PRELIMINARY RESULTS Year ended 31 December 2014 Ladbrokes plc 26 - PowerPoint PPT Presentation

PRELIMINARY RESULTS Year ended 31 December 2014 Ladbrokes plc 26 February 2015

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INTRODUCTION Peter Erskine, Chairman

AGENDA Financial Overview Ian Bull, CFO Operational Review Richard Glynn, CEO Q&A

Group Financial Performance Summary Year ended 31 December 2014 2013 Variance £m £m  2014 – year of exceptional football: (1)(3)  Q1 Football Net revenue 1,158.9 1,116.6 +3.8%  A good World Cup  Boxing Day alone costs c.£8 million (1)(2) Operating profit (9.3)% 125.4 138.3 Finance costs (27.4) (25.0) (9.6)%  H2 operating profit: +30%, H2 growth (1) Profit before tax 98.0 113.3 (13.5)% objectives delivered Effective tax rate 5.0% 5.1%  Tax: lower than guidance High Rollers 14.2 5.9 +141%  2014 DPS: 8.9p per share as committed (1) Underlying EPS 10.1p 11.7p (13.7)%  High Rollers: strong contribution in H1 Dividend 8.9p 8.9p Net debt 419.2 398.6 (5.2)%  Net debt: broadly stable Before exceptional items (1) Excluding High Rollers (2) Includes amortisation of acquisition related intangible assets of £5.6m in FY14 and £4.0m in FY13 (3) 2013 net revenue has been adjusted to reflect the change from VAT to MGD on 1 February 2013 5

Group Operating Profit KPIs on track; Digital back to growth; 2014 industry-wide results  Overall  UK Retail: significantly impacted by Boxing Day losses  Digital: strong mobile, Gaming back to growth, y-o-y EBIT growth supported by Australia  European Retail: good progress in Belgium and Spain, Ireland remains challenging  Depreciation and amortisation: £77.7m, in middle of guidance range  Corporate costs: £22.9m, better than guidance 6

UK Retail Operating Profit Underlying OTC stable, machines and costs ahead of guidance £(17.4)m £18.3m £133.9m £(5.3)m £(3.4)m £125.2m £(5.9)m £(0.9)m £119.3m FY13 EBIT Boxing Day loss GPT & MGD Adjusted OTC margin (1) OTC Machines Costs/SIS FY14 EBIT staking/freebets revenue  OTC Staking broadly stable: -1.4%; football +29% (+12% ex. W’Cup )  OTC Gross win margin: 16.4% (-0.5pps)  Machines: strong in H2 driven by slots (gross win Q3 +4.9%; Q4 +5.9%)  Cost targets exceeded: op. costs +2.7%. H2 savings plan delivered c.£3m.  SIS: contributes £1.2m in H2  Estate optimisation (2) : 89 shops closed; exceptional cost £26.9m (cash £12.1m (3) ); c.60 to close in 2015 (1) Excludes Boxing Day loss (2) Shops closed in 2014 generated operating loss of £1.1m with net revenue of £6.2m (3) 2014 cash costs £4.9m and future cash costs £7.2m 7

UK Retail Gross win per shop trends remain resilient 96 95 94 95 94 93 91 92 91 91 Average = 91 90 89 89 88 86 86 85 84 OTC GW per shop (1) (£000) Machine GW per shop (£000)  2014: after tough Q1 results, gross win per shop exceeds or achieves 5 year average in last three quarters driven by machine growth and effective estate optimisation  2015: target increased football staking. Expect further, gradual decline in traditional products. Target margins of c.16.5-17.0%  Resilient cash generation continues: operating FCF (2) of c.£138.0m (FY13: £124.8m) (1) Analysis excludes greyhound tracks Operating FCF = EBITDA before exceptional items – Capex (2) 8

UK Retail Estate Gross Win Machine growth remains strong and improved social responsibility Machine investment delivering growth  Q3 and Q4 deliver growth ahead of our 9.8% expectations ABB Code implementation/ Clarity roll-out 6.5%  Non roulette B3 (lower stake) slot products key 5.9% 4.9% driver (+24% yoy in H2); roulette stable 2.5% 2.2%  14Q4 mix: non B2 now 38% of machine gross 1.5% 0.7% 0.4% -1.1% win (13Q4: 34%) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 FY15 -2.4%  Higher MGD from 1 March 2015 -5.0%  DCMS regulations to impact on £50+ B2 games Machine GW yoy growth from April 2015 Machine GW per shop per week yoy growth  Target revenue growth of c.5% excluding DCMS impact  DCMS guidance: mid single digit impact on B2 spend from April 2015 9

Adverse Results When are exceptional results exceptional? Football Daily Gross Win/Loss Frequency 2009-2014 2014 a year with several weeks of large losses 10 s  Large wins and losses normal part of our Boxing Day 2014 138 days of business as we saw in H1 football >£1m win  Boxing Day loss – truly exceptional at 11 standard deviations from average. Too late in FY14 to benefit from recycling  Impacted UK OTC margins by around 1 ppt in Q4, resulted in a FY 2014 GW margin of 16.4% below our target range of 16.5-17.0%  We recovered well from losses in 14Q1 as OTC Gross Win Margin Trends customers recycled winnings into football betting 18.9% 16.9% 17.1% 16.2% 16.5% 17.0% 15.6% 16.9% Average 14.9% = 16.6%  Digital recycling faster than in Retail  Industry-wide football loss in week 3 and week 8 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 14 of 2015 ex. Boxing Day loss 10

UK Retail Costs performance better than guidance, more savings in 2015  Trend better than Feb 2014 guidance of +c.5% Year ended 2014 2013 (1) Variance 31 December £m £m  Staff costs – more effective scheduling Staff 200.5 201.4 (0.4)%  Rental – renewals better than reflected in our plans Property 115.8 113.9 +1.7%  Content – voluntary levy increase, Sky roll-out Content 96.8 87.1 +11.1% and normal inflationary increases Depreciation 39.3 35.6 +10.4%  2015 guidance: Other 97.8 97.6 +0.2%  Benefit from FY14/15 shop closures, operating Operating Costs 550.2 535.6 +2.7% costs will decline by c.1-2%  Like for like increase of c.1-2% 11