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Financial Results. 4 March 2004. David Harding Chief Executive. 2. Highlights, 52 weeks to 30 December 2003. Fourth consecutive year double digit earnings growth Product diversification and increased betting opportunities Fixed odds betting terminals IT and estate development
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Financial Results 4 March 2004
David Harding Chief Executive 2
Highlights, 52 weeks to 30 December 2003 • Fourth consecutive year double digit earnings growth • Product diversification and increased betting opportunities • Fixed odds betting terminals • IT and estate development • Government and regulation 3
Earnings growth – gross wins * Includes other 4
Earnings growth – EBIT * Net of other and central costs 5
Product diversification – indicative share of gross wins 2003 Other sports * Other sports 4% Numbers 7% Dogs 5% Dogs 6% Numbers 7% Football 7% Other Sports 19% Football 18% Terminals/AWPs 20% Horses 45% Horses 36% Horses 73% Football 31% Dogs 21% Telephone Retail Sportsbook & Arcade 6
128 92 48 Numbers 105 UK racing evenings 50 % increase 47 UK racing Sundays 100 % increase 18 Numbers 69 12 Numbers 40 Dogs 46 Dogs 30 Dogs 14 O/seas horses 14 O/seas horses 7 O/seas horses 20 UK Horses 20 UK Horses 20 UK Horses 2000 2002 2003 Increased betting opportunities & extended opening - Retail Betting opportunities November Thursday 2004 7
Fixed odds betting terminals • At end December we had 3239 FOBTs and 2454 AWPs in the estate • Average installed base throughout the year 2400 FOBTs, 2700 AWPs • Average weekly net profitability per terminal £380 • Planning assumption for 2004, 3600 FOBTs and 1900 AWPs by mid year • Factors influencing average profitability:- 8
Estate development * 20 Target new licence openers ‘04 * 47 New license applications in process 9
IT development • Retail technology programme - Electronic bet capture and settlement (EPOS) - New text information systems • Central bookmaking/single account 10
Government and regulation • Pre-legislative scrutiny • Gambling Commission • Gaming issues • Bookmaking issues • Definitions • Terminals • Exchanges • Bureaucracy 11
Tom Singer Group Finance Director 12
Presentation in four parts 1. Financial results FY2003 2. Return of capital 3. Guidance FY2004 4. Current trading 13
Summary of Financial ResultsFY03 v FY02 (pre-exceptional items) (1) Includes casino drop and AWP cash-in-box net of VAT (2) Includes casino drop and AWP cash-in-box inclusive of VAT 14
Summary of Earnings and DividendsFY03 v FY02 (pre-exceptional items) 15
Analysis of Gross WinFY03 v FY02 (1) Includes traditional OTC business, AWPs and FOBTs (2) Includes Sportsbook, Casino and Poker (3) Includes greyhound stadia, Course and Group Promotions 16
Net Operating ExpensesFY03 v FY02 (1) Includes printing and stationery, legal, consultancy, cleaning and miscellaneous other costs (2) Primarily central support functions and property costs 18
Profit Conversion (trading profit as a % of gross win)FY03 v FY02 20
Growth rate (Y on Y) Gross win +21 % Operating profit +36 % 2003 2002 Retail: ResultsFY03 v FY02 • Continuing benefit of GPT regime/recycling • Continuing strong growth in Numbers (virtual racing, FOBTs) betting • Extended trading hours • 13 new licences for LBOs and 112 other development actions 21
Growth rate (Y on Y) Gross win +11 % Operating profit +28 % 2003 2002 Telephone: ResultsFY03 v FY02 • 171,000 active accounts (31 December 2002: 164,000) • Good growth despite poor Cheltenham Festival, no major football championship and betting exchanges • Costs down by £0.6m due to closure of Athlone call centre (April 2002) and improving efficiency in Leeds/Sheffield call centres 22
Growth rate (Y on Y) Gross win +55 % Operating profit +81 % 2003 2002 Interactive (1): ResultsFY03 v FY02 • 247,000 active accounts (31 December 2002 :173,000) Sportsbook • Focus switching back to UK/selected European markets • Growing contribution from Arcade games • No major football championship in 2003 • Casino and Poker • Launch of hosted poker (January 2003) • Launch of integrated sportsbook/casino account and language/Euro casinos in Autumn 2003 • Multi-supplier strategy (1) Sportsbook, Casino and Poker 23
Cash Generation:FY03 v FY02 (pre-exceptional items) (1) Working capital benefit in FY2003 due to increase in GPT and PAYE creditors and client balances 24
Presentation in four parts 1. Financial results FY 2003 2. Return of capital 3. Guidance FY2004 4. Current trading 25
Return of Capital • Returning value to shareholders v flexibility for acquisitions • Share buy back is but one possible solution • Shareholder authority for: - Buy back of up to 10% of issued share capital - Hold in treasury up to 2.5% of issued share capital • Board to keep method, timing and quantum under review 26
Presentation in four parts 1. Financial results FY 2003 2. Return of capital 3. Guidance FY2004 4. Current trading 27
Guidance FY2004 • 3600 FOBTs and 1900 AWPs by June 2004 • LBO extended trading • Cheltenham/Euro 2004 • Retail Technology Programme (RTP) – revenue costs £3m in FY2004 • Capex – RTP: £10m; ‘Routine’: £23m • Effective interest rate: 6.5% • Effective tax rate: 29% 28
Presentation in four parts 1. Financial results FY 2003 2. Return of capital 3. Guidance FY2004 4. Current trading 29
Current Trading • Encouraging start to the current year • Group gross win up 17%; double-digit growth all three channels • Operating expenses up 13% • All three channels well positioned with clear strategies for growth 30