Flutter Entertainment Plc · NYSE:FLUT

Flutter Entertainment — Paddy Power Betfair — FY2018 Earnings Presentation

41 slides from Flutter Entertainment's earnings presentation, Mar 6, 2019

  1. Slide 1: Paddy Power Betfair 2018 Preliminary Results

    Paddy Power Betfair 2018 Preliminary Results 6 March 2019

  2. Slide 2: Introduction

    Introduction Peter Jackson, CEO

  3. Slide 3: Today's agenda

    3 Today’s agenda  How PPB will deliver sustainable shareholder returns  Overview of our strategy  Financial review  Operating review

  4. Slide 4: Sector remains very attractive space for investment

    4 Sector remains very attractive space for investment Global gambling revenue1 c.$450bn c.$405bn c.$335bn Online CAGR 2013-18 c.11% Each 1% migration from offline to 11% online equates to c$4bn revenue Online 8% 6% (% of total) 2008 2013 2018 Large global market with key trends benefitting scale onl

  5. Slide 5: PPB positioned for success within the sector

    5 PPB positioned for success within the sector Substantial Distinctive Leading sports online scale brands capabilities  £1.5bn revenue  Differentiated products Strong  >£400m marketing spend  Global risk & trading expertise foundations  >1,000 tech developers  Proprietary technology  Podium p

  6. Slide 6: Four pillar strategy to achieve success

    6 Four pillar strategy to achieve success Attain podium Maximise profitable Pursue US Grow Betfair in positions in growth in core opportunity rest of world additional regulated markets rigorously markets  Invest in leading customer  Target core bettors with  Identify attractive markets  Invest i

  7. Slide 7: Substantial progress made in 2018

    7 Substantial progress made in 2018  Paddy Power back taking market share Maximise profitable growth  Evolving Betfair’s proposition to better leverage its unique exchange-sportsbook combination in core markets  Sportsbet driving increased customer activity with additional generosity  Significan

  8. Slide 8: Financial review

    Financial review Jonathan Hill, CFO

  9. Slide 9: Key financial highlights

    9 Key financial highlights 2018 2017 YoY Revenue Revenue £1,873m £1,745m +7%  EBITDA pre-US sports betting towards top Underlying EBITDA pre-US sports betting £475m £473m Flat end of guided range at Q3 trading update Underlying EBITDA £451m £473m (5%) (£465m-£480m) Profitability Reported Profit bef

  10. Slide 10: Revenue highlights

    10 Revenue highlights ONLINE AUSTRALIA US RETAIL GROUP £m YOY % PROFORMA2 2018 YOY % 2018 2018 YOY % CC1 2018 YOY % 2018 YOY % CC1 Sports revenue 678 +3% 403 +6% 172 +17% 222 -3% 1,474 +6% Gaming revenue 270 +13% - - 20 +31% 110 +3% 399 +11% Total revenue 948 +5% 403 +6% 191 +18% 331 -1% 1,873 +7% 

  11. Slide 11: EBITDA bridge

    11 EBITDA bridge Underlying growth: +£24m / +5% £’m 16 15 71 16 9 24 13 473 475 451 451 3 2017 EBITDA FX impact FanDuel 2017 Revenue Marketing Betting tax Other costs 2018 EBITDA US sports 2018 EBITDA 1 2 2017 DFS Proforma growth cost growth changes pre US sports betting losses EBITDA CC betting inv

  12. Slide 12: Group P&L summary

    12 Group P&L summary YOY % £m 2018 2017 YOY % CC  Depreciation increasing with Revenue 1,873 1,745 +7% +9% investment in platform integration Gross profit 1,403 1,340 +5% +6% and product improvements Underlying EBITDA 451 473 -5% -3%  Net interest reflects increased Depreciation & amortisation (90

  13. Slide 13: Online

    13 Online £m 2018 2017 YOY % Sportsbook stakes 5,453 5,633 -3%  Sports growth comprised of sportsbook +6% Sportsbook net revenue % 7.7% 7.0% +0.7% and Exchange -2% (Q1 -7%; Q2-Q4 flat) Sports revenue 678 660 +3%  Significant turnaround in gaming performance Gaming revenue 270 238 +13% with strong

  14. Slide 14: Australia

    14 Australia A$ £m  Increased customer activity driving strong 2018 2017 YOY % YOY % stakes growth Sportsbook stakes 4,308 3,708 +16% +23%  Net revenue % decline reflects: Sportsbook net revenue % 9.4% 10.9% -1.5% -1.5% — adverse sports results Revenue 403 404 Flat +6% — decision to increase inves

  15. Slide 15: Retail

    15 Retail £m  Outperforming competitors due to market- 2018 2017 YOY % leading, sports-led proposition Sportsbook stakes 1,779 1,835 -3%  UK estate (362 shops) revenue +1% Sportsbook net revenue % 12.5% 12.4% +0.1%  Irish estate (264 shops) revenue -4% in local Sports revenue 222 228 -3% currency

  16. Slide 16: US

    16 US US$ £m, Proforma1 Proforma performance: 2018 2017 YOY % YOY % Sportsbook stakes 423  Revenue growth in existing businesses of 13% in local currency, combined with Sportsbook net revenue % 2.6% £11m of sports betting revenue Sports revenue 216 190 +14% +17%  Sportsbook net revenue % low due t

  17. Slide 17: We will report US separately from 2019

    17 We will report US separately from 2019 £’m 2018 2018 Revenue 1,873 £’m Group ex-US US Group EBITDA pre US sportsbetting 475 Revenue 1,682 191 1,873 US sports betting losses (24) EBITDA 465 (14) 451 Group EBITDA 451  US is at a different stage of investment cycle  Investment losses likely to be

  18. Slide 18: US: 2018 EBITDA by business

    18 US: 2018 EBITDA by business 2018 Proforma £m Fantasy, TVG & Casino Sportsbook Total Stakes 423 423 Net revenue % 2.6% 2.6% Revenue 224 11 236 Revenue (net of promotions) less cost of sales Contribution 100 (9) 91 (variable taxes & supplier costs) & marketing costs Other opex (91) (15) (106) Inclu

  19. Slide 19: US: financial guidance

    19 US: financial guidance Total US investment will be driven by four areas: Positive contribution  Good momentum into 2019 driven by investment in promotions, marketing and product from Fantasy, TVG & Casino businesses  Continuing to invest both to grow customer base and to generate positive retur

  20. Slide 20: Cash flow

    20 Cash flow £m 2018 2017  Capex increase reflects additional US Underlying EBITDA 451 473 investment Capex (107) (89)  Working capital adversely affected by: Working capital (38) 55 ― Timing of some Q4’17 costs paid in Q1’18 Corporation tax paid (60) (45) (c.£20m) ― Material prepayments at 31 Dec

  21. Slide 21: Evolution of capital structure

    21 Evolution of capital structure Net Debt / -0.5x 0.4x 0.7x EBITDA £’m (71) 246 (169) Reflects completion of buyback programme, £101m acquisition of 51% of Adjarabet and YTD cash flow Key developments 244 (415) 3 (162) (310) (148) Net cash at 31 2018 FanDuel Dividends Share Other 1 Net debt at 31 N

  22. Slide 22: Balancing investment with cash returns and leverage

    22 Balancing investment with cash returns and leverage UK, Ireland and New market Australia opportunities Invest in marketing Invest in product / / promotion / Organic capabilities to product to deliver investment growth and long scale internationally term value Achieve podium Free Invest where our

  23. Slide 23: Impact of regulation/taxation changes on 2019 and 2020

    23 Impact of regulation/taxation changes on 2019 and 2020 KEY TAX & REGULATORY HEADWINDS ESTIMATED EBITDA IMPACT AT 2018 REVENUE LEVELS Group total Online Australia Retail Australia: incremental POC tax & product fees c£50m c£50m UK retail: £2 machines stakes limit (applies from 1 Apr 19) c£30m c£30

  24. Slide 24: Current trading & financial guidance

    24 Current trading & financial guidance Current trading  Trading in 2019 year to date is in line with our expectations Quarterly  Q1 and Q3 trading updates will continue to update on key revenue trends reporting  No longer reporting quarterly EBITDA  £101m acquisition cash outflow on completion

  25. Slide 25: Operating review

    Operating review Peter Jackson, CEO Dan Taylor, CEO Europe

  26. Slide 26: Responsible gambling is key to long-term sustainability

    26 Responsible gambling is key to long-term sustainability All key stakeholders expect us to put operating responsibly at the core of our business Customers Shareholders Employees We have a responsibility to keep their Sustainability is a key Key consideration for attracting experience safe and fun

  27. Slide 27: Paddy Power: back winning market share in 2018

    27 Paddy Power: back winning market share in 2018 Long-term revenue trend Recent revenue momentum Paddy Power total online revenue rolling LTM1 Paddy Power online YoY revenue growth1 +11% Platform Clear mobile integration product with limited leadership Significant new improvements in product compet

  28. Slide 28: Paddy Power: enhanced customer proposition driving momentum

    28 Paddy Power: enhanced customer proposition driving momentum Better sports product with enhanced gaming content Leveraging distinct brand & investing in promotions % of customers rating app as “Simplest & easiest to use” 3rd ranked 6th brand ranked 25% brand 17% Q4 2017 Q4 2018 % of sports custome

  29. Slide 29: Retail: regulation provides opportunity to win further market share

    29 Retail: regulation provides opportunity to win further market share Key drivers of PP outperformance PP well positioned for regulation-driven market consolidation  Shops are more profitable & outperform on sports betting  All shops in high footfall locations Quality  Shops are located in marke

  30. Slide 30: Betfair: business model can offer unparalleled sports-betting

    30 Betfair: business model can offer unparalleled sports-betting Key customers Product engagement Key value drivers Brand & marketing UK&I core bettors Sportsbook X-sell Betfair Gaming Leading value proposition International core sports bettors Exchange Product investment Liquidity from global net d

  31. Slide 31: Betfair: growth should be considered in totality

    31 Betfair: growth should be considered in totality Long-term revenue trend Recent revenue momentum Betfair revenue rolling LTM Betfair online YoY revenue growth +9% Total revenue Sportsbook Exchange revenue launched Exchange excl market switch-offs (Jun’12) +4% Exchange market switch-offs: 2007 200

  32. Slide 32: Grow Betfair in rest of world

    32 Grow Betfair in rest of world  Target core bettors globally with unique sports proposition  Build an efficient global product, offering relevant customer propositions Approach  Invest in regional promotional & marketing spend on a returns-based approach  Leverage scale & platform to minimise

  33. Slide 33: Sportsbet: scale & leading proposition has driven long-term success

    33 Sportsbet: scale & leading proposition has driven long-term success Strong revenue growth & market share gains Strong profit growth despite increased taxes Sportsbet market share Sportsbet EBITDA Sportsbet P&L breakdown Sportsbet Revenue ( non-retail revenue1) 245 (% of revenue) A$’m 720 A$’m CAG

  34. Slide 34: Adjarabet acquisition

    34 Adjarabet acquisition  £101m initial acquisition for 51% of business Transaction  Call / put option to acquire remainder in 3 years at 7x 2021 EBITDA overview  Adjarabet 2018 financials: Revenue £64m, EBITDA £20m  Access to PPB sports capabilities & proprietary gaming content can enhance prop

  35. Slide 35: FanDuel: stealing a march in nascent US market

    35 FanDuel: stealing a march in nascent US market  Proven consumer demand: illegal sports betting market handle estimated at $150bn (per AGA) Huge market  Evolving New Jersey market already generating >$240m of annual sports revenue (based on last 3 months) opportunity  Combined NJ, NY & PA state

  36. Slide 36: FanDuel: key drivers of our initial success

    36 FanDuel: key drivers of our initial success NJ sportsbook customer activations by source (Sep-Jan) Leveraging Cost per acquisition for Fantasy Fantasy fantasy Direct to Sports database SBK customers Advantage substantially >7m customers across 45 states lower 300k additional sign-ups over NFL sea

  37. Slide 37: Summary

    37 Summary  Sector has a very long runway of online growth  Global regulation favours scale operators & creates new opportunities  PPB well positioned to capitalise: — Good momentum in our core markets — Increasing international diversification — Early podium position secured in US online market

  38. Slide 38: Q&A

    Q&A

  39. Slide 39: Appendix

    Appendix

  40. Slide 40: Divisional overview

    40 Divisional overview ONLINE AUSTRALIA RETAIL US GROUP 1 £m, Underlying FY’18 YOY % FY’18 YOY % FY’18 YOY % FY’18 YOY % FY’18 YOY % Sports revenue 678 +3% 403 Flat 222 -3% 172 +83% 1,474 +6% Gaming revenue 270 +13% - - 110 +3% 20 +26% 399 +11% Total revenue 948 +5% 403 Flat 331 -1% 191 +75% 1,873 +

  41. Slide 41: Separately disclosed items

    41 Separately disclosed items £m 2018 2017 Non-cash acquisition related items: Amortisation on acquired intangible assets (101) (135) Fair value adjustment for share-based payments - (7) Non-cash items relating to the DRAFT business: Impairment of goodwill & intangible assets (27) - Gain on continge

Paddy Power Betfair — FY2018 Earnings Presentation on 6ix