Entain PLC · LSE:ENT
Entain — Ladbrokes Coral Group — H1 2017 Earnings Presentation
34 slides from Entain's earnings presentation, Aug 31, 2017
Slide 1: Ladbrokes Coral Group plc 2017 Interim Results
Ladbrokes Coral Group plc 2017 Interim Results 31 August 2017 Ladbrokes CORAL* EUROBET = @ Ladbrokes.com.qu _GALACASINO BETDAQ _SPORTIUM LA D B R O K E S CO RAL GROUP
Slide 2: Introduction
Introduction John Kelly Chairman Ladbrokes CORAL* EUROBET = @ Ladbrokes.com.qu _GALACASIN © BETDAQ _SPORTIUM LA D B RO K E S CO RAL GROUP 2
Slide 3: Contents
Contents Overview Financial Results Operational Update Summary Q&A LADBROKES CORAL GROUP 3
Slide 4: Overview
Overview Jim Mullen CEO Ladbrokes CORAL* EUROBET = @ Ladbrokescom.au GAtacasino BETDAQ _SPORTIUM LA D B RO K E S CO RAL GROUP
Slide 5: Disclaimer
Disclaimer This presentation and the information contained in it is not for release, publication or distribution in, or to persons in, Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, the Republic of South Africa, the United States or in any jurisdiction where to do so would breach any a
Slide 6: Overview
Overview Good financial and operational performance * Strong progress on integration and synergies * More efficient, competitive and sustainable business Well placed to deliver on merger opportunities Dividend increase reflects progress-to-date and confidence in future LADBROKES CORAL GROUP
Slide 7: Financial Results
Financial Results Paul Bowtell CFO Ladbrokes CORAL* EUROBET = @ Ladbrokescomau cAtacasiio. BETDAQ _SPORTIUM LA D B R O K E S CO RAL GROUP 7
Slide 8: Financials: Group P&L
Financials: Group P&L Reported"! Proforma”! Proforma 6 months ended 30 June 2017. +2016 Change 2017 2016 Change £m £m % £m £m % Net Revenue 5 > + UK Retail -6% (-4% ex Euros) Net revenue 1,204.2 661.8 82% 1,198.0 1,184.5 = 1% —._Eyropean Retail -1% (+1% ex Cost of sales (361.8) (185.7) (95%) (360.2)
Slide 9: Financials: Proforma Operating Profit Bridge
Financials: Proforma Operating Profit Bridge £160m > £150m ~ £140m £130m + £120m + £110m £100m T H1 FY16 Operating Profit European Retail Other Corporate H1 FY17 Operating Profit H1 FY16 Operating Profit Rebased [1] Euro 2016 figure is incrementalprofit net of marketing costs LADBROKES CORAL GROUP
Slide 10: Financials: UK Retail P&L
Financials: UK Retail P&L Proforma 2017 2016 Change OTC 6 months ended 30 June £m £m % * OTC stakes -10% (-7% on an adjusted 9 basis!) and -5% after adjusting for OTC amounts staked 1,702.9 1,884.3 (10%) planned profit positive action on horse Machines amounts staked 9,860.8 10,022.3 (2%) racing con
Slide 11: UK Retail: OTC Stakes
UK Retail: OTC Stakes H1FY17 im H1FY17 Estimated Estimated Margin H1FY17 Reported Like for like Euros Day Align Adjusted Base Content?! Improvement Underlying 0% - : 1 1 am 4 2%) eo) (4.5%) 2 6% oo Ly & (4%) 4 (7.2%) g S 6%) - 5 41.5% Em J (8%) ~ \ ) (9%) Management actions to drive 205% increased p
Slide 12: Financials: European Retail P&L
Financials: European Retail P&L Proforma 2017 2016 Change 6 months ended 30 June fm £m % Amounts staked 703.5 602.9 17% Sports gross win margin 14.8% 18.4% (3.6pp) Sports net revenue 74.7 778 (4%) Virtual net revenue 24.5 22.9 7% Other net revenue 4.4 3.9 13% Net revenue 103.6 104.6 (1%) Cost of sal
Slide 13: Financials: Eurobet Sports Margin
Financials: Eurobet Sports Margin Eurobet Retail Pre Match Sport GW% Online Eurobet Pre Match Sport GW% ™~ —_— [ \ 105% 111% 19.0% (740 ) WES 19.0% 10.0% | (ere : li : : : : 12.4%] 12016 12017 Average Average GHZ CE Ney eS H12012-2016 -H12014- 2016 H12012-2016 —-H12014- 2016 * — Sports margin signif
Slide 14: Financials: Digital P&L
Financials: Digital P&L Proforma 2017 2016 Change 6 months ended 30 June £m £m % Sportsbook amounts staked 2,802.7 2,276.6 23% Sportsbook gross win margin 9.0% 8.6% 0.4pp Sportsbook net revenue 180.7 145.1 25% Gaming net revenue 193.8 174.9 11% Net revenue 374.5 320.0 17% Cost of sales (117.1) (97.1
Slide 15: Integration: Synergies
Integration: Synergies £m Total Synergies £m Cumulative Integration Costs 180.0 200.0 160.0 £150.0m 180.0 ‘ £172.5m uo £130.0m 1600 154.5m 120.0 50.0 140.0 40.0 120.0 100.0 100.0 800 800 £66.0m 60.0 £45.0m en 100.0 600 40.0 10.0 - 40.0 20.0 35.0 20.0 2017 2018 2019 2016 2017 2018 Synergies reported
Slide 16: Financials: Cashflow
Financials: Cashflow Proforma 2017 2016 Change 6 months ended 30 June £m £m £m Operating profit 158.3 147.9 10.4 Adjusted for: Depreciation and amortisation 54.6 64.3 (9.7) Share of JV and associates (1.9) (2.1) 0.2 EBITDA 211.0 210.1 0.9 Underlying working capital (46.3) (24.2) (22.1) Movement in c
Slide 17: Financials: Uses of Cash
Financials: Uses of Cash Cash inflow used to delever and fund integration costs Cashflow 2017 Net debt 6 months ended 30 June £m £m 30-Jun-17 31-Dec-16 Change Operating cashflow 129.2 Bonds (500.0) = (725.0) 225.0 Tax (15.0) Term loans / RCF (627.0) (438.0) _ (189.0) Non-trading interest 27.5 (1,127
Slide 18: Financials: Non-trading items
Financials: Non-trading items Reported: Non-trading items Amortisation of acquired intangibles £55.5m h Cash NES | predominantly relates to customer lists, 6 months ended 30 June £m £m brand and licences acquired at merger Amortistion of acquired intangibles (55.5) 0.0 (55.5) . . Integration costs £
Slide 19: Financials: Current Trading and Outlook
Financials: Current Trading and Outlook Current Trading for the period 1 July 2017 to 20 August 2017: * Group net revenue +6% * Digital net revenue +15% * UK Retail net revenue -1%, improving OTC stakes trends FY17 Guidance Recap Digital marketing / NGR c24-25% Capital Expenditure * Underlying: c£11
Slide 20: Strategy
Strategy Jim Mullen CEO ba Poeast . PREMIERSHIP cd 2016/17 CHAMPIONS : 5 Ladbrokes CORAL* EUROBET = @ Ladbrokescomau cAtacasiio. BETDAQ _SPORTIUM LA D B R O K E S CO RAL GROUP 20
Slide 21: Strategy Recap
Strategy Recap Technology Great Customer Experience Marketing Sustainable Product Growth Multi-channel Shareholder Value Underpinned by people with a passion for sports and a commitment to responsible gambling and health and safety LADBROKES CORAL GROUP International 21
Slide 22: Regulatory Update
Regulatory Update Triennial Review * DCMS confirmed that an announcement will be made in October 2017 at the earliest CMA Review of Customer Offer Terms and Conditions * Engagement with the CMA to address issues with bonus marketing in the Ladbrokes brand * — Industry wide investigation widened to c
Slide 23: Integration: Progress to Date
Integration: Progress to Date Integration well progressed, total synergies now £150m by end of 2019 People All organisation structures confirmed Over 98% of colleagues either in role or have their outcome confirmed Key office moves and refits complete New product development and innovation centre op
Slide 24: Integration: Increase in Synergies to £150m
Integration: Increase in Synergies to £150m Synergies now more than double the original estimate Example of synergy savings: UK Retail * Procurement savings (£15m) — e.g. content deals and Sky * In-house shop repairs and maintenance (£5m) * Optimised stock and coupon deliveries to shops (£1m) * In-h
Slide 25: Integration: Margin Improvement
Integration: Margin Improvement OTC gross win margin alignment in Ladbrokes Retail driving increased gross win Historic sports gross win margin differential between Coral and Ladbrokes (Coral consistently 1pp ahead of Ladbrokes) is being addressed with initial focus on UK Retail UK Retail Sports Gro
Slide 26: UK Retail: Horse Racing
UK Retail: Horse Racing UK Retail horse profits under pressure from significant cost inflation UK Horse Racing Profit Contribution Decline £m 2008 > 2016 % Change UK Retail Horse Racing . 311.9 17h (44%) Gross Win After Tax Horse Race Levy (36.5) (21.9) (40%) Direct Costs!” (44.6) (76.0) (70%) UK Re
Slide 27: Product: Sportsbook
Product: Sportsbook Product delivery accelerated ahead of the new football season * Product release had slowed in the UK brands in H2 2016 and H1 2017 as Digital platforms were migrated * Completion of migration in April has enabled a range of new product and features being released ahead of the dom
Slide 28: Product: Gaming
Product: Gaming Differentiated and exclusive gaming content helping drive outperformance * New products building on an already extensive gaming range Recent examples of gaming product development: Coral One Gaming Gala Bingo - The Chase Gala Spins 3s ) \ / Full suite of gaming content accessible in
Slide 29: Marketing
Marketing Marketing models roll out: Ladbrokescom —(CLOTRZVRERT LTV Predictor LIVE -Q2 17 LIVE -Q115 LIVE -Q1 14 Churn Predictor “Ponned 0417 | uve. sts | u we. 314 VIP Predictor Planned Q4 17 LIVE -Q115 LIVE-Q115 Player Protection Predictor Planned Q4 17 LIVE - Q3 16 LIVE - Q2 16 Sports Player Risk
Slide 30: Marketing: Dual Brand Promotion
Marketing: Dual Brand Promotion Scale provides pricing and promotion options The Open — appealing to a wider range of customers COMUNE & MOBILE EXCLUSIVE FIO IN FREE BETS ‘Bat £20 win or £10 EW on the Outright Market and get a £5 ee bet on Thursday and Friday 8 THE OPEN ‘PLACES 1/5 ODDS 1-2-3-4-5- ‘
Slide 31: Multi-channel
Multi-channel Increasing our share of a customer’s betting wallet * 1.3 million combined sign-ups to date * Lifetime value around 2x higher than non multi-channel customers Driving Digital growth MC appeals to all customers Product Evolution Proportion of H1 Digital Multi-channel customer preference
Slide 32: • Odd Boost – roll out multi’s • Infohub – increased • Player bets
• • • • • • • • • • • • • • • Odd Boost – roll out multi’s • • Infohub – increased information available • Player bets – proposed bets base on player stats • 32
Slide 33: Summary
Summary Continuing to build on the merger opportunity Good performance allied with significant progress on integration Digital growth underpinned by: * Successful migration to one digital platform for UK brands * Multi-channel continuing to attract customers and drive brand loyalty * Data-driven eff
Slide 34: Q&A
Q&A Ladbrokes CORAL* EUROBET = @ Ladbrokescomau cAtacasiio. BETDAQ _SPORTIUM LA D B R O K E S CO RAL GROUP 34
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