Investor Pack. August 2018

Transcription

1 Investor Pack August 2018

2 Contents Business Overview Appendix 2018 Trading Update Historic Proforma Numbers Other Regulatory / Capital Structure / Geographic split 2

3 Business Overview

4 GVC Business Overview Business overview GVC is a global, multi-channel sports betting led gaming company Global presence Diversified geographic footprint and product mix Operates B2C sports brands (bwin, Ladbrokes, Coral, Sportingbet, Eurobet) and games brands (partypoker, PartyCasino, Galabingo, Gioco Digitale) Scalable and proven proprietary platform also supports B2B offering Acquired bwin.party in 2016 with a synergy target of 125m and Ladbrokes Coral in 2018 with a synergy target of 130m Office Locations Business highlights Licensed jurisdictions , >20 >95% Major established B2C gaming brands Languages Shops across UK Offices across five continents Licenses GVC revenues processed derived through own platform Yes Yes (Transitional) Yes (Application) 4 Source: 2016 annual report, as at 31 Dec GVC combined Prospectus and Class 1 circular dated 9 February 2018.

5 GVC Business Overview Acquisition of Ladbrokes Coral creates an enlarged company with a range of competitive advantages: 1 Significant scale as the largest listed online-led betting and gaming operator by revenue 2 Geographic diversification with over 90% of revenue from regulated and/or taxed markets 3 Market leading technology and product development 4 Strong brand portfolio and opportunity to leverage multi-channel 5 Experienced management team with a track record of successful acquisitions 6 Opportunities for cost and revenue synergies 7 Well positioned to enter new markets in a consolidating industry 5

6 1 Significant Scale Acquisition of Ladbrokes Coral creates a global leader The largest online-led operator in the world ( in billions, last reported full year revenue) (1) (2) 6 Source: Latest annual reports revenue figures. Note: Peer revenue based on last reported financial year. Exchange rates used as of 31 Dec Charts exclude Asian markets. (1) Includes Proforma GVC FY17 and Proforma Ladbrokes Coral FY17 (2) The Stars Group announced its acquisition of the Sky Betting and Gaming Group on 21 April Completion is expected in Q3 2018

7 US Italy Australia UK Germany Canada France Spain Netherlands Sweden 2 Geographic Diversification Present in the world s most important gaming markets Present in all of the world s top ten markets (ex Asia) ( in billions, gross win, 2017) Over 90% revenue from regulated / taxed markets % GVC (1) Regulated/ing and Taxed Unregulated % 75% 3 2 Ladbrokes Coral Regulated/ing and Taxed Unregulated 99.8% Top 3 positions in Europe s largest online markets UK, Germany and Italy Top 3 retail positions in UK, Italy, Spain, Belgium and Ireland Strong presence in Australia and licensed in the US 6% Combined Group 94% Regulated/ing and Taxed Unregulated 7 Source: H2 Gambling Capital, Ladbrokes Coral 2016 annual report, GVC RNS 2 November 2017 (1) Pro forma for sale of Turkey facing business.

8 3 Market Leading Technology Proprietary single, integrated technology platform yields a significant competitive advantage GVC proprietary technology platform Significantly improved since bwin.party acquisition Key strategic benefits of the GVC platform Highly AVAILABLE Massively SCALABLE Easily EXTENDABLE Capable IT STAFF To integrate a new Game Provider To setup a new Label (Business) Previously 20 to 24 Weeks 8 to 9 Weeks Now 2 to 3 Weeks 1 to 2 Weeks Provides flexibility and independence from third parties Significant economies of scale Improvements to the platform benefit all brands (and B2B operations) at once Multi BRAND & B2B Fully REGULATED Omni CHANNEL Complete PRODUCT SET To adapt to a new Regulation To on-board a new B2B Partner 16 to 20 Weeks 32 to 40 Weeks 2 to 4 Weeks 8 to 12 Weeks Device agnostic, providing a seamless experience from mobile to desktop to tablet Content management system allows marketing teams to customise the site Ensures that the group remains compliant and meets the needs of individual country regulators 8

9 Rest of World Europe 4 Strong and Complementary Brand Portfolio Limited geographic brand overlap UK Online: Sports-led Online: Games Retail Highly complementary brand portfolios Italy Ireland Belgium Spain Germany Eastern Europe Minimal brand overlap in key markets Addition of Retail adds powerful, low-cost marketing channel for online Combined Group to pursue multibrand strategy in markets with overlap Creates significant cross-sell and revenue synergies opportunities Greece Brazil Columbia Australia Canada 9

10 4 Brand Portfolio: Online Sports brands Games brands Most major markets Europe Latin America All major markets Latin America Central Europe 17 well established B2C sports and gaming brands Innovative products with in-house game studio building exclusive content Holds top 3 positions in Europe s largest online markets UK, Germany and Italy 10

11 4 Brand Portfolio: Retail UK Retail #1 operator in UK retail gaming industry 41% market share (2) Over 3,500 UK shops (3.6 year avg lease length in 2016) Market leading multi-channel offering 1.3 million combined multi-channel signups Lifetime value of multi-channel customers are 2x higher European Retail Ireland #3 retail 140 shops NGR H1-17 Italy #3 retail Strong multichannel presence 850 shops Spain #1 retail Online recently launched 1,726 shops Belgium #1 retail Online recently launched 541 shops 11

12 5 Experienced Management Team Experienced management team with a track record of successful acquisitions Name and role Year joined Experience Lee Feldman Non-executive Chairman 2004 (GVC) Kenneth Alexander Chief Executive Officer Paul Bowtell Chief Financial Officer Andy Hornby Joint Chief Operating Officer Shay Segev Joint Chief Operating Officer 2007 (GVC) 2011 (Gala Coral) 2011 (Gala Coral) 2016 (GVC) 12

13 Successful execution 5 Proven Track Record of Synergies Delivery Proven acquisition track record and ability to constantly overachieve on synergies over a short period Target Date Deal Size 83.9m (1) 19 March February November bn 2.3bn Cost savings / synergy delivery Delivered EBITDA of 38.3m in year 1 vs. expected 28.7m Removed 50m of cost and returned to profitability in <1 year On track to deliver run rate synergy target of 125m by the end of 2017 (on 2015 EBITDA of only 109m) bwin.party brands returned to growth almost immediately after four consecutive years of declining sales ( in millions) 65 Original synergies projection 150 Revised synergies projection GVC share price since 2009 Ladbrokes Coral synergies phasing ( in millions) GBp 1, Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan Original synergies projection Revised synergies projection 13 Source: Prospectus dated 9 February 2018, Ladbrokes Coral prospectus dated 27 October 2016, GVC presentation dated 16 November 2015, FactSet. Note: Close price adjusted for both dividends and splits. (1) William Hill contributed 36.5m towards balance sheet repair, restructuring and deal costs.

14 6 Synergies Announced upgraded cost synergies of 130 million Synergy overview Cost synergies now expected to be 130million (previously 100m) by the end of Total integration costs expected to be c1.0x cost synergies Potential additional synergies: Capital expenditure savings from technology and procurement Revenue synergies through cross-selling, implementation of best in class systems and sophisticated marketing techniques Cost synergy areas Technology and data enabled Common platforms Own gaming content Increased bargaining power with content suppliers Other Combining international platforms and teams External costs Office and travel costs Corporate and administrative Consolidating customer service teams and technology costs Lower cost locations Common mktg & central functions Marketing Leveraging combined Group s business intelligence capability to achieve savings from reduced marketing and bonus spend Year post acq. Originally announced (cumulative) Exit Run Rate Financial Exit Run Rate Increase (Run Year Rate) Updated guidance (cumulative) New Exit Run Rate Realised in Year Year 1 7m m 2m 7m 4m- 5m Year 2 33m m 8m 35m 16m- 26m Year 3 56m m 28m 78m 52m- 62m Year 4 100m m 30m 130m 104m- 114m Year 5 100m m 30m 130m 130m Integration Costs (In Year) 17m 39m 43m 31m - Synergies split: c 125m of synergies to be delivered in Online and c 5m in Corporate 14 Source: GVC combined Prospectus and Class 1 circular dated 9 February [1] Exit run rate

15 7 US Opportunity: JV with MGM Transaction structure and key terms Transaction 50 / 50 joint venture between MGM Resorts International ( MGM ) and GVC Holdings ( GVC ) for sports betting and interactive gaming in the U.S. Both parties providing exclusive rights to relevant assets subject to 25-year agreements Joint venture business activity Exclusive access to all U.S. land-based and online sports betting, online real money and free-to-play casino gaming, major tournament and online poker, and other similar future interactive businesses Business to be conducted primarily under the playmgm and partypoker brands Parties are exclusive to each other in the U.S. for these activities Four person board of directors, with two members appointed from each of MGM and GVC Governance Equal governance and decision making rights Joint venture structure creates alignment of interests Management & Operations Independent leadership team to be selected from best-in-class talent from each company and additional new hires New joint venture headquarters to be located in major U.S. technology hub 15

16 7 US Opportunity: JV with MGM Exclusive access to relevant assets Parties contributing exclusive access to: Economics of existing and future U.S. sportsbooks All U.S. gaming licenses, including all skins for sports betting and interactive gaming Market access agreements with Boyd Gaming, providing a path to 15 states with addressable population of ~90mm (1) GVC s platform technology (including Stadium) Premier, globally recognized gaming and sports brands Transaction creates a leading U.S. sports betting and interactive gaming platform with world-class content, state-of-the-art proprietary technology, and broad distribution 16 [1] Population figure represents Eilers & Krejcik Gaming estimate of population above 21 years old. Number of states includes pending acquisitions and development projects.

17 7 US Opportunity: JV with MGM Joint venture transaction highlights Opportunity to leverage each company s unique and complementary assets to capture a once-in-alifetime new market opportunity Creates a leading platform with world class content, state-of-the-art proprietary technology, and broad reach and distribution Significantly increases speed to market for both parties and creates meaningful early mover advantages Lowers execution risk due to strong existing relationship, complementary capabilities, and both companies track records of successful partnerships Complete alignment of interests with a 50/50 joint venture structure Ample liquidity with total upfront capital commitments from partners of $200 million 17

18 7 US Opportunity: JV with MGM Broad footprint and marketable customer base MGM Nevada Mississippi New York New Jersey Maryland Massachusetts Michigan 30 Million M Life Members Boyd Pennsylvania Ohio Indiana Illinois Idaho Missouri Kansas Louisiana Clear path to 15 states with total addressable population of ~90mm (1) Leading combination is well positioned to attract additional market access and other partners 18 [1] Population figure represents Eilers & Krejcik Gaming estimate of population above 21 years old. Number of states includes pending acquisitions and development projects.

19 Appendix: 2018 Trading Update

20 Combined Results H1 Post Close Trading Update Year-on-year growth in Q2 over Q1 driven by good underlying momentum and the World Cup Key highlights (proforma basis 1 ): Q2: Group NGR +11% (cc 2 +12%) Online NGR +22% (cc 2 +25%) UK Retail Like-for-like ( LFL ) 3 NGR +2% European Retail NGR +19% (cc 2 +16%) H1: Group NGR +8% (cc 2 +8%) Online NGR +18% (cc 2 +20%) UK Retail LFL 3 NGR -3% European Retail NGR +29% (cc 2 +26%) Strong underlying growth in Online and have continued to benefit from a pipeline of new products and high profile marketing campaigns UK Retail improved in Q2 as the weather proved less disruptive than in Q1 European Retail remained very strong helped by soft comparative Positive World Cup tournament driven by gross win margin, volumes and value of new customer deposits 20 [1] The Group s proforma results are presented as if the current Group, post the acquisition of Ladbrokes Coral, had always existed. As such, it excludes the results of the Turkish business which was discontinued during 2017and the 360 shops that the Ladbrokes Coral Group was required to divest on merger. [2] Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2018 exchange rates. [3] UK Retail numbers are quoted on a LFL basis. During H1 and Q2 there were an average of 3,562 shops in the estate, compared to an average of 3,662 in the same periods last year.

21 Combined Results Q Trading Update Strong start to 2018; synergies upgraded Year to date growth (1 Jan 2018 to 20 May 2018) 1 Total NGR Total NGR CC Sports Wagers Sports Margin Change in Margin Online Sports Brands 16% 18% 4% 10.4% 1.2pp Games Brands 16% 18% B2B 46% 48% Total Online 17% 18% UK Retail (Like-for-like) (5%) n/a (9%) 18.3% 0.2pp European Retail 32% 28% 4% 18.1% 3.8pp Other (26%) (26%) Total Group 7% 7% Overall good start to 2018 Online strong with double-digit growth across both GVC legacy and Ladbrokes Coral Strong European Retail performance UK Retail impacted by weather Synergy work ongoing; interim upgrade to minimum of 130m cost synergies Well placed for US opportunity 21 [1] The Group s proforma results are presented as if the current Group, post the acquisition of Ladbrokes Coral, had always existed. As such, it excludes the results of the Turkish business which was discontinued during 2017, the 360 shops that the Ladbrokes Coral Group were required to divest on merger and the previously discontinued Ladbrokes Coral High Roller segment

22 FY18 Guidance Guidance: Capex underlying 1 c 125m post acquisition 2, c 160m annualised Capex - EPOS 2 1 c 27m post acquisition 2 Depreciation and Amortisation Subject to IFRS 3 adjustments Guidance to be provided at H1 Integration costs previous deals 3 c 15m P&L charge post acquisition 2 45m cash cost post acquisition 2 Opening gross debt 4 2,160m Opening net debt 4 1,860m Opening net debt / EBITDA 4 2.7x (LTM proforma EBITDA) Share based payments c 10m 15m Interest costs c4% on gross debt c60m P&L charge 5 post acquisition 2, c 85m annualised c50m cash cost post acquisition 2, c 85m annualised Tax rate (% of adjusted PBT) c13%, annualised cash tax in-line with historic blended rates Triennial Impact: Fully mitigated impact of c 120m on Group EBITDA by end of the second year post implementation, with an expected adverse impact of c 145m in UK Retail and positive impact of c 25m in Online In the first full year the impact on Group EBITDA is anticipated to be in the region of 160m 22 [1] Pre Triennial Review [2] Period 28 March 2018 to 31 December 2018 [3] GVC Holdings plc acquisition of bwin.party and Ladbrokes PLC merger with the Coral Group [4] 28 March 2018 [5] P&L cost of interest that will be paid in cash

23 Appendix: Historic Proforma Numbers

24 Historic Proforma: Overview The following slides provide proforma results for GVC Holdings Plc ( The Group ) for the 24 months ended 31 December 2017 The Group s proforma results are presented as if the current Group, post the acquisition of Ladbrokes Coral, had always existed. As such, it excludes the results of the Turkish business which was discontinued during 2017, the 360 shops that the Ladbrokes Coral Group were required to divest on merger and the previously discontinued Ladbrokes Coral High Roller segment The Group has changed its reporting currency to GBP and therefore the proforma information is also presented in GBP. As GVC previously reported in Euros, historic information has been translated into GBP using a rate of 1.14: 1 in 2017 and 1.24: 1 in 2016 The proforma information has separated out Corporate costs from the legacy GVC Digital business. These will continue to be reported under Corporate costs going forward Reporting segments and accounting policies have been aligned across GVC and Ladbrokes Coral for the proforma period. The way in which these results are presented is consistent with the reporting format which will be adopted by the Group going forward The proforma results depict actual historical trading performance and do not reflect any increases in profit anticipated from the delivery of synergies, nor do they account for the impact on the future depreciation and amortisation charge resulting from the IFRS 3 fair value exercise which is being undertaken on the Ladbrokes Coral business Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets Contribution is defined as statutory gross profit less marketing costs and underlying EBITDA is stated as operating profit before the deduction of depreciation, amortisation, changes in fair value of financial instruments and IFRS 2 share based payments charges 24

25 Historic Proforma: Basis Included: bwin Corporate costs Included for the period post acquisition (1 Feb 2016) and proforma adjustments made to include pre acquisition trading (January 2016). As such, both 2016 and 2017 include a full 12 months of trading for bwin Legacy GVC costs have been split between those relating to the Online business and those which are true "Corporate" costs. The latter of these is now reported under the Corporate costs segment Kalixa Included for the period until disposal (31 May 2017) Excluded: Turkey Proforma adjustments to remove the trading of the disposed Turkish business in both 2016 and divested shops Proforma adjustments to remove the trading of the 360 shops that the Ladbrokes Coral Group were required to divest on the merger of Ladbrokes and Coral Share based payment charges Amortisation of acquired intangibles Share based payment charges previously reported in Ladbrokes Coral have been removed from underlying EBITDA in line with previously reported GVC "Clean EBITDA" The amortisation of acquired intangibles will now be a separately disclosed item (formerly exceptional) and is therefore excluded from underlying profit and also from the proforma numbers presented High Rollers The High Rollers business which the legacy Ladbrokes Coral Group discontinued in 2016 has been excluded from the proforma information Crystalbet The 2018 acquisition in Georgia is not included in the historic proforma numbers 25

26 Historic Proforma: Segmentation 26 [1] Costs which were previously reported as Corporate Costs in GVC have now been split between the Online segment and those which are true Corporate Costs which remain in Corporate

27 Total Group 27 [1] Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets

28 Online 28 [1] Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets

29 UK Retail 29 [1] Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets

30 European Retail 30 [1] Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets

31 Other and Corporate 31 [1] Operating profit is shown before all items requiring separate disclosure (previously called exceptional items), the impact of changes in the fair value of financial instruments and the amortisation of acquired intangible assets

32 Appendix: Other

33 Triennial Review Triennial Review Outcome Announced UK Government announced on 17 May that stakes on B2 content should be cut to a maximum of 2 per spin Expected Financial Impact Fully mitigated impact of c 120m on Group EBITDA by end of the 2 nd year post implementation, with an expected adverse impact of c 145m in UK Retail and positive impact of c 25m in Online In the first full year the impact on Group EBITDA is anticipated to be c 160m Contingent Value Right (CVR) As part of the consideration paid for the acquisition of Ladbrokes Coral (LCL), GVC issued each LCL shareholder a CVR for each LCL share held The value of each CVR is directly linked to the outcome of the Triennial Review The CVR instrument envisages that if the legislation is enacted prior to 28 March 2019 reducing maximum stakes to 2 as announced, this will result in CVR having a zero value Tracy Crouch (Minster of Sports) verbally stated in Parliament that the legislation will be enacted this year 33

34 Greek Tax Assessment Background On 25 January 2018, GVC announced that its subsidiary, Sportingodds Limited, received a tax audit assessment notice from the Greek Audit Centre for Large Enterprises in respect of the fiscal years 2010 and 2011 At that time Sportingodds was owned by Sportingbet, prior to GVC s acquisition of Sportingbet in 2013 The audit assessment claims that Greek corporate income tax, Greek gaming tax and withheld player winnings tax plus surcharges are owed to the Greek Audit Centre for Large Enterprises The total assessment amount is m The GVC Board believes that Sportingodds has strong grounds for appeal and on 29 January 2018 an appeal was filed Sportingodds is in discussions with the Greek Audit Centre for Large Enterprises to enter a payment scheme of approximately 7.8m per month over a 24 month period Entrance into the payment scheme is not an admission that the assessment is correct Impact Entrance into the payment scheme ensures that Greek authorities cannot seize assets of Sportingodds situated in Greece and reduces the risk of major disruption to the Greek business In the event that Sportingodds is wholly or partially unsuccessful in its appeal, it is likely that it will need to pay all or part of the assessment (which includes surcharges), less amounts already paid under the payment scheme 34

35 German Regulatory Update Background The German business operates against the backdrop of significant regulatory uncertainty The uncertainty stems from the Interstate Gambling Treaty of 1 July 2012, which effectively introduced a ban on online casino and online poker Online casino and poker are subject to a total ban under the Interstate Treaty, however, a license tender for online sports betting commenced in 2012 Each of the GVC Group and the Ladbrokes Coral Group were successful applicants in the tender process for one of the 20 available Germany-wide sports betting licenses Due to ongoing legal challenges, no such license has been granted so far GVC was separately granted an online sports betting, casino and poker license by the state of Schleswig- Holstein (one state that rejected the treaty) Sports betting is permitted under 2012 State Gaming Treaty (licensing regime yet to be finalised) Current position It remains unclear whether Germany s prohibition of online casino and online poker is compliant with EU law Amendments to the Interstate Treaty had been scheduled to enter into force on 1 January 2018 They have not been ratified by all 16 German states, as required It is likely that the legislative debate will recommence in the second half of 2018 Tax is paid on all German revenues German poker/casino NGR is c4% of Group NGR 35

36 Capital Structure & Leverage Opening Gross debt - 2,160m 1 Debt Facility New TLB Amount 1,400m Existing GVC TLB 260m Existing LCL Bond 400m Existing LCL Bond 100m Total 2,160m Opening Net debt - 1,860m 1 Opening net debt/ebitda 2.7x (LTM proforma EBITDA) 1 Interest costs c4% on gross debt c60m P&L charge 2 post acquisition 3, c 85m annualised c50m cash cost post acquisition 3, c 85m annualised 36 (1) 28 March 2018 (2) P&L cost of interest that will be paid in cash (3) Period 28 March 2018 to 31 December 2018

37 Geographic Revenue Split Of which: Sports 3.3% Gaming 4.1% Of which: UK Retail 43.4% UK Online 19.6% 37 Basis: FY17 Proforma Net Revenue