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2006 Interim Results 24 August 2006

2006 Interim Results 24 August 2006. Sir Ian Robinson Chairman. Rosemary Thorne Group Finance Director. Summary of Performance. 2006 £m. 2005 £m. Variance % B(W). Half year to 30 June. Continuing operations Operating profit (1) Net finance costs (1)

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2006 Interim Results 24 August 2006

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  1. 2006 Interim Results24 August 2006

  2. Sir Ian RobinsonChairman

  3. Rosemary ThorneGroup Finance Director

  4. Summary of Performance 2006 £m 2005 £m Variance % B(W) Half year to 30 June Continuing operations Operating profit(1) Net finance costs (1) Interest income on Hotels sale proceeds Profit before tax(1) Effective tax rate(1) EBITDA(1) EPS(1) 151.3134.712.3 (19.9) (12.1) (64.5) 24.0 - - 155.4 122.6 26.8 24.0% 26.0% 171.3 152.9 12.0 9.8p 5.7p N/A (1)Before non-trading items

  5. Betting and Gaming Gross Win 2006 2005 £m £m Operating Profit 2006 2005 £m £m Half year to 30 June UK Retail 366.4 342.1 111.5 108.8 Ireland & Belgium 41.2 35.6 8.6 5.7 eGaming 72.6 58.0 19.8 17.5 Telephone Betting 33.6 21.6 16.6 8.5 Vernons 9.3 9.9 2.1 3.1 Central costs - - (7.3) (8.9) Total 523.1 467.2 151.3 134.7

  6. UK Retail - Results 2006 £m 2005 £m Variance % B(W) Half year to 30 June OTC gross win 261.8 242.5 8.0 Machines gross win 104.6 99.6 5.0 Total gross win 366.4 342.1 7.1 Adjustments to gross win (1) (14.8) (0.5) Net revenue 351.6 341.6 2.9 Gross profits tax (38.5) (49.3) 21.9 Staff costs (91.5) (84.4) (8.4) Property costs (2) (41.4) (36.7) (12.8) Content costs (3) (28.3) (25.4) (11.4) Other costs (inc. depn) (4) (40.4) (37.0) (9.2) Operating profit111.5 108.8 2.5 (1)Fair value adjustments, VAT, associate income (3)Pictures, data, levy, Sky (2)Rent, rates and utilities (4)Depreciation = £16.3m (2005: £14.7m)

  7. UK Retail - KPIs Variance % B(W) Half year to 30 June 2006 2005 Like for like total gross win growth 1.0% (0.9)% Like for like OTC gross win growth 1.4% (6.7)% Like for like machines gross win growth 0.1% 16.8% OTC margin 16.9% 15.8% Like for like total costs (1) increase 3.2% 5.9% Like for like shop staff costs (de)/increase (0.3)% 12.0% Stake per slip (2) £8.36 £8.54 (2.1) Average number of FOBTs 6,797 6,087 11.7 Average weekly gross win per FOBT £548 £576 (4.9) (1)Excludes VAT and Gross profits tax (2)Slips exclude machines

  8. eGaming - Gross win 2006 £m 2005 £m Variance % B(W) Half year to 30 June Sportsbook 24.6 16.0 53.8 Poker 21.3 18.5 15.1 Casino 21.4 18.4 16.3 Games 5.3 5.1 3.9 Gross win72.6 58.0 25.2

  9. eGaming - Results 2006 £m 2005 £m Variance % B(W) %age of net revenue %age of net revenue Half year to 30 June Gross win 72.6 58.0 25.2 Fair value adjustments (1) (6.0) (3.4) Net revenue 66.6 54.6 22.0 Gross profits tax (3.8) 5.7 (3.2) 5.9 Levy (0.8) 1.2 (0.6) 1.1 Staff costs (5.1) 7.7 (4.9) 9.0 Software & geographical partners (2) (15.0) 22.5 (12.4) 22.7 Marketing (inc. affiliates) (10.5) 15.8 (7.9) 14.5 Banking & chargebacks (4.8) 7.2 (2.5) 4.6 Other costs (inc. depn) (6.8) 10.2 (5.6) 10.3 Operating profit19.8 29.7 17.5 32.113.1 (1) Adjustments for free bets, promotions and bonuses (2)Payments to third party software and platform providers and geographical partners

  10. eGaming - KPIs Variance % B(W) Half year to 30 June 2006 2005 Unique active players (000’s) (1) 420 306 37.3 Real money sign-ups (000’s) (2) 197 144 36.8 Cost per acquisition (3) £81.83 £78.05 (4.8) Adjusted cost per acquisition (4) £50.65 £57.73 12.3 (1)A player who has contributed to rake and/or placed a wager during the period (2)A new player who has registered and deposited funds during the period (3)Total of all online and offline marketing spend and affiliate expenses divided by the aggregate real money sign ups (4)Total of all online and offline marketing spend less any CRM spend divided by the total real money sign-ups

  11. Telephone Betting - Results %age of net revenue excl. High Rollers %age of net revenue excl. High Rollers 2006 £m 2005 £m Variance % B(W) Half year to 30 June Gross win exc. High Rollers 20.3 15.7 29.3 Fair value adjustments (0.1) (0.2) Net revenue exc High Rollers 20.2 15.5 30.3 High Rollers’ net revenue 13.3 5.9 Net revenue 33.5 21.4 56.5 Gross profits tax (5.1) (3.3) Levy (1.8) (1.2) Staff costs (4.5) 22.3 (4.1) 26.5 Direct operating costs (1) (1.7) 8.4 (2.3) 14.8 Other costs (inc. marketing and depn) (3.8) 18.8 (2.0) 12.9 Operating profit16.6 8.5 95.3 (1)Direct operating costs include telephone, bandwidth and banking costs

  12. Telephone Betting - KPIs Variance % B(W) Half year to 30 June 2006 2005 No. of calls (000’s) (1) 4,059 3,751 8.2 Agent cost per call 55p 65p 15.4 Gross win margin (exc. High Rollers) 8.8% 5.9% Unique active players (000’s) (2) 100.1 99.8 0.3 Average monthly active player days (000’s) 218.6 213.1 2.6 • Numbers of calls (excluding customer service calls) • A player who has placed a wager during the period

  13. Analysis of 2006 Capital Expenditure 2006 £m 2005 £m Half year to 30 June Capex UK development (1) 14.5 15.8 Xtra 4.3 0.7 Ireland 1.7 1.8 Other (including IT £5.3m; 2005 - £2.2m) 9.7 4.8 Retail 30.2 23.1 eGaming / Telephone Betting 2.5 1.7 Total 32.7 24.8 Acquisitions Jack Brown 5.3 - Other (UK: £1.7m, Ireland: £7.2m)8.9 38.2 46.9 63.0 (1)Development = new licences, relocations and refurbishments

  14. Cash proceeds (1) Assets disposed Related cost of disposal Foreign exchange Profit on disposal Disposal of Hotels £m 3,241 (2,769) (97) 4 379 (1) £m 3,298 as announced on 23 February 2006 (57) debt and working capital adjustment 3,241

  15. Cash Flow 2006 £m Half year to 30 June Cash generated by operations 127.8 Interest and tax (0.9) PPE capital spend (1) (38.4) Intangibles (2.3) Acquired subsidiaries (6.2) Total capital spend (1) (46.9) Cash flow after interest, tax and capital 80.0 Hotels disposalproceeds3,241.4 Dividends paid (4,179.6) Proceeds from issue of shares, convertibles and options 339.5 Exchange and other movements (8.1) Net borrowings movement (526.8) Opening net borrowing(397.9) Closing net borrowings(924.7) Annualised net debt to EBITDA* ratio for continuing operations 3.0 *H1 2006 plus H2 2005 (1)Continuing operations only

  16. Christopher BellChief Executive Officer

  17. Key Developments Technology World Cup 2006 International expansion - Italy Sportsbetting margins The 2005 Gambling Act

  18. First Half Good sportsbetting margins Record World Cup Integration of Jack Brown Continued growth in shop numbers Strong performance in Telephone Betting Increased International development activity New Paddington Casino and Sportsbar

  19. Retail Ladbrokes Xtra installed Renewal of EPOS systems Testing of self-service terminals New FOBT estate (starts in Q3) Continuing shop development Smoking ban

  20. World Cup 2 3 rds of favourites won over the whole tournament, with few upsets A number of high profile draws at the knockout stages Tournament contributed £17.5m gross win across all channels (H1: £10.6m, H2: £6.9m) 220,000 new recruits to eGaming and Telephone in first half

  21. International Pianeta Scommesse Joint Venture: Government licensed provider Around €100m capex in Retail, eGaming and Telephone 300 shops in China, in 2 provinces(Beijing and Tianjin) Sportsbetting in Russian casinos JV with Intralot to tender for the Turkish lottery Final bidders for football betting in Vietnam US review ongoing

  22. UK Retail Gross Win Margin % *Overround – Theoretical profit margin set by the bookmaker on every “book” made

  23. eGaming Solid first half Good Sportsbook performance Good Casino and Games growth Competition in the Poker market place New customer acquisition cost remains low at £51 Offline events continuing

  24. 2005 Gambling Act Fully in force from Autumn 2007 Winter evening opening for 7 months £500 AWP Jackpot machines 17 new UK casinos

  25. 2006 Retail Developments Ladbrokes Xtra installed Q1 Jack Brown refurbishment Q2 New screen systems installed Betting into PMU French Pools Sports Xtra (All internet markets) Q3 Virtual football New dual screened FOBTs Q4 Betting into US Pools £1m virtual events Self Service Betting Terminals New EPOS system

  26. 2006 eGaming Developments Mah Jong Poker School and 2nd Poker Cruise Q1 Extended ‘Betting in Running’ Additional payment method - Paypal Pokerbet Wireless hospitality betting Backgammon Ladbrokes Financials (Currencies) Q2 Bingo Additional payment method - Ukash Updated mobile phone Sportsbook New Casino & Games products Updated Poker site Updated download Casino Q3 Pontoon Bet New Ladbrokes Financials markets (NYMEX) ‘Deal or No Deal’ New mobile phone Casino Complete new Sportsbook Next generation Poker software Q4 New Casino & Games products New Ladbrokes Financials markets (Brent) Poker leaderboards Viewable virtual racing

  27. 2006 Interim Results24 August 2006

  28. Appendix

  29. UK Retail - Shop Numbers • Plus: • 32 relocations • 27 refurbs • 13 extensions

  30. eGaming – Net Revenue 2006 £m 2005 £m Variance % B(W) Half year to 30 June Sportsbook 23.8 15.6 52.6 Poker 18.4 17.6 4.5 Casino 19.4 16.4 18.3 Games 5.0 5.0 0.0 Net revenue66.6 54.6 22.0

  31. eGaming – KPIs Variance % B(W) Half year to 30 June 2006 2005 Sportsbook Gross win margin 6.7% 7.1% Unique active players (000s) 318 223 42.6 Average monthly active player days (000s) 644 450 43.1 Yield per unique active player (£) (1) 75 70 7.1 Poker Unique active players (000s) 114 78 46.2 Average monthly active player days (000s) 496 356 39.3 Yield per unique active player (£) (1) 161 225 (28.4) Casino Unique active players (000s) 58 46 26.1 Average monthly active player days (000s) 72 55 30.9 Yield per unique active player (£) (1) 336 358 (6.1) Games Unique active players (000s) 62 48 29.2 Average monthly active player days (000s) 70 54 29.6 Yield per unique active player (£) (1) 81 105 (22.9) (1) Net revenue per unique active player for the period

  32. Ireland 2006 £m 2005 £m Variance % B(W) Half year to 30 June Gross win 23.2 16.9 37.3 Fair value adjustments (0.1) - Net revenue 23.1 16.9 Duty / Gross profits tax (3.3) (2.0) Other costs (12.9) (11.8) (9.3) Operating profit 6.9 3.1 122.6 Shop numbers 165 141(1)17.0 (1) Shop numbers at 31 December 2005: 148

  33. Belgium 2006 £m 2005 £m Variance % B(W) Half year to 30 June Gross win 18.0 18.7 (3.7) Duty / Gross profits tax (6.7) (6.9) Other costs (9.6) (9.2) (4.3) Operating profit 1.7 2.6 (34.6) Shop numbers 299 306 (1) (2.3) (1) Shop numbers at 31 December 2005: 301

  34. Vernons 2006 £m 2005 £m Variance % B(W) Half year to 30 June Gross win / Net revenue 9.3 9.9 (6.1) Duty / Gross profits tax (1.3) (1.4) Other costs (5.9) (5.4) (9.3) Operating profit2.1 3.1 (32.3) Customer recruitment (000’s): New customers 66.0 79.9 (17.4) Reactivated customers 35.3 34.2 3.2

  35. Taxation £m Normal tax charge: Tax charge at 24% on continuing operations profit before tax and non-trading items Tax charge at 35% on discontinued operations profit before tax and non-trading items Tax charge at 24.7% for Total Group Non-trading tax charge: Tax credit on non-trading items: Total tax charge 37.3 3.8 41.1 (6.6) 34.5

  36. 2006 World Cup – Gross Win £m H1 H2 Total UK Retail 6.0 4.6 10.6 Ireland & Belgium 0.9 0.4 1.3 eGaming 3.4 1.2 4.6 Telephone Betting 0.3 0.7 1.0 Total 10.6 6.9 17.5

  37. Cash flow after interest, tax and capital Half year to 30 June 2006 Profit before tax and finance costs - continuing 151.3 Profit before tax and finance costs - discontinued 11.2 Profit before tax and finance costs - total162.5 Depreciation and amortisation 20.0 Decrease in retirement benefit obligation (60.2) Other non cash movements 5.5 Cash generated by operations 127.8 Income taxes paid(33.3) Finance costs paid (11.4) Net cash inflow from operating activities83.1 Interest received 43.8 Total capital spend (1) (46.9) Cash flow after interest, tax and capital 80.0 (1) Continuing operations only

  38. Revenue Under IFRS • Definition of Revenue - IFRS(1) = gains and losses from betting and gaming net of discounts (free bets, bonuses, promotions) and VAT. • - UK GAAP = amounts staked. Amounts staked = “UK GAAP” Revenue 6,359.5 5,709.6 11,500.0 Gross win 523.1 467.2 918.0 Free bets, promotions, bonuses (7.0) (4.1) (8.2) VAT(2) (15.6) (1.3) (4.4) Associate income1.6 1.3 3.1 Net revenue 502.1 463.1 908.5 H1 2006 £m H1 2005 £m FY 2005 £m • Referred to as net revenue • (2) FOBT subject to VAT from December 2005

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