012 Revenue per shop 311.1 316.2 321.5 +3.3% Euros, machine growth, margin Gross profits tax (30.1) (29.4) (27.3) -9.3% Operating costs (1) (218.5) (220.5) (223.3) +2.2% Initiatives underway : 3% LFL guidance EBIT per shop (1) 62.5 66.3 70.9 +13.4% Operating profit per shop up 7% on 2010 (1) Strong foundation on which to build in 2012 page 11 (1) Excluding the impact of the £6.7m VAT credit (£3,200 per shop). In 2010 Analysis excludes greyhound tracks and income from associates
UK Retail – disciplined investment grows profit New shops payback in 3 years YR5 175% YR4 150% YR3 125% YR2 50 shops opened in 2011 % Payback Payback YR1 100% 60 openings planned for 2012 75% 50% 25% 0% 2007 2008 2009 2010 2011 PAYBACK 3.3 3.1 2.5 YRS page 12
Digital – decline driven by poker and sportsbook £(0.8)m £(4.6)m £62.7m £61.9m £(3.4)m £2.0m £55.0m £(0.9)m FY 2010 Adjusted Poker Sportsbook Costs Gaming FY 2010 PBIT VAT 2010 Revenues 2011 PBIT Credit Poker driving two thirds of the YOY decline Sportsbook margin 0.1% up H1 but 1.2% down H2 Operating costs (1) broadly flat for the full year page 13 (1) Excluding the impact of the £0.8m VAT credit and including £0.4 of betting tax
Digital – H2 2011 sporting results drive decline in profit £2.7m £(3.8)m £(1.3)m £(3.6)m £61.9m £(0.9)m £55.0m 2010 H1 PBIT var H2 Poker Sportsbook Other 2011 Adjusted Digital PBIT Marketing H1 profits up 6.5% or 9.5% LFL (1) Margin in H2 hides momentum in KPIs Marketing investment up 32% YOY (£3.8m) in H2 Poker rate of decline halved in H2 over H1 H2 2011 volume at H2 2010 sportsbook margin worth £5m page 14 (1) Excluding the impact of the £0.8m VAT credit
Digital – positive H2 2011 momentum carried into 2012 H1 Q3 Q4 Digital sign ups -6.4% +31.8% +63.5% Digital actives -1.9% +3.8% +26.1% Sportsbook sign ups +3.1% +39.8% +76.9% Sportsbook actives +3.1% +3.0% +24.1% Casino sign ups -37.1% +9.3% +88.9% Casino actives -12.6% +13.3% +72.1% Marked increase in digital KPIs in H2 2011 Positive trend in sportsbook and casino Digital (online and mobile) net revenue up in January page 15
Digital – disciplined investment in marketing 24% 25.0 25% (World Cup) Historically low investment as % NGR 20.0 22% 20% £m A&P spend Q3 saw start of uplift in digital marketing 17% A&P % NGR 15.0 19% 14% Early results encouraging 10.0 16% Sustainable investment required to 5.0 13% support development of digital offer 11.7 20.2 14.9 15.5 - 10% H1 '10 H2'10 H1'11 H2'11 Expect mid 20s as % of NGR in 2012 Evenly balanced split H1:H2 page 16
Digital – 2012 profit will be H2 weighted H1 2012 H2 2012 NGR growth will be higher in H2 Net revenue Consistent level of marketing planned in H1 and H2 Marketing cost H1 profits will be down Profit Profit growth during H2 Well placed for 2013 page 17
Balance sheet – continued capex investment £m 2010 2011 2012 Shop development 18.8 22.4 19.0 New shop formats - - 15.0 Step change 25.0 25.0 Group IT 20.1 20.0 20.0 Other/International 9.9 9.9 16.0 Total 48.8 77.3 95.0 Total spend in 2012 circa £95m £15m for new format shops and customer experience Step change capex as per guidance (£50m across 2011 and 2012) £5m on online International expansion page 18
Balance Sheet – new bank facilities extend maturity 650 540 550 450 350 225 250 131 150 50 2012 2013 2014 2015 2016 2017 Debt Bank facilities Undrawn facilities £405m at end 2011 Net debt to EBITDA 1.9x for 2011 New bank facility matures 2016 and covers 2012 bonds Circa £275m undrawn post settlement page 19
Cash flow – cash generation supports investment £m 2011 EBITDA (1) 238.5 Other movements - Cash supporting; Interest (36.0) Tax (18.1) capex investment in business Capex (77.3) growth in dividend further reduction of debt of £38m Free cash flow 107.1 Dividend (69.0) Cash & P&L tax rate 13% for 2012 & 2013 Debt reduction 38.1 Opening net debt (492.0) Interest for 2012 at rate of 7.5% Closing net debt (453.9) page 20 (1) Excludes non-trading items
Today’s line up Highlights Richard Glynn, Chief Executive Financial Overview Ian Bull, Chief Financial Officer Momentum, execution, delivery Richard Glynn, Chief Executive Q&A page 21
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