Flutter Entertainment Plc · NYSE:FLUT
Flutter Entertainment — Betfair Group — H1 FY11 Earnings Presentation
55 slides from Flutter Entertainment's earnings presentation, December 2010
Slide 1: Results for 6 Months Ended 31 October 2010
RESULTS FOR 6 MONTHS ENDED 31 OCTOBER 2010 December 2010 4 betfair
Slide 2: Disclaimer
DISCLAIMER This presentation and its contents may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part for any purpose without the consent of Betfair Group plc ("Betfair"). This presentation does not constitute or form part of a
Slide 3: H1 FY11 Highlights
H1 FY11 HIGHLIGHTS DAVID YU Chief Executive Officer 2 © The Sporting Exchange Limited
Slide 4: Introduction
INTRODUCTION 1 Unique, disruptive technology 2 Leader in a large and growing global market Well positioned 3 Transformational impact on customers for multi-layered growth 4 Sustainable competitive advantages opportunities 5 High quality, loyal customers reflect attractive business model 6 Experience
Slide 5: Exceptionally Busy Period for Betfair
EXCEPTIONALLY BUSY PERIOD FOR BETFAIR Significant progress against each key growth area 1 Strong sports-led growth Strong World Cup performance 2 Cross-selling & portfolio expansion New platforms for poker and casino 3 New channels New smartphone apps delivering growth 4 Geographic expansion Excha
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS Group – 12.3% revenue growth to £188.5m (H1 FY10: £168.0m)(1) – 24.0% Adjusted EBITDA growth to £31.2m (H1 FY10: £25.1m)(1,2) Core Betfair – 11.3% revenue growth to £167.2m (H1 FY10: £150.1m) – 25.7% Adjusted EBITDA growth to £35.5m (H1 FY10: £28.2m)(2) Cash at 31 October
Slide 7: Financial Results
FINANCIAL RESULTS STEPHEN MORANA Chief Financial Officer 6 © The Sporting Exchange Limited
Slide 8: Group Income Statement: As Reported
GROUP INCOME STATEMENT: AS REPORTED H1 FY11 H1 FY10 (£m) (£m) Revenue - Core Betfair 167.2 150.1 - Other investments 21.4 17.8 - High rollers 24.7 - Group revenue 213.3 168.0 Adjusted EBITDA - Core Betfair 35.5 28.2 - Other investments (4.3) (3.1) - High rollers 6.4 - Adjusted EBITDA(1) 37.6 25.1 Ex
Slide 9: Reported vs. Underlying Income Statement
REPORTED VS. UNDERLYING INCOME STATEMENT Exclusions from reported financials required to reach underlying performance(1) – High rollers – Exceptional items – Equity settled share-based payments – Profit on disposal of financial asset – Tax effect of above items (1) Reconciliation to reported numbe
Slide 10: Group Income Statement: Underlying
GROUP INCOME STATEMENT: UNDERLYING H1 FY11 H1 FY10 H1 YoY% (£m) (£m) Revenue - Core Betfair 167.2 150.1 - Other investments 21.4 17.8 Group revenue 188.5 168.0 +12.3% Underlying EBITDA - Core Betfair 35.5 28.2 - Other investments (4.3) (3.1) Underlying EBITDA 31.2 25.1 +24.0% Depreciation and amorti
Slide 11: Core Betfair vs. Other Investments Split
CORE BETFAIR vs. OTHER INVESTMENTS SPLIT H1 FY11 Adjusted EBITDA (£m) 40 35.5 (4.3) 35 Core Betfair 31.2 Sports, Games, Poker 30 UK, Europe, RoW 25 Other investments 20 Betfair US LMAX 15 10 Joint Venture (1) 5 Betfair Australia 0 Core Betfair Other Group investments (excluding High roller
Slide 12: Core Betfair: Revenue Growth
CORE BETFAIR: REVENUE GROWTH Q1FY10 – Q1FY11 Q2FY10 – Q2FY11 H1FY10 - H1FY11 Sports +23.6% +1.4% +11.7% Games +26.1% +8.9% +17.6% Poker +3.3% -15.8% -6.5% Total Net Gaming Revenue +22.3% +1.3% +11.2% Revenue from management of client funds +19.5% +46.8% +32.8% Core revenue +22.3% +1.6% +11.3% 11 © T
Slide 13: Core Betfair: Net Gaming Revenue Overview
CORE BETFAIR: NET GAMING REVENUE OVERVIEW Net Gaming Revenue by quarter 100 90 Strong Q1: +22.3% 80 – World Cup 70 Net Gaming Revenue (£m) 60 Mixed Q2: +1.3% 50 – Growth in Football 40 and Games 30 – Offset by 20 challenges in Racing and Poker 10 0 FY10 Q3 FY08 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY09 Q1
Slide 14: Core Betfair: Net Gaming Revenue by Product & Geography
CORE BETFAIR: NET GAMING REVENUE BY PRODUCT & GEOGRAPHY Net Gaming Revenue by quarter Net Gaming Revenue by quarter – product split – geographic split 70 50 45 60 40 Net Gaming Revenue (£m) Net Gaming Revenue (£m) 50 35 40 30 25 30 20 20 15 10 10 5 0 0 FY08 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY09 Q1 FY09 Q2
Slide 15: Core Betfair: Actives by Product & Geography
CORE BETFAIR: ACTIVES BY PRODUCT & GEOGRAPHY Actives by quarter – product split Actives by quarter – geographic split 500 350 450 300 400 350 250 300 Actives (k) Actives (k) 200 250 200 150 150 100 100 50 50 0 0 FY08 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY09 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY10 Q1 FY10 Q2 FY10 Q3
Slide 16: Core Betfair: ARPU by Product & Geography
CORE BETFAIR: ARPU BY PRODUCT & GEOGRAPHY ARPU by quarter – product split ARPU by quarter – geographic split 300 800 700 250 600 200 500 ARPU (£) ARPU (£) 150 400 300 100 200 50 100 0 0 FY08 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY09 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY10 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY11 Q1 FY11 Q2 FY
Slide 17: Core Betfair: Gross Margin
CORE BETFAIR: GROSS MARGIN 83.7% 84.3% 150 145 140 Gross margin (£m) 135 130 125 120 £140.9m 115 £125.7m 110 105 100 H1 FY10 H1 FY11 16 © The Sporting Exchange Limited
Slide 18: Core Betfair: Administrative Expenses
CORE BETFAIR: ADMINISTRATIVE EXPENSES Administrative expenses(1) As % of Core Betfair revenue H1 FY11 (£m) H1 FY10 (£m) H1 FY11 H1 FY10 Commercial & Marketing 43.3 41.5 25.9% 27.6% Technology & Product 34.0 22.9 20.3% 15.2% Operations 9.1 9.2 5.4% 6.1% Corporate 19.1 23.9 11.4% 15.9% Total 105.4 97.
Slide 19: Core Betfair: EBITDA Development
CORE BETFAIR: EBITDA DEVELOPMENT H1 FY11 (£m) H1 FY10 (£m) YoY growth (%) Net Gaming Revenue 165.7 159.0 +11.2% Revenue from management of 1.5 1.1 +32.8% customer funds Revenue 167.2 150.1 +11.3% Variable costs (26.3) (24.4) +7.6% Gross profit 140.9 125.7 +12.1% Administrative expenses(1) (105.4) (9
Slide 20: Other Investments: Betfair US
OTHER INVESTMENTS: BETFAIR US H1 FY11 H1 FY11 revenue (£m) Adjusted EBITDA (£m)(1) Betfair US £19.3m £(1.8)m TVG – Handle growth of 21%(2) from market share gain – Revenue growth of 10%(2) – Upgrading TVG’s website and operations Betfair US – Ongoing investment in product development and lobbyin
Slide 21: Other Investments: LMAX
OTHER INVESTMENTS: LMAX H1 FY11 revenue (£m) H1 FY11 EBITDA (£m) LMAX £2.1m £(2.4)m Successful launch in October 2010 – Revenue from existing “Tradefair” white label financial spread betting business – EBITDA investment in the build up to launch – Investment anticipated to increase through the rem
Slide 22: Group Income Statement: Underlying
GROUP INCOME STATEMENT: UNDERLYING H1 FY11 H1 FY10 (£m) (£m) Underlying EBITDA 31.2 25.1 Depreciation and amortisation (13.3) (12.5) Underlying operating profit 17.8 12.6 Finance income (0.7) 0.2 Share of loss of equity accounted (0.3) (1.5) investments Underlying profit before tax 16.9 11.3 Taxatio
Slide 23: Group Income Statement: Underlying
GROUP INCOME STATEMENT: UNDERLYING H1 FY11 H1 FY10 H1 FY11 H1 FY10 (£m) (£m) (£m) (£m) Net interest receivable 0.4 0.4 Underlying EBITDA 31.2 25.1 Net foreign exchange loss (1.1) (0.2) Depreciation and amortisation (13.3) (12.5) Finance income (0.7) 0.2 Underlying operating profit 17.8 12.6 Finance
Slide 24: Group Income Statement: Underlying - Betfair Australia
GROUP INCOME STATEMENT: UNDERLYING H1 FY11 H1 FY10 (£m) (£m) Underlying EBITDA 31.2 25.1 Depreciation and amortisation (13.3) (12.5) Betfair Australia Underlying operating profit 17.8 12.6 – 13% revenue growth(1) Finance income (0.7) 0.2 – Gross margin improvement from Share of loss of equity accoun
Slide 25: Group Income Statement: Underlying - Taxation
GROUP INCOME STATEMENT: UNDERLYING H1 FY11 H1 FY10 (£m) (£m) Underlying EBITDA 31.2 25.1 Depreciation and amortisation (13.3) (12.5) Underlying operating profit 17.8 12.6 Finance income (0.7) 0.2 Taxation Share of loss of equity accounted (0.3) (1.5) investments – Reported tax expense £0.6m Underlyi
Slide 26: Depreciation and Amortisation
DEPRECIATION AND AMORTISATION H1 FY11 H1 FY10 (£m) (£m) Depreciation 6.3 6.9 Amortisation - development expenses 3.7 4.0 Amortisation – intangible assets 3.3 1.6 Depreciation and amortisation (13.3) (12.5) Amortisation of development expenses – Several previously capitalised projects now fully amo
Slide 27: Cash Flow
CASH FLOW H1 FY11 H1 FY10 (£m) (£m) Net cash flow from operations 36.6 29.8 Taxation paid - (7.7) Acquisition of subsidiary net of cash acquired - (3.3) Capital expenditure – property, plant and equipment (9.7) (5.0) Capital expenditure – other intangibles (10.2) (2.2) Capitalised development expend
Slide 28: Business Review
BUSINESS REVIEW DAVID YU Chief Executive Officer 27 © The Sporting Exchange Limited
Slide 29: Agenda
AGENDA H1 business review Growth opportunities Current trading and outlook 28 28 © The Sporting Exchange Limited
Slide 30: H1 Business Review: Sports
H1 BUSINESS REVIEW: SPORTS Strong growth in Q1 – Disciplined and efficient marketing campaign during World Cup Growth moderated in Q2 – Robust growth in football – Challenges in horse racing 29 29 © The Sporting Exchange Limited
Slide 31: H1 Business Review: First Quarter Included World Cup
H1 BUSINESS REVIEW: FIRST QUARTER INCLUDED WORLD CUP World Cup used as efficient New sports features added acquisition tool 18% reduction in H1 CPA on previous year 53% 18% 200 150 150 100 100 50 50 0 0 Activations (k) CPA (£) H1 FY10 H1 FY11 Vs. William Hill Vs. Bwin 30 30 © The Sporting Exch
Slide 32: H1 Business Review: Second Quarter More Challenging
H1 BUSINESS REVIEW: SECOND QUARTER MORE CHALLENGING UK based Racing UK based Racing Average settled days per Active Average Settled Bet Size 20 £35 18 £30 16 14 £25 12 £20 10 8 £15 6 £10 4 £5 2 0 £0 Q1 FY11 Q1 FY11 Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY
Slide 33: H1 Business Review: Poker
H1 BUSINESS REVIEW: POKER Quarterly Poker Net Gaming Revenue and Actives Successful migration from a 9 80 technical viewpoint 8 70 Improved liquidity provides 7 solid base for sustainable poker Poker Net Gaming Revenue (£m) 60 6 revenues 50 Actives (k) 5 Active customer numbers 40 4 stable, bu
Slide 34: H1 Business Review: Games
H1 BUSINESS REVIEW: GAMES Quarterly Games Net Gaming Revenue and Actives Games segment delivered 18 120 robust growth of 17.6% in H1 16 – Very strong Q1 driven by World 100 14 Cup cross sell and unusually Games Net Gaming Revenue (£m) strong margin 12 80 Actives (k) 10 60 Migration onto Playtech
Slide 35: H1 Business Review: Betfair US
H1 BUSINESS REVIEW: BETFAIR US TVG Handle and market share gains Service available in additional States Continued to build relationships with industry participants and regulators US exchange Continued lobbying efforts and product development Anticipated introduction of exchange wagering on
Slide 36: H1 Business Review: LMAX
H1 BUSINESS REVIEW: LMAX Successful launch of exchange platform for online retail financial trading in the last week of October 2010 Continued investment in LMAX – Marketing expenditure – Product extensions – International expansion 35 35 © The Sporting Exchange Limited
Slide 37: Growth Opportunities
GROWTH OPPORTUNITIES 1 Strong sports-led growth 2 Cross-selling & portfolio expansion 3 New channels ui 4 Geographic expansion 5 New markets / new verticals 36 © The Sporting Exchange Limited
Slide 38: Sports: Continued Enhancements Planned for H2
SPORTS: CONTINUED ENHANCEMENTS PLANNED FOR H2 Change screen shot to E w multiples New look in-play sports site Each-way Multiples bet slip 37 37 © The Sporting Exchange Limited
Slide 39: Betfair for iPhone, iPad and Android
#* betfair oO Man United 3-1 Newcastie i @*betfar © “ wine Betfair for iPhone Betfair for iPad Betfair for Android 4* betfair © thes;
Slide 40: Third-party mobile apps: iBetMate, Bet Angel, Bet on the Move
iBetMate (iPhone) (1) Bet Angel optimised for iPad =a) jeu leu ae ee fo fee) ee) Be ey Bet Angel Bet on the Move (Android) 4* betfair
Slide 41: New Channels: Mobile Growth Opportunities
NEW CHANNELS: MOBILE GROWTH OPPORTUNITIES Mobile sports customers (k) Mobile sports revenue (£m) 100 92.8 6 80 + ya 5 ia “8 4 °° 39.9 3, 328 40 5 20 1 0) — | | H1 FY10 H1FY 11 H1 FY10 H1FY 11 % of sports 9% 16% % of sports 2.5% 3.9% customers revenue 19% incremental ARPU uplift 4° betfair
Slide 42: Geographic Expansion
GEOGRAPHIC EXPANSION Operational developments Regulatory developments – New payments platform – Continued momentum in Europe, but timescales – Mobile roll out hard to predict – Marketing reallocation – US legislative progress 41 41 © The Sporting Exchange Limited
Slide 43: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK Third quarter began on a stronger overall trend than Q2 in Sports led by football – Recent weather conditions in the UK and Ireland have moderated overall growth rates due to horse race meeting cancellations Games growth has strengthened Poker has continued to show
Slide 44: Summary
SUMMARY Exceptionally busy period Progress in each of our key growth priorities Double digit increase in H1 revenue Strong underlying increase in H1 EBITDA Well positioned for the future through unique products and technology 43 43 © The Sporting Exchange Limited
Slide 45: Q&A
Q&A 44 © The Sporting Exchange Limited
Slide 46: Appendices
APPENDICES 45 © The Sporting Exchange Limited
Slide 47: Appendices contents
APPENDICES A1 KPIs 47 A2 Adjustments 53 A3 Balance sheet 54 46 © The Sporting Exchange Limited
Slide 48: A1: KPIs - By Product, By Year
A1: KPIs - BY PRODUCT, BY YEAR Core Betfair Net Gaming Revenue Development By Product Segment By Year Actives (k) FY08 FY09 FY10 Sports 459 572 713 Games 128 183 232 Poker 114 129 147 Total 522 652 823 Net ARPU (£) FY08 FY09 FY10 Sports 361 348 314 Games 320 294 233 Poker 234 233 174 Total 447 434 3
Slide 49: A1: KPIs - By Product, By Half Year
A1: KPIs - BY PRODUCT, BY HALF YEAR Core Betfair Net Gaming Revenue Development By Product Segment By Half Year FY08 FY09 FY10 FY11 Actives (k) H1 H2 H1 H2 H1 H2 H1 Sports 279 375 382 438 437 563 579 Games 64 93 106 120 126 156 155 Poker 67 82 88 83 88 102 105 Total 315 421 435 491 499 639 654 FY08
Slide 50: A1: KPIs - By Product, By Quarter
A1: KPIs - BY PRODUCT, BY QUARTER Core Betfair Net Gaming Revenue Development By Product Segment By Quarter FY08 FY09 FY10 FY11 Actives (k) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sports 209 221 225 322 303 274 285 361 321 332 344 468 472 368 Games 38 44 51 65 67 67 71 79 80 78 85 106 102 90 Poker
Slide 51: A1: KPIs - By Geography, By Year
A1: KPIs - BY GEOGRAPHY, BY YEAR Core Betfair Net Gaming Revenue Development By Geographic Segment By Year Actives (k) FY08 FY09 FY10 UK 350 403 474 Europe 161 237 335 RoW 11 12 14 Total 522 652 823 Net ARPU (£) FY08 FY09 FY10 UK 390 387 345 Europe 522 472 373 RoW 1,154 1,266 1,046 Total 447 434 369
Slide 52: A1: KPIs - By Geography, By Half Year
A1: KPIs - BY GEOGRAPHY, BY HALF YEAR Core Betfair Net Gaming Revenue Development By Geographic Segment By Half Year FY08 FY09 FY10 FY11 Actives (k) H1 H2 H1 H2 H1 H2 H1 UK 205 290 276 308 298 375 349 Europe 102 123 150 175 192 254 292 RoW 8 7 8 8 9 10 14 Total 315 421 435 491 499 639 654 FY08 FY09
Slide 53: A1: KPIs - By Geography, By Quarter
A1: KPIs - BY GEOGRAPHY, BY QUARTER Core Betfair Net Gaming Revenue Development By Geographic Segment By Quarter FY08 FY09 FY10 FY11 Actives (k) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 UK 157 161 165 253 226 194 195 260 230 223 223 317 291 225 Europe 70 81 86 96 108 111 121 131 128 146 159 197 225
Slide 54: A2: Adjustments
A2: ADJUSTMENTS Operating H1 FY11 (£m) Revenue EBITDA profit PBT PAT Reported 213.3 20.6 7.3 7.4 6.8 High rollers (24.7) (6.4) (6.4) (6.4) (6.4) Exceptional items - 14.7 14.7 14.7 14.7 Equity settled share-based payments - 2.3 2.3 2.3 2.3 Profit on disposal of financial asset - - - (1.2) (1.2) Tax e
Slide 55: A3: Balance Sheet
54 A3: BALANCE SHEET 31 October 2010 31 October 2009 30 April £m (Unaudited) (Unaudited) 2010 (Audited) Property, plant and equipment 27.7 22.0 24.5 Intangible assets 100.8 83.8 89.0 Investments - 1.6 0.2 Available-for-sale financial assets 2.1 4.3 4.4 Deferred tax asset 9.4 6.1 5.5 Non-current asse