2017 Full Year Results 9 March 2018 A growing global player 1 - - PowerPoint PPT Presentation

2017 full year results
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2017 Full Year Results 9 March 2018 A growing global player 1 - - PowerPoint PPT Presentation

2017 Full Year Results 9 March 2018 A growing global player 1 Disclaimer NOT FOR PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS


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2017 Full Year Results

9 March 2018

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A growing global player

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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NOT FOR PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT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 statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond GVC’s ability to control or predict. Nothing in this presentation should be construed as a profit forecast. Forward looking statements are not guarantees of future performance and hence may prove to be erroneous. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation (596/2014), the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules), GVC does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by GVC or any of its directors,

  • fficers, employees, advisers, representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection,

representation or warranty (express or implied), omissions, errors or misstatements in this presentation, or any other written or oral statement provided. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotions in section 21 of the UK Financial Services and Markets Act 2000. In making this presentation available, GVC makes no recommendation to buy, sell or otherwise deal in shares of GVC or in any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of any such investment activity. Any recipients of this presentation outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction, and are treated as having represented that they are able to receive this presentation without contravention of any law or regulation in the jurisdiction in which they reside or conduct business. In particular, the securities referred to in this presentation have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act of 1933. Totals may not sum as rounding and percentages have been calculated on the underlying rather than summarised figures.

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Kenneth Alexander

Chief Executive

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Contents

Introduction Financial review Divisional review Summary

  • Key highlights
  • Income statements
  • Exceptional items
  • Cashflow
  • Balance sheet extracts
  • Debt
  • Guidance
  • Sports Brands
  • Games Brands
  • Current trading & regulatory update
  • Ladbrokes Coral Acquisition update
  • Conclusion
  • Q & A
  • Appendix

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  • Group NGR

+17% to €925.6m (pro forma1 2016: €794.3m ); +17% in constant currency +13% to €1,008m including discontinued (pro forma 2016: €894.6m )

  • Clean EBITDA2

+40% to €239.5m (pro forma 2016: €170.5m) +33% to €274.2m including discontinued (pro forma 2016: €205.7m)

  • Clean EBITDA margin %

26% vs 21% (pro forma 2016)

  • Adjusted PBT3

€178.7m (2016: €58.9m)

  • Adjusted EPS

+195% to €0.56 (2016: €0.19) +113% to €0.66 including discontinued (2016: €0.31)

  • Net debt

€108.6m (0.4x LTM Clean EBITDA)

  • Dividend

€0.175 second interim giving €0.34 for the year (+13% vs 2016)

  • Current trading (Q1 to 4 March)

NGR4 +16% (+18% constant currency)

  • Acquisition

Ladbrokes Coral & GVC shareholders approve transaction

2017 Key highlights

1Pro forma assumes bwin.party was acquired from 1 January 2016 2 Clean EBITDA: defined as EBITDA before share based payments and exceptional items 3Adjusted PBT is Loss/Profit before tax adjusted for exceptional items, change in the value of assets held for sale, fair value of derivative financial instruments,

amortisation of acquired intangibles, dividend income and amortisation of loan fees and early repayment option

4Like for like – excluding acquisitions and disposals made in 2017
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Paul Miles

Chief Financial Officer

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Pro forma abridged income statement

In €m 2017 2016* Change NGR 925.6 794.3 17% NGR (inc discnt’d) 1,008.0 894.6 13% Revenue 896.1 772.9 16% Contribution 454.4 420.1 8% Contribution margin 49% 53% Clean EBITDA 239.5 170.5 40% Clean EBITDA margin 26% 21% Clean EBITDA (inc discnt’d) 274.2 205.7 33%

  • NGR from continuing operations 17%

higher

  • Top 10 territories all grew NGR; Top 9

NGR growth all >10%

  • Contribution margin lower due to;
  • Increased marketing (25 % of

NGR vs 21% in 2016)

  • Incremental gaming taxes
  • Marketing as % of NGR expected to

remain broadly unchanged going forward

  • Clean EBITDA margin increased to

26% (21% pro forma 2016)

  • Net expenditure €34.8m lower vs pro

forma 2016

  • bwin.party synergies fully

secured

  • Underlying cost inflation c. 2-3%

*Pro forma assumes bwin.party was acquired on 1 January 2016

7 170 240 69 35 11 39 7

  • 50

100 150 200 250 300

2016 Pro forma Clean EBITDA Growth Expenditure Savings Cost of Sales Savings Marketing Investment Impact of Regulation 2017 Clean EBITDA

€m

Clean EBITDA Bridge

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Income statement – statutory

  • Strong top line growth from continuing
  • perations
  • Share based payments:
  • LTIP, MIP share options and share bonus

awards

  • Significant decrease from 2016
  • Depreciation & amortisation:
  • Depreciation declining reflecting lower

expenditure on tangible assets

  • As guided, amortisation increasing reflecting

product development

  • Finance income & expense include:
  • Financial income € 1.3m (€4.5m 2016)
  • Loan interest € 14.2m (€46.0m 2016)
  • Other items include:
  • Changes in fair value of derivative financial

instruments (€34.5m)

  • Cerberus early repayment
  • partypoker option
  • Amortisation of loan fees and unwinding of

early repayment option (€7.3m)

  • Taxation:
  • Corporate tax charge (€13.1m)
  • Deferred tax credit €15.0m

8 Year ended 31 December 2017 2016 €m €m NGR 925.6 743.1 NGR (including discontinued) 1,008.0 843.4 Revenue 896.1 723.0 Contribution 454.4 393.6 Contribution margin 49% 57%

Clean EBITDA 239.5 158.3 Clean EBITDA margin 26% 21% Clean EBITDA (including discontinued) 274.2 193.5 Share based payments (17.7) (31.0) Depreciation (15.6) (19.8) Amortisation (excluding acquired intangibles) (14.4) (7.0) Finance income & expense (13.2) (41.8) Share of profit from associate 0.1 0.2 Adjusted profit before tax 178.7 58.9 Amortisation of acquired intangibles (121.0) (109.5) Exceptional items (39.9) (117.8) Other items (43.4) (5.1) Loss before tax (25.6) (173.5) Taxation 1.9 0.3 Loss after tax from continuing operations (23.7) (173.2) (Loss)/profit from discontinued operations (15.7) 34.6 Loss after tax (39.4) (138.6)

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Exceptional items

  • Significant reduction in exceptional

items

  • Integration completed
  • Reorganisation costs include:
  • Ukraine closed
  • MM1 platform
  • General integration one off

costs

9 Year ended 31 December 2017 2016 €m €m M & A costs (7.7) (51.5) Premium listing application costs 0.0 (4.4) Reorganisation costs (23.9) (14.4) Contract termination costs 0.0 (11.7) Accelerated depreciation 0.0 (12.5) Progressive jackpots 0.0 (7.6) Release of contingent consideration 0.0 (8.1) Foreign exchange on deposit (0.3) (16.4) Profit on disposal of joint venture 0.0 11.7 Legal settlements (2.1) 0.0 Other (5.9) (2.9) (39.9) (117.8)

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Cashflow – statutory

  • Net working capital outflow of €16.0m

mainly due to disposal of Kalixa

  • Capital expenditure:
  • €38.4m mainly represented

investment in internally generated assets

  • Exceptional cash costs
  • €39.6m predominantly associated

with the restructuring of the business post the acquisition

  • Acquisitions & disposals include:
  • Cozy Games acquired for

€22.3m

  • Zatrix acquired for €14.4m
  • Kalixa disposal €30.7m
  • Other notable movements
  • Dividends €141.0m
  • Net €86.5m repayment of loans
  • Group cash at period end €303.8m

10 Year ended 31 December 2017 2016 €m €m Clean EBITDA (inc discontinued) 274.2 193.5 Capitalised software development (26.0) (19.0) Property, plant and equipment purchases (12.4) (15.8) Interest paid including loan costs (43.3) (47.6) Corporate taxes (14.9) (7.9) Other working capital movements (16.0) (31.9) Free cash flow before exceptional items 161.6 71.3 Exceptional items (39.6) (86.4) Acquisitions net of cash acquired (36.7) (189.4) Proceeds of issued share capital net of costs 47.0 193.8 Proceeds from disposals 30.7 20.9 Interest bearing loan drawdown 550.0 380.0 Loan repayments (636.5) (55.5) Dividends paid (141.0)

  • Other cash movements

1.3 4.8 Net cash generated (63.2) 339.5 Foreign exchange 0.0 (0.7) Cash and cash equivalents at beginning of period 367.0 28.2 Cash and cash equivalents at the end of period 303.8 367.0

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Balance sheet

  • Reduction in intangibles reflects

amortisation of bwin.party acquisition

  • Cash balances lower due to refinancing

and dividend payments

  • Reduction in other current assets

reflects disposal of assets held for sale (Kalixa sold H1 2017) and movement in derivative financial assets

  • Reduction in current liabilities

predominantly due to replacement of €400m Cerberus loan

11 As at 31 December 2017 2016 €m €m Goodwill 1,094.3 1,090.3 Other intangible assets 437.3 519.1 Other non-current assets 22.6 28.3 Total non-current assets 1,554.2 1,637.7 Cash & cash equivalents 303.8 354.8 Trade receivables 115.6 105.2 Other current assets 6.8 98.0 Total current assets 426.2 558.0 Total assets 1,980.4 2,195.7 Trade and other payables (105.7) (93.9) Balances with customers (117.4) (112.0) Progressive prize pools (18.0) (22.8)

Loans and borrowings (0.2) (403.5) Other current liabilities (84.3) (89.3) Total current liabilities (325.6) (721.5) Loans and borrowings (295.2)

  • Deferred tax

(52.2) (65.6) Other non-current liabilities (28.6) (11.3) Total non-current liabilities (376.0) (76.9) Net Assets 1,278.8 1,397.3

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Debt

  • Group debt facilities consist of:
  • Euribor +2.75% €300m six year

term loan

  • €70m revolving credit facility
  • Net debt as at 31 December 2017

was €108.6m, representing leverage of 0.4x (last twelve months Clean EBITDA)

  • Including cash with payment

processors (as per term loan covenant), net debt €54.5m

  • Positive long-term credit ratings

As at 31 December 2017 2016 €m €m Loans due <1 year (0.0) (386.5) Loans due > 1 year (300.0) (0.0) Gross debt (300.0) (386.5) Cash and cash equivalents 303.8 367.0 Short term investments 5.0 5.4 Less client liabilities (117.4) (112.0) Net debt (108.6) (126.1) Cash in transit with payment processors 54.1 60.0 Net debt adjusted for payment processors (54.5) (66.1) Agency Senior secured debt Corporate Comment Fitch Ratings (expected) BB+ BB+ Stable outlook Standard & Poor's BB BB- Positive outlook pending completion of LCL acquisition Moody's Investors Service Ba2 Ba2 Stable outlook

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Guidance

  • Capital expenditure
  • Fixed assets

€10-15m

  • Intangibles

€20-25m

  • Depreciation

€12-15m

  • Amortisation
  • Internally generated assets
  • c. €18-20m
  • Related to bwin acquisition

€120m (for 1 year, €102m 2019-21)

  • bwin.party synergies

Fully secured Restructuring costs €10m

  • Share based payment charges

€10m

  • Marketing spend (% NGR)
  • c. 25%
  • Interest (excluding LCL transaction)
  • c. €10m gross
  • Tax rate (% of adjusted PBT)
  • c. 10%
  • Greece

Appeal filed and payments commenced Board strongly disputes basis of Assessment Strong supportive tax and legal opinion Contingent liability created

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Kenneth Alexander

Chief Executive

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Sports Brands: Financial overview

  • Sports margin 10.8% vs 9.4% prior year
  • Sustainable sports margin target raised

to 10.5%

  • Wagers +2% despite;
  • Impact in Eastern Europe post

regulatory changes

  • Exit from low margin turnover
  • Above average sports win

margin

  • Core territories saw positive wager

growth

  • Marketing spend 19% of NGR (2016:

17%)

  • Mobile sports 67% of GGR (2016: 59%)
  • Mobile games 50% of GGR (2016:

37%)

#Pro forma – assumes the acquisition of bwin.party was completed on 1 January 2016

Year ended 31 December 2017 €m 2016 (pro forma#) €m Change Sports wagers 3,785.6 3,724.3 2% Sports margin 10.8% 9.4% Sports NGR 331.2 277.9 19% Gaming/other NGR 332.6 275.7 21% NGR 663.8 553.6 20% EU VAT (22.2) (15.0) 48% Revenue 641.6 538.6 19% Contribution 360.3 318.1 13% Contribution margin 54% 57%

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0% 2% 4% 6% 8% 10% 12% 14% 20 40 60 80 100 120 140 160 180 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

NGR Rebased to 100

Sports Brands Performance

Sports NGR Gaming NGR Sports Margin

Sports Brands: Progress & outlook

Delivered

  • Launch of bwin’s Black and Yellow campaign
  • VIP programme improvements
  • Merged pre-match and live books
  • Improved coupon management
  • New profiling tools introduced
  • New horse racing product launched

4

Delivering significant momentum through marketing and enhanced customer proposition

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  • Improve post-bet experience
  • Next Generation Combi
  • Enhancing customer profiling
  • Improved US sports product
  • World Cup enhancements
  • Real-time messaging

Sports NGR up19% 2016-17, Gaming NGR +21% 2016-17

What’s next

0% 10% 20% 30% 40% 50% 60% 70% 80% 2017 2016

Mobile % GGR Sports Gaming

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Games Brands: Financial overview

  • Investment driving top line growth
  • NGR +12%
  • Contribution reflects;
  • Kalixa disposal
  • Investment in partypoker
  • Ambitious partypoker strategy
  • Significant investment
  • NGR +42% vs 2016
  • FTDS +25%
  • Live tournaments
  • All core casino brands grew NGR in

2017

  • Bingo most challenging vertical but

improved profitability

#Pro forma – assumes the acquisition of bwin.party was completed on 1 January 2016

Year ended 31 December 2017 €m 2016 (pro forma#) €m Change Sports wagers 69.8 65.2 7% Sports margin 8.3% 7.7% Sports NGR 4.7 4.3 9% Gaming/other NGR 224.0 199.2 12% NGR 228.7 203.5 12% EU VAT (7.3) (6.4) 14% Revenue 221.4 197.1 12% Contribution 77.0 89.0

  • 13%

Contribution margin 34% 44%

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Games Brands: Progress and outlook

Reinvigoration of some of the industry’s leading gaming brands

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Delivered

  • 600+ games added (third party plus premium in-house

developed titles)

  • Relaunch of PartyCasino site
  • New CRM engagement tools
  • Poker product overhauled – lobby, tables, mobile and loyalty

programme

  • Launch of global partypoker LIVE tour
  • Acquired new proprietary bingo platform
  • Re-launch CasinoClub
  • New front end platform
  • Further CRM enhancements and churn prevention tools
  • New promotions hub
  • Re-launch of affiliate programme
  • Pooled poker liquidity
  • New tablet poker product
  • Introduction of real-time messaging

What’s next

25% 42% 52% 42%

0% 10% 20% 30% 40% 50% 60%

FTD's First Deposit Amount Deposits NGR

Y-on-Y partypoker growth

  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 2013 2014 2015 2016 2017

Games Brands Y-on Y-NGR Growth

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Current trading and regulatory update

  • Daily NGR1 + 16% (+ 18% constant currency)
  • Latin America migrated – completing all significant migrations
  • Crystalbet acquisition
  • UK regulatory backdrop continues to evolve
  • Germany- no material new developments
  • Increasing number of lander calling for revisions to State Gaming Treaty
  • Protection of customers at forefront and best delivered by regulated licensing regime
  • US – active discussions with potential partners
1For period 1 January – 4 March 2018 vs same period in 2017. Like for like, excluding acquisitions and disposals made in 2017

Strong trading momentum continues

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Ladbrokes Coral Group acquisition update

Process

  • GVC and Ladbrokes Coral Group shareholders approved transaction on 8 March
  • Completion expected 28 March (subject to regulatory approval)

Enlarged Group

  • One of the world’s largest listed sportsbetting and gaming companies
  • Highly regulated with >90% of NGR from regulated/locally taxed markets
  • Diversified and complementary international revenue base
  • Opportunity to leverage proven and scalable technology
  • Diversified portfolio of leading brands in core markets
  • Clear focus on sports betting
  • Significant growth and cost synergy potential

Truly exciting opportunity to create world’s largest sportsbetting group

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Conclusion

Global brands, technology and people driving growth

  • Financial performance and completed technical migration demonstrate GVC’s ability to successfully

integrate large scale business while delivering growth

  • Ladbrokes Coral acquisition proceeding on track and set to transform the business in 2018
  • Growth opportunities for the Enlarged Group extremely exciting
  • Operational synergies
  • Reinvigorating some of the industry’s best known brands
  • Continuous product enhancement
  • Global opportunities
  • Combination of strong brands, technology and talent driving growth and creating significant

shareholder value

  • Strong start to 2018
  • Trading in line with the Board’s expectations
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Q&A

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Appendices

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Pro forma continuing quarterly KPIs

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In €000s Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017 Sports Brands Sports wagers 10,694 10,192 9,442 10,381 10,996 10,324 9,917 10,262 Sports margin % 8.1% 9.8% 10.4% 9.4% 9.1% 9.9% 11.0% 13.1% Sports NGR 703 799 807 728 782 827 877 1,140 Gaming NGR / other revenue 714 757 715 826 902 886 868 989 NGR per day 1,417 1,557 1,522 1,554 1,684 1,714 1,745 2,129 Games Brands NGR per day 592 547 531 554 615 627 612 653 B2B and Other Revenue per day 98 96 96 117 112 95 68 88 Group NGR per day 2,107 2,199 2,149 2,225 2,410 2,436 2,424 2,870 Group NGR €m 191.7 200.1 197.7 204.7 216.9 221.6 223.0 264.0

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Overview – GVC today

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  • €3.9bn sports wagering €0.9bn NGR
  • €239.5m Clean EBITDA
  • €178.7m Adjusted PBT
  • €108.6m net debt as at 31 Dec 2017
  • Shares in issue as at 1 Mar 2018: 303,784,807

Financial* Corporate

  • >3,000 FTEs and contractors
  • 14 offices across four continents
  • Licenced in 18 jurisdictions

Technology

  • Highly scalable and robust platform
  • Proprietary sportsbook, casino and poker
  • c95% revenues processed derived through own platform
  • Best in class IT Management
  • C. 1,000 IT people

Customer

  • 10 major established B2C gaming brands
  • >1,400 games offered
  • 21 languages, 19 currencies
  • 79m registered accounts

*FY 2017 continuing

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Acquisition The purchase of bwin.party digital entertainment plc by the Company B2B Business-to-business B2C Business-to-consumer bwin.party bwin.party digital entertainment plc Clean EBITDA Earnings before interest, taxation, depreciation, amortisation, impairment charges, changes in the fair value of derivative financial instruments, share option charges and exceptional items Clean EBITDA margin Clean EBITDA as a percentage of NGR Free Cashflow Clean EBITDA less: capital expenditure on fixed and intangible assets, net corporate taxes paid, finance lease payments, interest and debt fee payments and net working Capital movements Contribution Total Revenue less betting taxes, payment service provider fees, software royalties, affiliate commissions, revenue share and marketing costs Contribution margin Contribution as a percentage of NGR Constant currency basis Each month in the prior period re-translated at the current periods exchange rate Enlarged Group GVC Holdings plc incorporating Ladbrokes Coral Group IAS International Accounting Standards IFRS International Financial Reporting Standards InterTrader The Group’s financial markets services

Glossary of terms and definitions

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KPIs Key Performance Indicators Net debt Cash and cash equivalents (including amounts recorded as assets in disposal groups classified as held for sale), less customer liabilities less interest bearing loans and borrowings. Net Gaming Revenue (“NGR”) Revenue before deducting VAT Revenue Net Gaming Revenue less VAT (imposed by certain EU jurisdictions on either sports or gaming revenue) Sports Gross Margin Sports wagers less payouts Sports Gross Margin % Sports Gross Margin divided by Sports wagers Sports Net Gaming Revenue (‘Sports NGR’) Sports Gross Margin less free bets and promotional bonuses

Glossary of terms and definitions (cont)

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