Flutter Entertainment Plc · NYSE:FLUT
Flutter Entertainment — Betfair Group — H1 FY15 Earnings Presentation
25 slides from Flutter Entertainment's earnings presentation, Dec 4, 2014
Slide 1: Interim Results FY15
INTERIM RESULTS FY15 4 December 2014
Slide 2: Overview
Overview Successfully delivering our plan Competing hard to acquire & retain customers Cross-sell success is improving monetisation Record half year for active customers (+50%), revenue (+26%) and EBITDA (+51%) Returning cash to shareholders while retaining flexibility 2
Slide 3: Financial Results
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Slide 4: Group P&L
Group P&L H1 FY15 H1 FY14 YoY % Revenue £237.6m £188.0m +26% COS (£37.2m) (£23.5m) +58% Gross Profit £200.4m £164.5m +22% Operating Costs (£126.5m) (£115.6m) +9% EBITDA £73.9m £48.9m +51% D&A (£14.0m) (£15.9m) -12% Operating Profit £59.9m £33.0m +82% Net Interest £0.9m (£0.3m) n/a Share of JV £0.1m
Slide 5: Revenue growth driven by sustainable markets
Revenue growth driven by sustainable markets £237.6m +26% £192.0m US £188.0m +17% +32% Gaming +44% £145.3m +17% Sports +60% +24% +30% +7% £45.6m £42.7m +4% +8% H1 FY14 H1 FY15 H1 FY14 H1 FY15 H1 FY14 H1 FY15 Sustainable markets1 Other markets Total • Excluding the World Cup and unusually high gross
Slide 6: Operating costs
Operating costs H1 FY15 H1 FY14 YoY % Sales and marketing £62.0m £51.6m 20% Technology £29.3m £28.8m 2% Operations £18.7m £18.2m 3% +1% G&A £16.5m £17.0m -3% Group £126.5m £115.6m 9% • Increase in marketing spend was driven by the World Cup • Other costs up just 1% despite 26% revenue growth 6
Slide 7: Capex
Capex H1 FY15 H1 FY14 YoY % External Capex £4.3m £5.3m -19% Internal Devex £3.1m £2.6m 19% Total Capex £7.4m £7.9m -6% • Full year Capex now expected to be approximately £20m 7
Slide 8: Cash flow
Cash flow H1 FY15 H1 FY14 YoY % Underlying free cash flow £67.2m £23.5m +186% Cash flow from separately disclosed items - (£9.3m) n/a Free cash flow £67.2m £14.2m +373% Dividends paid (£14.6m) (£9.3m) +57% Proceeds from disposal of stake in Betfair Australia £12.0m - n/a Other ¹ (£2.2m) (£1.3m) +69%
Slide 9: Return of capital
Return of capital Cash return • £200m distribution = 189 pence per share • Return of capital via a B-Share scheme • Share consolidation will preserve approximate share price parity Mechanics • Shareholder approval required via General Meeting ‒ Circular to be published shortly 9
Slide 10: Outlook
Outlook • On average in the medium term, we continue to expect: ‒ Sustainable markets revenue to grow in line with the market Revenues ‒ Other markets revenue to decline by between 15% and 25% per annum • We expect FY15 EBITDA to be between £97m and £103m EBITDA • Includes estimated POC tax cost of
Slide 11: Business Review
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Slide 12: Delivering our plan
Delivering our plan Plan Objective Focus on sustainable revenues • Higher quality of earnings • Larger addressable market Invest in product & brand • Product differentiation • Revenue growth • Margin expansion Increase operating efficiency • Fund investments in product & brand / international • Redu
Slide 13: Focus on sustainable revenues
Focus on sustainable revenues Sustainable markets revenue growth Sustainable markets revenue mix 34% 30% 23% H1 13 H1 15 11% 12% Ex-World Cup: +17% 71% 81% -7% Q1 Q2 Q3 Q4 Q1 Q2 FY14 FY15 Sustainable markets delivering stability & growth 13
Slide 14: Drivers of customer growth
Drivers of customer growth Reason for joining Betfair Active customers, YoY change World Cup 41% 48% 36% 31% 23% 15% 11% 9% -4% Product Promotions Price Q1 Q2 Q3 Q4 Q1 Q2 FY14 FY15 We now have a full range of acquisition & retention tools 14
Slide 15: Product: Why, what & how
Product: Why, what & how • Cash Out second highest reason for joining Acquisition, Retention, • Cash Out & Price Rush reduce churn Why Monetisation & • Price Rush & Cash Back Extra increase activity Barrier to Entry • Investment requires scale & expertise • Close competitive gaps Commercially • Plat
Slide 16: Market leading promotions
Market leading promotions Competing aggressively to acquire and retain customers CONFIDENTIAL and not for reproduction without prior written consent. © of The Sporting Exchange Limited. 16
Slide 17: Competing on price
Competing on price Market leading Sportsbook odds Exchange value via Price Rush Premier League 1 % of bets receiving a Price Rush 2 108% Match Odds Football: Correct score 75% 107% Under / Over 2.5 goals 106% Football: IP match odds 41% Overround 105% Tennis: Match odds 48% 104% Horseracing: Win 44%
Slide 18: Improved cross-sell to Gaming
Improved cross-sell to Gaming Gaming cross-sell from Sports Gaming revenue (£m) Number of customers % YoY change % +61% 22.1 +46% +66% 19.8 +20% 15.4 -6% 13.7 +9% +45% +44% Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 FY14 FY14 FY15 FY15 Cross-sell success is improving monetisation 18
Slide 19: Italy: Hard work continues
Italy: Hard work continues Crowded market and we are late Focused on filling product gaps Others 13% Number of markets per football match Betfair 1% 90 Bet365 29% 80 Snai 7% 70 60 50 Sisal 7% 40 30 20 Lottomatica 10% 10 Paddy Power 8% 0 Source: Eurobet 8% William Hill 9% AGIMEG Bwin 8% October 2014
Slide 20: TVG: Good operational performance
TVG: Good operational performance Market flat over the last three years… …but TVG has been taking share… Total industry handle TVG Handle +1% Flat -2% +26% +22% 1,000 12,000 $m $m +7% 10,000 800 8,000 600 6,000 400 4,000 2,000 200 - - 2011 2012 2013 2014 YTD 2011 2012 2013 2014 YTD ...and is now the
Slide 21: New Jersey Casino: Remains early days
New Jersey Casino: Remains early days NJ online gaming market GGR Betfair share of casino market 12 10 11% $m 8 9% 8% 9% 9% 6 7% 4 2 0 May June July Aug Sep Oct May June July Aug Sep Oct • Significant investment to introduce the Betfair brand to the US • Part of a potential NJ triple play: ADW, Casi
Slide 22: Growth operational gearing
Growth operational gearing H1 EBITDA margin % Operating free cash flow 1 (£m) 67.2 31.1% 26.0% 21.1% 23.5 15.5 FY13 FY14 FY15 FY13 FY14 FY15 Operational gearing driving margin expansion and strong cash generation 1 Defined as EBITDA plus cash flows from changes in working capital and interest receiv
Slide 23: Returns to shareholders
Returns to shareholders Cash • Distributing £200m of excess cash return • Interim dividend up 50% to 9.0 pence per share Ordinary dividends • Increasing medium term target dividend payout ratio to approximately 50% of earnings Share buy- • Will look to make opportunistic share buy-backs backs Retain
Slide 24: Creating value
Creating value Invest in product & brand Better acquisition Grow profit & retention Operational Grow revenues gearing Continuing to drive shareholder returns 24
Slide 25: Q&A
Q&A CONFIDENTIAL and not for reproduction without prior written consent. © of The Sporting Exchange Limited.