Flutter Entertainment Plc · NYSE:FLUT
Flutter Entertainment — Betfair Group — Corporate Update (May 2013)
36 slides from Flutter Entertainment's corporate update, May 7, 2013
Slide 1: FY13 Trading & Strategy Update
FY13 TRADING & STRATEGY UPDATE MOMENTUM BUILDING FROM EARLY SUCCESS 7 May 2013
Slide 2: Important Information
IMPORTANT INFORMATION This presentation is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jur
Slide 3: Highlights
HIGHLIGHTS Stronger than • Results above top end of guidance range expected FY13 • Cost savings increased to £30m, with full impact in FY14 • Regulated revenue mix up to 75% Excellent • Recent performance indicates product & marketing Progress on investment is working delivery • Cultural shift is un
Slide 4: FY13 Update
FY13 UPDATE a* betfair
Slide 5: FY13 Trading Update
FY13 TRADING UPDATE FY13 FY12 YoY % Revenue c.£387m £388m Flat Underlying EBITDA1 c.£73m £86m -c.15% Free cash flow2 £37m £44m -16% Cash balance £168m £118m +42% Year end headcount 1,832 2,286 -20% 1 Figures represent underlying results, which exclude, where relevant, separately disclosed items, inc
Slide 6: FY13 Results Above Guidance
FY13 RESULTS ABOVE GUIDANCE FY13 Guidance Drivers £370m to • Better than expected Revenue c.£387m £385m sportsbook performance (acquisition & margin) • International revenues £65m to resilient despite ceasing Underlying EBITDA1 c.£73m investment £70m Beat our guidance due to revenue outperformance 1
Slide 7: FY13 Underlying Revenue Growth of 6%
FY13 UNDERLYING REVENUE GROWTH OF 6% £388m +£23m c.£387m £364m -£24m FY12 Regulatory FY12 Underlying FY13 Impact1 adjusted change Broadly flat revenues achieved despite regulatory impact 1 Year on year decline in revenues from Greece, Germany, Cyprus and Spain Exchange Results are from continuing op
Slide 8: FY13 Underlying EBITDA Change
FY13 UNDERLYING EBITDA CHANGE £86m £77m c.£73m -£9m -£4m FY12 Change in FY12 Underlying FY13 capitalisation (adjusted for change devex change) of devex Underlying EBITDA affected by regulatory change partially offset by growth in sustainable jurisdictions Underlying EBITDA excludes separately disclo
Slide 9: FY14 Cost Savings Increased to £30m
FY14 COST SAVINGS INCREASED TO £30M • Entered FY14 with c.500 fewer employees than FY13 Employment average costs c.£23m • Majority of development activity shifted to near shore locations (Romania, Portugal) • Professional services External • Facilities c.£7m costs • Travel & entertainment • Telecom
Slide 10: Revenue and Profitability Outlook
• Expect to grow UK revenues in-line with the market • International revenues more resilient than expected Revenue • Opportunity to exploit international optionality • Balance sheet flexibility creates acquisition opportunities • Full impact of c.£30m cost savings in FY14 • Re-investing c.£10m in pr
Slide 11: Our Plan
OUR PLAN a* betfair
Slide 12: What We Said in December (1)
WHAT WE SAID IN DECEMBER (1) 12
Slide 13: What We Said in December (2)
WHAT WE SAID IN DECEMBER (2) 13
Slide 14: Our Plan
OUR PLAN 1 Focus on sustainable revenues 2 Invest in our products and brand for growth 3 Introduce greater accountability & discipline 4 Accelerate growth through sustainable international expansion and disciplined M&A 14
Slide 15: Focus on Sustainable Revenues
1 Focus on sustainable revenues FY13 Monthly Core active customers (‘000) Group Revenue mix 400 Insufficient International UK visibility3 26% 20% Reasonable 300 visibility2 5% 8% 200 67% Licenced / good visibility1 100 60% 75% 66% 0 Jun Jul Dec Jan Aug Mar Nov Feb Sep Oct Apr May Q4 12 Q4 13 % UK ac
Slide 16: Sportsbook Successfully Launched
2 Invest in products & brand SPORTSBOOK SUCCESSFULLY LAUNCHED • First ‘each way’ bet taken in December 2012 (via Exchange toggle) ̵ Approximately 70% of horseracing customers have placed each way bets • Sportsbook launched in February 2013 • ‘Best odds guaranteed’ was introduced in March 2013 16
Slide 17: Sportsbook Driving Acquisition
2 Invest in products & brand SPORTSBOOK DRIVING ACQUISITION UK&I activations Q4 Cost per acquisition (all products, May 2011 = 100) (all products; Q4 FY12 = 100) 500 +108% YoY FY12 UK&I activations 400 FY13 UK&I activations 100 Sportsbook 300 launch UK focus 50 -20% 200 100 0 FY12 FY13 0 May Jun Jul
Slide 18: UK Customer Base Returns to Growth
2 Invest in products & UK CUSTOMER BASE RETURNS TO brand GROWTH UK&I Actives (all products - YoY change %) 30% +18% 25% 20% 15% 10% 5% 0% Nov-10 Mar 2012 Mar 2013 Jan-11 Mar-11 Jul 2011 Sep 2011 Jul 2012 Sep 2012 Sep-10 Nov 2011 Nov 2012 Jul-10 May-10 May 2011 May 2012 Jan 2012 Jan 2013 -5% -10% -15
Slide 19: The Future of Sportsbook
2 Invest in products & brand THE FUTURE OF SPORTSBOOK No. of in-play football No. of in-play Broadening in-play sports matches / week markets1 coverage: • Rugby Union Aiming for c.750 • Rugby League c.500 c.130 competitive c.300 c.65 • Cricket • Golf parity • Basketball • NFL March May Aug March May
Slide 20: Exchange Remains Betfair's USP
2 Invest in products & brand EXCHANGE REMAINS BETFAIR’S USP • Focused on reducing complexity Product • Ongoing trial to incentivise customers to seed illiquid markets • Marketing spend focused on retention of high value customers Efficiency • Making technology investment work harder Cross-sell • Gro
Slide 21: Exchange-Sports Mix Is Working
2 Invest in products & brand EXCHANGE-SPORTS MIX IS WORKING Product over-lap March & April ‘131 56% 24% 20% Sportsbook Exchange 1 % of UK football customers placing a bet on each / both products in March & April 2013. Relative sizes of circles is indicative of number of customers Customers are movin
Slide 22: Pricing
2 Invest in products & brand PRICING Historical pricing model Betfair Australia case study • Commission structure: • Base rate changed from 5% to 6.5% in • 5% base rate response to significant cost inflation • Reduces to 2% via volume based • Volume change implies some price discounts elasticity • U
Slide 23: Gaming
2 Invest in products & brand GAMING Acquisition Cross-sell Games direct activations Cross-sell to Games (YoY growth %) (May 2011 = 100) 300 +74% YoY 100% 250 FY12 FY13 75% 200 150 50% 100 25% 50 0% 0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr -25%
Slide 24: Brand
2 Invest in products & brand BRAND Growth in Cash Out Usage (% of all exchange customers) Campaign 40% launched Oct’12 30% 20% 10% 0% Mar 2012 Mar 2013 Jul 2011 Jul 2012 Sep 2011 Sep 2012 Nov 2011 May 2012 Nov 2012 Jan 2012 Jan 2013 Advertising initiatives successfully taking our product to a wider
Slide 25: Betfair US / TVG
3 Accountability & discipline BETFAIR US / TVG EBITDA margin% 19% Betfair US 7% -3% FY12 FY13 Betfair Group FY13 • Opportunity to grow TVG margins through: ̵ Operational gearing from revenue growth (e.g. NJ) ̵ Cost discipline TVG can achieve margins consistent with rest of group and preserves option
Slide 26: Technology Efficiency
3 Accountability & discipline TECHNOLOGY EFFICIENCY New • New CIO and CTO management • Technology headcount reduced by more than 100 1 People • Near shoring providing productivity gains Infrastructure • New cloud based development & testing environment driving efficiency gains & reducing site down t
Slide 27: Marketing Efficiency
3 Accountability & discipline MARKETING EFFICIENCY UK focus • Scale drives lower costs and improves access to prime media properties Acquisition • Sportsbook promotions more efficient and widening our market efficiency • Cost per acquisition is falling • Mobile is now front of mind in all communicat
Slide 28: Progress
PROGRESS KPI Progress 1 Dec Today Stopped investment in countries with Focus on Mix of unclear regulatory outlook sustainable sustainable >75% of marketing spend focused on UK revenues revenue (from <50%) Sustainable revenue mix up to 75% 2 Invest in products and Revenue Successfully launche
Slide 29: Accelerate Growth
4 ACCELERATE GROWTH International opportunities Balance sheet flexibility / disciplined M&A 29
Slide 30: International Opportunity
4 Accelerate growth INTERNATIONAL OPPORTUNITY • Exchange licences • Relevant Decree • Regulator announced expected in New signed by MoF intention to regulate Jersey and California Progress exchanges • iGaming developments on a state-by-state basis Market size • Total sports c.€1.1bn • Total sports c
Slide 31: Importance of Scale
4 Accelerate growth IMPORTANCE OF SCALE Invest in brand and product Better acquisition Grow profit and retention Operational Grow revenues gearing Scale advantage is key to winning 31
Slide 32: Key Drivers of M&A and Value Creation Strategy
4 Accelerate growth Key Drivers of M&A in the Our strategy for Value Creation Gaming Sector • Target acquisitions to create value Scale is key ̵ Provide domestic scale • Cost, marketing and brand ̵ Achieving geographic expansion economies of scale ̵ Closing product and capability gaps • Disciplined
Slide 33: Beat Expectations for 2013
Beat expectations for 2013 EBITDA of £73m Additional cost savings £30m delivered - full impact in FY14 Regulatory mix is improving 75% of revenue from regulated markets Unregulated revenues more Fourth quarter revenue down just 14% on Q21 resilient Growing UK customer base 18% growth in la
Slide 34: Summary
SUMMARY Stronger than • Results above top end of guidance range expected FY13 • Cost savings increased to c.£30m, with full impact in FY14 • Regulated revenue mix up to 75% Excellent • Recent performance indicates product & marketing Progress on investment is working delivery • Cultural shift is und
Slide 35: Appendix
APPENDIX a* betfair
Slide 36: Betfair Profit Estimate
BETFAIR PROFIT ESTIMATE The statements in this presentation that Group revenue for FY13 was approximately £387 million and that estimated underlying Group EBITDA for FY13 was approximately £73 million (the “Betfair Profit Estimate”) constitute a profit forecast for the purposes of Rule 28 of the Cit