Slide 1: Results for the year ended 31 December 2005
Results for the year ended 31 December 2005 16 March 2006 0
Slide 2: Agenda
Agenda John Anderson Highlights Aviad Kobrine Financial review KPI’s John Anderson Operating review Marketing review Regulatory Environment Summary and Q&A 1
Slide 3: Financial highlights
Financial highlights Ø Profit before tax up 56% to $67.4m* (2004: $43.1m) Ø Net Gaming Revenues up 52% to $271m (2004: $178m) Ø PBT* / NGR up to 25% (2004: 24%) Ø Operating expenses / NGR down to 27% (2004: 28%) Ø Cash generated from operations up 58% to $88m (2004: $51m) Ø Basic EPS* up 58% to 19.3
Slide 4: KPIs - highlights
KPIs - highlights Casino Ø NGR in 2005 up 16% to $161m (2004: $139m) Ø Active members in Q4 2005 up 48% to 98,000 (Q4 2004: 66,000) Ø NGR per active member is $419 in Q4 2005 (Q4 2004: $521) Poker Ø NGR in 2005 up 179% to $110m (2004: $39m) Ø Active members in Q4 2005 up 89% to 233,000 (Q4 2004: 123
Slide 5: Operating highlights
Operating highlights Ø Introduction of an entirely new Casino product Ø Introduction of an upgraded Poker version - multi language Ø Live: English, German, Italian and Swedish Ø March 2006: French and Danish Ø Upgraded affiliates IT platform including multilingual support Ø Members made a total of 1
Slide 6: Marketing highlights
Marketing highlights Ø Marketing investment of $100 million optimised by comprehensive multi-channel approach Ø Resulted in 2,500 real money registrations per day in 2005 Ø The most recognised online gambling brand in the UK * Ø Maintained industry leadership through sports sponsorships Ø 888.com Wo
Slide 7: Financial review
Financial review 888 N a com 8
Slide 8: Profit and loss account
Profit and loss account 2005 2004 % Change $m $m Net Gaming Revenue 271.0 177.9 52% Operating expenses 73.0 50.1 46% Research and development expenses 11.3 6.9 64% Selling and marketing expenses 100.0 64.5 55% Administrative expenses* 20.1 13.6 48% Operating profit* 66.7 42.8 56% Finance income 0.7
Slide 9: Quarterly NGR
Quarterly NGR Ø NGR in Q4 2005 up 56% to $77m (Q4 2004: $50m) Ø Quarterly CAGR of 9.3% from Q1 2004 to Q1 2005 Quarterly NGR 2004-2005 $m 80 60 40 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 8
Slide 10: Geographic segmentation
Geographic segmentation Ø USA NGR comprises 55% of total NGR (2004: 58%) Ø UK NGR comprises 44% of non-USA NGR (2004: 35%) Geographic segmentation, NGR 2005 Non-USA USA 45% 55% Non-USA breakdown In brackets percentage of total ROW Americas 9% (4%) 8% (4%) Europe UK 39% (17%) 44% (20%) 9 ROW – Rest O
Slide 11: Geographic segmentation
Geographic segmentation Ø Non-USA NGR up 64% to $123m (2004: $75m) Ø Europe is the main driver for growth Ø USA is still the largest market with NGR of $151m in 2005 (2004: $103m) NGR 2004 – 2005 $m 160 140 USA Non US 120 47% 100 4 % 6 80 60 2004 2005 10
Slide 12: The UK
The UK Ø UK NGR grew 103% in 2005 to $54m Ø CAGR 2002 – 2005 of 84% Ø UK results demonstrate the impact of a multi channel marketing approach, template for further expansion The UK, NGR 2002 - 2005 $m 60 50 40 30 20 10 0 2002 2003 2004 2005 11
Slide 13: Non-USA new player growth
Non-USA new player growth Ø 50% of new players* in 2005 are non-USA players, (2004: 38%) Ø 62% of new players in Q4 2005 are non-USA players Ø Percentage of non-USA new members is rising in both Poker and Casino Percentage of non-USA new players 70% Casino 60% Poker 50% 40% 30% 20% 10% Q1 Q2 Q3 Q4 Q
Slide 14: Costs
Costs Ø Overall expenses % of NGR reduced since 2003* Ø Largest expense in 2005 was marketing, 36.9% of NGR, down from 39.2% in 2003 Ø Administrative expense* was 7.4% of NGR (2004: 7.6%, 2003: 13.7%) Ø Operating expense was 26.9% of NGR (2004: 28.2%, 2003: 25.6%) Costs % of NGR Operating Costs % of
Slide 15: CPA
CPA Ø Our choice – a variable under control Ø CPA varies according to: Ø products Ø marketing channel (online, offline, affiliates, etc.) Ø geographical area Ø profile of target audience (age, gender, etc.) Ø timing Ø 888.com utilises a set of rigorous quantitative methods to ensure high return on i
Slide 16: Share benefit charges - IFRS2
Share benefit charges - IFRS2 Ø Investment in human capital Ø At IPO controlling shareholders granted free shares to employees – “Admission Grant” Ø At IPO grant of shares and options under the All Employee Share Option Plan Ø No cash effect Ø The majority of the charge already released to distribut
Slide 17: Profit before tax
Profit before tax Ø Profit before tax in 2005 was $67.4m* , (2004: $43.1m, 2003: $20.8m) Ø Profit margin in 2005 up to 25%* (2004: 24%, 2003:17%) Ø Profit before tax* CAGR from 2003 to 2005 was 82% Profit before tax* Profit before tax* % of NGR $m 80 28% 60 24% 40 20% 25% 24% 67.4 20 43.1 16% 17% 20
Slide 18: Balance sheet
Balance sheet 2005 2004 Non-current assets $m $m Property, plant and equipment 8.3 7.2 Deferred tax 0.4 ---- 8.7 7.2 Current assets Cash and cash equivalents 62.2 40.3 Trade and other receivables 15.0 15.2 Amounts due from related parties 1.6 2.2 78.9 57.8 Total Assets 87.6 65.0 Equity Share capital
Slide 19: Cash flow statement
Cash flow statement 2005 2004 $m $m Cash flows from operating activities Profit before tax 50.2 43.1 Share benefit charges 17.2 Profit before tax and SBC 67.4 43.1 Depreciation and Amortization 3.6 2.4 Interest received (0.7) (0.3) Change in current assets and liabilities 21.2 7.2 91.4 52.4 Tax paid
Slide 20: Cash flow from operating activities
Cash flow from operating activities Ø Cash flow from operating activities grew by 74% in 2005 to $91.4m (2004: $52.5m, 2003: $24.6m) Ø Cash flow from operating activities as percentage of operating profit* grew in 2005 to 134% (2004: 122%, 2003: 119%) Cash flow from operating activities Cash flow as
Slide 21: KPI's
KPI’s
Slide 22: Registrations
Registrations Ø Member registrations have increased consistently and reached 23.2 million at year end 2005 Ø Includes 4.3 million Poker registered member accounts and 18.9 million Casino registered member accounts Ø In 2005, Casino real money registrations exceeded 0.9 million and Poker real money r
Slide 23: Real money registrations
Real money registrations Ø In Q4 2005, more than one third of all new registrations were real money registrations Ø This percentage has risen consistently since Q3 2003: Real money registration out of total registrations 30% 20% 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 22
Slide 24: Retention
Retention Ø Population – January active members of 2004 and 2005 Ø Casino: Net deposits* in USD of January active members, in subsequent months as a percentage of January net deposits Ø Poker: Rake** in USD of January active members in subsequent months , as a percentage of January rake 100% Casino
Slide 25: Casino KPI's
Casino KPI’s Ø Casino NGR in 2005 up 16% to $161m (2004: $139m) Ø Casino active members in Q4 2005 up 48% to 98,000 (Q4 2004: 66,000) Casino NGR Casino active members $m 45 100 80 40 60 35 40 30 20 0 25 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 2004 2005 24
Slide 26: Casino NGR – a closer look
Casino NGR – a closer look Ø Casino NGR responds positively to innovations and promotions Ø New Casino product development completed in December 2005, and went live in early 2006 New Casino Product January 2006 $m 45 Bonus policy November 2004 40 New Version 35 20 new games October 2003 30 25 20 Q1
Slide 27: Casino NGR per active member
Casino NGR per active member Ø Casino NGR per active member was $419 in Q4 2005. This KPI can fluctuate as a result of promotion initiatives. For example: Ø December 2005 promotion caused a significant increase in active members Ø The promotion has added profit, but caused a decrease in “NGR per Act
Slide 28: Casino NGR per active member
Casino NGR per active member Q1 2006 NGR increase, but not in the same proportion to the KPI ‘000 180 600 $ active As for March 13th NGR per Active 1Q 2006 members KPI is higher 150 500 NGR per Active 4Q 2005 419 120 400 90 300 Promotion Started 60 200 30 100 Active Players 4Q 2005 0 0 27 Start of Q
Slide 29: New & long-term players
New & long-term players Ø 53% of 2005 Casino NGR, is generated from players recruited in 2004 or earlier Ø Strong long-term core membership NGR by year of players’ recruitment $m 50 4Q05 40 3Q05 2Q05 30 1Q05 4Q04 3Q04 20 2Q04 1Q04 10 2003 1998-02 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 28
Slide 30: Poker KPI's
Poker KPI’s Ø Poker NGR in 2005 up 79% to $110m (2004: $39m) Ø Poker active members in Q4 2005 up 89% to 233,000 (Q4 2004: 123,000) Poker NGR Poker active members in ‘000 $m 40 250 30 200 150 20 100 10 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2004 2005 2004 2005 29
Slide 31: Poker KPI's
Poker KPI’s Ø Poker quarterly NGR per active member in Q4 2005 reached $156 Ø An increase of 26% over Q4 2004 (Q4 2004: $124) NGR per active member 2004 - 2005 $ 160 120 80 2004 2005 40 Q1 Q2 Q3 Q4 30
Slide 32: Poker monthly rake
Poker monthly rake Ø Poker rake has increased consistently since launch Ø Monthly CAGR 2004-2005 of 10% Monthly Poker rake in 2005 $m 16 12 8 4 0 Aug Aug Apr Apr May May Jan Jun Jan Jun Jul Jul Oct Oct Mar Mar Nov Dec Nov Dec Feb Sep Feb Sep 31 2004 2005
Slide 33: New & long-term players
New & long-term players Ø 44% of 2005 Poker rake*, is generated from players recruited in 2004 or earlier Ø While the new members join, the prior members stay Poker rake by year of players’ recruitment $m 40 30 4Q05 3Q05 2Q05 20 1Q05 4Q04 3Q04 10 2Q04 1Q04 2003 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05
Slide 34: Operating review
Operating review ie NE com -
Slide 35: Casino new product
Casino new product Features Ø Complete redesign Ø Expanded games offering Ø Integration of Video capabilities Ø Upgraded infrastructure, enabling easy launch of future games Ø Development competed in December 2005 and product went live in January 2006 First results – based on internal tests Casino d
Slide 36: Operational statistics
Operational statistics Gaming Ø Every second in 2005, there were 27 Casino bets and 23 Poker hands Ø A new poker tournament started every 6 seconds Ø Resulting in total of 5 million tournaments and 1.6 billion bets/hands, growth of 45% Support Every single minute in 2005 Æ 4 customers were supported
Slide 37: Payment methods
Payment methods Ø Expansion of payment methods Ø Over 5 million transaction a year Ø Every day in 2005 more than 10,000 deposit requests were approved Ø Approved deposits of $30m via methods implemented in 2005 Ø Currently 22 different payment methods Number of methods 2002-2005 2005 main new paymen
Slide 38: Marketing
Marketing Ø One international brand not constrained by language Ø Marketing strategy based on comprehensive multi-channel approach Ø Successful UK strategy rolled out to new European markets Ø Economies of scale - total marketing investment of $100 million in 2005 A new registration every 11 seconds
Slide 39: Sports sponsorship
Sports sponsorship 888.com World Snooker Championship Ø A national institution in the UK Ø Broadcast on and supported by the BBC (126 hours in 2005) and Eurosport (116 hours) Ø 2005 final attracted 7.8 million viewers Ø Snooker is now booming in the Far East, especially China Sponsorship of Middlesb
Slide 40: More campaigns
More campaigns Televised 888.com Poker tournaments Ø UK Open – into its third successful year Ø Women’s Poker – the largest ever televised women-only Poker tournament Ø Poker Nations Cup – innovative team format. Roll out to new markets: Ireland, Germany, Sweden, Denmark and USA 39
Slide 41: Brand awareness
Brand awareness is the best known online gambling brand in the UK Ø 888.com is the 3rd best known gambling brand in the UK Ø 888.com has in a short time established its brand in the face of long-established land based competitors 2/3 of gamblers in the UK are familiar with brand Source: Milward Brow
Slide 42: Regulation
Regulation Current situation Ø USA – latest legislation attempts Ø Italy – latest developments 888.com’s approach Ø Working with industry bodies Ø Constant monitoring of developments worldwide Lobbying efforts Ø Lead industry lobbying efforts towards regulation of the industry is at the forefront of
Slide 43: Product & development rollout
Product & development rollout Casino Ø An entirely new product – Q1 2006 Ø New 5~6 video slots and card games – Q3/4 2006 Poker Ø Jackpot – Q1 2006 Ø Blackjack into Poker – Q3 2006 Ø New client platform – Q4 2006 Other initiatives Ø Mobile phone – Q2 2006 Ø One / two more games – Q3/4 2006 Ø Unified
Slide 44: Current trading
Current trading Ø 2006 started well Ø Continued growth in: Ø New member recruitment Ø Average daily deposits Ø Poker rake Ø Positive start in Casino, following new product roll out Ø Confident in the outlook for the year Trading in line with management’s expectations 43
Slide 45: Summary
Summary Ø Outstanding 2005 results Ø Record profits and cash generation Ø The best known online gambling brand in the UK Ø Continuous growth Ø Strong core of long-term members Ø Continuous innovation Ø Strong balance sheet Ø New Casino product well received, performing well Ø Multi-hand Poker produc
Slide 46: Q&A
Q&A