30th Nov 2015 07:14
30 November 2015
LADBROKES PLC
Coral Group
Financial results for the year ended 26 September 2015
Gala Coral Group Limited ("Gala Coral") has today announced its financial results for the fourth quarter ended 26 September 2015 and the full year ended 26 September 2015. The full announcement can be viewed on the following website:
http://www.galacoral.co.uk/financial-centre/results-centre/2015
In accordance with Listing Rule 5.6.15G(4), Ladbrokes plc ("the Company") discloses the following extract from Gala Coral's financial results in relation to the Coral Group (comprising Coral Retail, Eurobet Retail and Online, but excluding Gala Retail) for the year ended 26 September 2015:
FULL YEAR HIGHLIGHTS
· Total Coral Group EBITDA{1/2} of £205.3m was £2.7m or 1% ahead of last year
· After adjusting for regulatory impacts{3} and the World Cup{4}, underlying EBITDA was 30% ahead
· Online EBITDA{1/2} of £56.2m was £6.7m or 14% ahead of last year and was 99% ahead on an underlying basis after adjusting FY14 for regulatory impacts{3} and the World Cup{4}. Online net revenue was 36% ahead, driven by 972k first time depositors
· Despite the introduction of the Point of Consumption tax during Q1, and the increase in MGD and introduction of FOBT high stakes restrictions at the end of Q2, the Group has grown EBITDA{1/2} in the second half of the year.
· Announced the proposed merger of the Coral Group with Ladbrokes PLC, subject to clearance by certain regulatory authorities including the Competition and Markets Authority ("CMA")
FULL YEAR OVERVIEW
Net revenue of £1,005.4m was £60.1m or 6% ahead of last year and EBITDA{1/2} of £205.3m was £2.7m or 1% ahead, with continued strong growth in Online.
Adjusting FY14 for the impact of regulation{4} and the World Cup{5}, EBITDA{1/2} increased by £47.5m or 30% versus last year.
QUARTER 4 OVERVIEW
Net revenue of £229.6m was £7.8m or 4% ahead of last year, with Online £14.2m or 30% ahead. EBITDA{1/2} of £43.2m was £0.2m ahead.
Adjusting FY14 for the impact of regulation{4} and the World Cup{5}, EBITDA{1/2} was £14.4.m or 50% ahead of last year.
{1} | EBITDA is stated pre-exceptional items |
{2} | EBITDA includes all revenue and expenses for the Coral Group and excludes Gala Retail (FY15: £50.6m and FY14: £32.9m), Propco rental income (FY15: £5.8m and FY14: £28.2m) and High Roller activity (FY15: -£7.6m and FY14: £0.0m) |
{3} {4} | Full year represents the 52 week periods ending 26 September 2015 and 27 September 2014 FY14 Coral Group EBITDA (pre-exceptionals) rebased for the estimated impact of Point of Consumption Tax (-£20.4m, of which Online -£19.8m) and the increase in rate of MGD to 25% and DCMS FOBT high staking restrictions (-£16.5m), calculated as if all changes had been in existence for the corresponding periods in FY14 |
{5} | World Cup EBITDA impact (previously reported as £9.4m) is now stated net of "cannibalisation" of other OTC products in Coral Retail, which is estimated at £1.5m, resulting in a restated World Cup impact of £7.9m, of which £4.5m related to Coral Retail, £1.9m related to Eurobet Retail and £1.5m related to Online |
CURRENT TRADING
Volumes have been strong across all divisions in the 8 week period to 22 November 2015. Coral Retail like-for-like stakes were 2.3% ahead, Eurobet Retail sports stakes were 32.6% ahead (on a constant currency basis), Coral.co.uk sports stakes 57.6% ahead and Eurobet.it sports stakes 89.9% ahead (on a constant currency basis). Football results have, however, been poor in both the UK and Italy, adversely impacting Coral Retail and Eurobet Retail in particular. Despite these adverse results, the Online business continues to see impressive net revenue growth.
DIVISIONAL REVIEW
Coral Retail
Full Year
Coral Retail EBITDA{1} of £141.2m was £1.8m or 1% behind last year. EBITDA was £19.2m or 16% ahead after adjusting FY14 for the impacts of regulation (£16.5m) {4} and the World Cup (£4.5m).
OTC stakes were £37.1m or 2% behind last year but £0.7m ahead excluding the impacts of the World Cup and a large staking individual in the prior year. Staking levels in the second half of the year were particularly encouraging, growing 3% year-on-year (excluding the World Cup).
OTC net revenue was £14.2m or 5% behind last year and £8.9m or 3% behind excluding the World Cup. OTC margins were 0.4pp behind, with both Grand National and Cheltenham margins behind the excellent levels achieved in FY14, and football margins failing to bounce back from the abnormally low margins seen last year.
Machines net revenue was £14.0m or 4% ahead of last year. This was despite the introduction of the DCMS high stakes restriction that was implemented in April, which is estimated to have adversely impacted net revenue by 5% and is not expected to improve. Machines gross-win-per-machine-per-week increased by 3% to £986, driven by an increased range of exclusive slots and multichannel content. B3 slots now account for 31% of Machines gross win.
Operating costs were 2% lower than last year, driven by the annualisation of payroll savings and lower content costs. The total number of LBOs at the end of FY15 was 1,850, an increase of 17 over the previous year, with 33 shops opening and 16 shops closing.
Quarter 4
Coral Retail EBITDA{1} of £27.8m was £1.6m or 5% behind last year. Adjusting FY14 for the adverse impact of MGD / high stakes restriction (£7.2m){4} and the World Cup (£0.2m), EBITDA was £5.8m or 26% ahead. OTC net revenue was 6% behind last year, with gross win margin 1.8pp lower offsetting a 4% increase in stakes (5% excluding the World Cup). Machines net revenue was 2% ahead despite the impact of the restriction on high stakes (>£50) play.
{1} | EBITDA is stated pre-exceptional items |
{2} | Quarter 4 represents the 12 week periods ending 26 September 2015 and 27 September 2014. Full year represents the 52 week periods ending 26 September 2015 and 27 September 2014 |
{3} | Net revenue is calculated as gross win less free bets |
{4} | The regulatory / tax impact has been calculated as if all changes had been in existence for the corresponding periods in FY14 |
Eurobet Retail
Full Year
Eurobet Retail EBITDA{1} was £5.4m or 29% behind last year (£3.4m or 20% behind on a constant currency basis) due to adverse football results (full year impact £3.8m) and the World Cup in FY14 (£1.9m).
Sports stakes were 19% ahead of last year (39% excluding the World Cup and on a constant currency basis) partly driven by the increased estate size (FY15 average LBOs 820, FY14: 739) and shop relocations. The shop optimisation programme, whereby 250 shops are being relocated to more profitable locations, is nearing completion with 210 units reopened by the end of FY15. The programme is expected to complete during the first quarter of FY16. Bet-in-Play stakes growth of 85% (100% on a constant currency basis) also contributed to growth, and by the year end represented 20.4% of retail sports stakes. Eurobet's share of the retail sports betting market in the second half of FY15 was 14.8%, an increase of 3.0pp on the prior year.
Virtual net revenue was £5.9m or 33% ahead of last year (44% on a constant currency basis) primarily due to the annualisation of the product's launch in quarter 1 last year. However, the Virtual market softened significantly during the second half, with Eurobet Retail recording a 17% fall in staking levels in quarter 4 (10% on a constant currency basis), in-line with the market, as customers began to rebalance their spending towards sports betting, and Bet-In-Play in particular. Eurobet's share of the Virtual market at the end of FY15 was 0.3pp higher than FY14 at 17.3%, well ahead of its "natural" share.
Operating costs were £1.6m or 16% higher than last year due to costs associated with the increased estate size (back office and marketing).
Quarter 4
Eurobet Retail EBITDA{1} of £2.8m was £1.4m or 33% behind last year (£0.4m or 13% excluding the World Cup and on a constant currency basis). Sports stakes were 16% ahead of last year (36% ahead excluding the World Cup and on a constant currency basis), however sports gross win margin was significantly behind last year's above average level.
{1} | EBITDA is stated pre-exceptional items |
{2} | Quarter 4 represents the 12 week periods ending 26 September 2015 and 27 September 2014. Full year represents the 52 week periods ending 26 September 2015 and 27 September 2014 |
{3} | Net revenue is calculated as gross win less free bets |
Online
Full Year
Online growth was very strong with net revenue 36% ahead of last year. We estimate that the combined Coral and Gala websites are the fastest growing in the UK online gambling market, adding more net revenue than any other listed peer in both cash and percentage terms, and reaching a market share of over 7%.
Online EBITDA{1} of £56.2m was £6.7m or 14% ahead of last year. EBITDA was 99% ahead after adjusting for the impact of Point of Consumption tax (£19.8m){4} and the World Cup (£1.5m).
During the year 972k first-time depositors were acquired, at an average CPA of £52{5} which is well below market comparators.
Advanced data analytics and business intelligence tools have been key to our acquisition strategy. Life-time value modelling enables a rigorous approach to managing returns on marketing investment. Business Intelligence has also helped drive improved retention and player value. Churn prevention models have enabled time appropriate interventions to reduce churn and CRM strategies better informed by data analytics have been employed to increase player value.
Mobile usage continues to grow and now represents over 70% of Coral sports and gaming stakes, over 50% of Galabingo.com stakes and 37% of Eurobet.it sports stakes.
Coral.co.uk
Coral.co.uk net revenue of £119.0m was £45.7m or 62% ahead of last year. Sports net revenue of £41.9m was £16.9m or 68% ahead, with stakes 58% ahead and sports spend-per-head 31% ahead reflecting an improved sportsbook product range, a maturing customer base and the acquisition of higher spending multichannel actives.
Gaming net revenue of £77.1m was £28.8m or 60% ahead driven by a strong pipeline of new games, cross-sell from sports into gaming and high levels of multi-channel play.
Galabingo.com
Galabingo.com net revenue was of £78.0m was £16.1m or 26% ahead of last year with TV marketing campaigns helping deliver strong player acquisition and reactivation. More detailed customer segmentation, enhanced VIP customer serviceand targeted CRM drove an increase in spend-per-head of 25% and significantly reduced churn rates (9pp lower year-on-year).
Galacasino.com
Galacasino.com net revenue was £13.1m was £0.3m or 2% ahead of last year, with a 20% increase in actives largely offset by a reduction in VIP spend-per-head.
Eurobet.it
Eurobet net revenue of £36.8m was £2.5m or 7% ahead of last year (£6.4m or 21% ahead excluding the World Cup and on a constant currency basis), with sports net revenue of £17.0m, £3.8m or 29% ahead despite the poor Italian football margins experienced during the first half of the year (£4.6m). Sports stakes were 90% ahead of the prior year.
Eurobet.it maintained its market share at around 10% despite the regularisation of bet365 at the end of FY14, which increased the size of the regulated market by around 40%. Eurobet's multi-channel offering is well established and provides a key advantage over non-land based operators. During FY15 31% of new sign-ups were acquired through shops. Combined with a significant uplift in direct acquisitions, this has helped establish Eurobet.it as the number 2 operator in the Italian online sports betting market behind bet365. The level of multichannel sign-ups is expected to further increase following the relocation of licences to previously untargeted areas, as part of the ongoing shop optimisation programme.
Operating costs
Operating costs increased by 28% to £54.6m, driven by increased headcount and volume related finance charges. Marketing costs were 20% higher than last year at £56.1m, representing 22.6% of Online net gaming revenue.
During the year the Group also ceased to operate Gala.se which generated gross profit of £0.7m and an EBITDA loss of £0.2m.
Quarter 4
Online EBITDA{1} of £15.2m was £0.5m or 3% ahead of last year. Adjusting FY14 for the impact of Point of Consumption tax (£6.1m){4} and the World Cup (loss of £0.1m), FY15 EBITDA was £6.5m or 75% ahead. Coral.co.uk net revenue was 50% ahead of last year and Galabingo.com net revenue was 21% ahead.
{1} | EBITDA is stated pre-exceptional items |
{2} | Quarter 4 represents the 12 week periods ending 26 September 2015 and 27 September 2014. Full year represents the 52 week periods ending 26 September 2015 and 27 September 2014 |
{3} | Net revenue is calculated as gross win less customer bonuses |
{4} | The regulatory / tax impact has been calculated as if all changes had been in existence for the corresponding periods in FY14 |
{5} | Cost per acquisition calculated as acquisition marketing costs and affiliate costs divided by first time depositors |
IMPORTANT NOTICE:
The information contained in this announcement is not for release, publication or distribution to persons in Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, the Republic of South Africa or the United States or in any jurisdiction where to do so would breach any applicable law. No public offer of securities is being made by virtue of this announcement.
This announcement has been prepared for the purposes of complying with the applicable law and regulation of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.
No statement in this announcement is intended as a profit forecast of the Company or a profit estimate of the Company and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.
Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.
This announcement is for information purposes only and does not constitute a prospectus or offering memorandum or an offer in respect of any securities and is not intended to provide the basis for any decision in respect of the Company or any other entity and should not be considered as a recommendation that any investor should subscribe for or purchase any such securities. Neither the issue of this announcement nor any part of its contents constitutes an offer to sell or invitation to purchase any securities of the Company or any other entity and no information set out in this announcement or referred to in other written or oral information is intended to form the basis of any contract of sale, investment decision or any decision to purchase any securities in it.
Related Shares:
Ladbrokes Coral