Entain PLC · LSE:ENT
Entain — GVC Holdings — H1 2018 Earnings Presentation
36 slides from Entain's earnings presentation, Sep 13, 2018
Slide 1: 2018 Interim Results
2018 Interim Results 13 September 2018
Slide 2: Disclaimer
Disclaimer NOT FOR PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. This presentation has been prepared by GVC Holdings PLC (“GVC”). This presentation includes state
Slide 3: Contents
Contents Introduction Kenneth Alexander Financial Review Paul Bowtell Integration and Regulatory Paul Bowtell Update Operational Update Kenneth Alexander Summary Kenneth Alexander 3
Slide 4: Overview
Overview • Strong financial and operational performance • Group NGR1 +8% (cc2 +8%) with strong growth in Online1 +18% (cc2 +20%) and European Retail1 +29% (cc2 +26%) • Underlying EBITDA1,3 +11%; and operating profit1,3 +17% • Market share gains in key territories • Completion of Ladbrokes Coral acqu
Slide 5: Paul Bowtell, Chief Financial Officer
Paul Bowtell Chief Financial Officer 5
Slide 6: Financials: Group P&L
Financials: Group P&L Reported 1 Proforma 2 • Group Proforma NGR +8% 2018 2017 Change 2018 2017 Change CC 3 £m £m % £m £m % % • Group Proforma NGR 1,125.1 386.6 191% 1,717.0 1,591.0 8% 8% underlying EBITDA +11% Revenue 1,105.9 374.8 195% 1,694.3 1,572.8 8% 8% • Adjusted fully diluted EPS Gross profi
Slide 7: Financials: Proforma EBITDA Profit Bridge
Financials: Proforma EBITDA Profit Bridge Strong growth in Online and European Retail £350m 4.8 (0.5) £340m Online UK POCT - £6.5m 13.1 (5.4) £330m Horse Race Levy - £2.5m £320m 32.4 £310m (9.0) £300m £349.5m £290m £280m £314.1m £305.1m £270m £260m £250m UK Retail H1 FY17 EBITDA European Retail H1 F
Slide 8: Financials: Statutory P&L
Financials: Statutory P&L Reported 1 Proforma 2 Group Proforma underlying 2018 2017 Change 2018 2017 Change CC 3 EBITDA +11% £m £m % £m £m % % Group Proforma Operating profit NGR 1,125.1 386.6 191% 1,717.0 1,591.0 8% 8% +17% Revenue 1,105.9 374.8 195% 1,694.3 1,572.8 8% 8% Finance costs £26.5m Gross
Slide 9: Online
Online Proforma 1 Sports brands NGR +19% (cc +21%) 6 months ended 30 June 2018 2017 Change CC 2 • GVC brands +23% (cc +26%) • Ladbrokes.com +7% £m £m % % • Coral.co.uk +12% Sports brands: sports wagers 4,875.4 4,503.1 8% 10% • Ladbrokes.com.au +24% (cc +31%) • Eurobet.it +36% (cc +32%) Sports brands
Slide 10: Online: Contribution Margin
Online: Contribution Margin 46% 44% (0.9%) (2.3%) 42% (0.1%) 40% (0.7%) 38% 44.7% 43.8% 36% 40.7% 34% 32% 30% Marketing phasing Contribution Margin Horse Race Levy Contribution Margin Contribution Margin Growth in higher Kalixa [1] H1 FY17 Online H1 FY17 Online H1 FY18 Online tax regions UK POC & Re
Slide 11: UK Retail
UK Retail Proforma 1 OTC wagers -8% (LFL3–7%) 6 months ended 30 June 2018 2017 Change • -6% after adjusting for the impact £m £m % of poor weather, the World Cup and full horse racing content OTC wagers 1,562.9 1,702.9 (8%) OTC margin 17.9% (flat) OTC margin 17.9% 17.9% 0.0pp • Positive World Cup an
Slide 12: European Retail
European Retail Proforma 1 OTC wagers +7% (cc +4%) 6 months ended 30 June 2018 2017 Change CC 2 • Organic growth in Eurobet Italy and estate growth in Ladbrokes £m £m % % Belgium OTC wagers 753.1 703.5 7% 4% OTC margin 17.8% (+3.0pp) OTC margin 17.8% 14.8% 3.0pp 3.0pp • Strong football margins in It
Slide 13: Financials: Separately Disclosed Items
Financials: Separately Disclosed Items Reported 1 2018 Amort. of acq .intangibles: £126.2m Cash Non Cash • Primarily relates to the acquisition of 6 months ended 30 June P&L the Ladbrokes Coral Group and items items bwin.party £m £m £m Amortisation of acquired intangibles 126.2 - 126.2 Corporate tra
Slide 14: Financials: Cashflow
Financials: Cashflow Proforma 1 Underlying working capital: £45.8m 6 months ended 30 June 2018 outflow £m • Primarily driven by payment of staff bonus; a large proportion of which Underlying EBITDA 349.5 is expected to unwind in H2. Working capital Greek tax working capital: £46.6m Underlying (45.8)
Slide 15: Financials: Net Debt
Financials: Net Debt Par Issue costs/ Total • The Group raised borrowings of Net Debt £1,398.0m to finance the Value Premium As at 30 June 2018 acquisition of the Ladbrokes Coral £m £m £m Group, utilised as follows: Bonds (500.0) (35.4) (535.4) • £660.2m repayment of Terms loans / RCF (1,698.0) 34.8
Slide 16: Guidance
Guidance FY18 Guidance: New • Australian POCT c£1-2m 2018 and c£20m 2019 • Depreciation and Amortisation Full year proforma charge of c£140m • Dividend Paid on 50:50 (H1:H2) basis • Online contribution margin c42.0% - 43.0% FY18 Guidance: Unchanged from Q1 Capex and integration: • Capex – underlying
Slide 17: Integration Update
Integration Update • Detailed integration and synergy plans signed off • Senior management structures in place, organisation structure design well progressed • Trading teams aligned from Day 1, protecting the underlying trading performance • Discussions with Playtech are well advanced regarding the
Slide 18: Regulation
Regulation UK Germany Sweden • Change in maximum B2 stakes No material updates. Increasing Licences expected to be expected to be enacted in 2018. number of lander calling for issued in 1/1/19 Implementation date tbc. revisions to State Gaming Treaty • Expected update on RGD increase in Nov 2018 bud
Slide 19: UK Retail – Post Triennial Plan & Impact
UK Retail – Post Triennial Plan & Impact Triennial final decision provides certainty and enables planning for a post £2 Retail estate Planning for the post triennial world Triennial Impact (EBITDA guidance unchanged from Q1) • Project team up-and-running to ensure a smooth • Fully mitigated impact o
Slide 20: Kenneth Alexander, Chief Executive
Kenneth Alexander Chief Executive 20
Slide 21: Strategic Overview
Strategic Overview Vision To be the world’s largest sports-betting and gaming business Strategic Scale + Geographic Diversification Imperatives Market Leading Goals Organic Growth + M&A Key Enablers Technology + Brands + Product + Marketing + People A passion for delivering superior customer experie
Slide 22: Scale
Scale The largest online-led sports-betting and gaming operator in the world Full Year Net Revenue1 (£ in billions, last reported) 3.3 2.2 1.0 0.7 1.7 1.7 0.8 0.9 0.6 0.4 0.4 0.3 [2] [3] [4] [1] Latest annual reports revenue figures. Exchange rates used as of 31 Dec 2017 [2] Includes Proforma GVC FY
Slide 23: Geographic Diversification
Geographic Diversification Truly global reach >20 Licensed jurisdictions Global presence – 22 offices across five continents Yes Yes (Transitional) Office Locations Yes (Application) • Expertise in operating in a wide range of markets • Present in all of the world’s top ten markets (ex Asia) and top
Slide 24: Organic Growth: Online
Organic Growth: Online Sustainable organic growth in all key online markets; market share gains consolidating leading positions Country/ Brands Estimated YTD NGR Growth2 Driven By Brand Market Position1 +10% UK 3 +16% Technology +8% Brands Germany 1 +28% Australia 3 +26% Product +30% Italy 3 Marketi
Slide 25: M&A
M&A Proven track record of delivering value from successful large scale M&A Expertise in: • Improving growth in acquired businesses • Brand revitalisation • Synergy delivery • Successful integration of people and cultures • Multiple system migrations • Retaining top talent from acquired businesses T
Slide 26: M&A: U.S. JV with MGM
M&A: U.S. JV with MGM Creating a leading U.S. sports betting and interactive gaming platform with world-class content, state-of-the-art proprietary technology, and broad distribution reach • 50/50 joint venture Parties contributing exclusive access to: • 25 year exclusive agreement Economics of exis
Slide 27: M&A: U.S. JV with MGM
M&A: U.S. JV with MGM Broad footprint and marketable customer base MGM Sports Betting Regulatory Status Nevada Fully regulated New Jersey Fully regulated Mississippi Fully regulated New York Passed law but not yet regulated Maryland Likely to pass law by 2019 Massachusetts Likely to pass law by 2019
Slide 28: M&A Bolt-on: Crystalbet
M&A Bolt-on: Crystalbet The group will continue to invest in bolt-on acquisitions in existing and new territories • Acquisition of 51% of Mars LLC (“Crystalbet”) for £36.0m completed April 2018 • Agreement to acquire 49% in 2021 (7x 2020 EBITDA – max total consideration £172.5m) • Management retaine
Slide 29: Technology
Technology Powerful proprietary technology provides operating leverage and speed to market Processing (p.a.) • >350m sports bets Significant • >9bn casino spins Scale • >1bn poker hands played Currently supports: • 100+ front-ends Flexible • 27 languages • 25 currencies • 99.95% service availability
Slide 30: Brands
Brands Leading brands in leading markets • Well established brands act as barriers to entry in more mature markets • Multiple brands in one market provide a cross sell opportunity especially to lapsing customers • Omni channel sports brands drive faster online growth through cost effective retail ac
Slide 31: Product development
Product development Product development remains a priority throughout integration GVC Brands Ladbrokes Coral Brands • Improved UX - Increased data integrations • 40% reduction in mobile load time (L) and improved post bet experience • Extended Cash Out markets (L) Sports • Combination bet BetBuilder
Slide 32: Marketing
Marketing Creativity and technology driving engagement • Track record of innovative marking and brand revitalisation • Acquisition of Ladbrokes Coral enhances CRM capability • Major brand campaigns launched for the World Cup: Brand revitalisation continued with a Brand relaunched with “The smart Mas
Slide 33: Corporate Social Responsibility
Corporate Social Responsibility CSR strategy will reflect Group’s position as industry leader • New CSR Board committee established Corporate • New position of Head of CSR created and filled • Commitment to increase investment in RG initiatives beyond 0.1% of UK GGR • £0.5m extra commitment to GamCa
Slide 34: Current Trading
Current Trading Trading in the period 1 July 2018 to 2 September 20181,2 was strong • Group NGR +14% (cc +14%) buoyed by the final two weeks of the World Cup • Online NGR +30% (cc +31%): • Sports brands NGR +34% (cc +35%) • Sports gross win margin+0.7pp • Strong wagering +22% (cc +25%) • Crystalbet
Slide 35: Summary
Summary • Strong financial and operational performance with market share gains in all main territories • Integration progressing well • MGM joint-venture leaves us very well placed for US sport betting market • Sustainable growth enabled by: • Proprietary technology • Portfolio of leading brands • R
Slide 36: Q&A
Q&A 36