9th Aug 2007 07:01
Ladbrokes PLC09 August 2007 Unaudited interim results for the six months ended 30 June 2007 Half year to Half year to Year to 30 June 2007 30 June 2006 31 December 2006 £m £m £m Continuing operations Gross win 624.0 523.1 1,008.9 Net revenue 600.9 502.1 970.0 Operating profit (1) 195.0 151.3 268.1 Net finance costs (1) (34.4) (19.9) (45.6) Interest income on hotels sale proceeds - 24.0 24.0 Profit before tax and non-trading items (1) 160.6 155.4 246.5 Loss on disposal of non-current assets (1.1) - - Other non-trading items before tax (3.5) 3.2 (3.5) Profit before tax 156.0 158.6 243.0 Tax (24.7) (29.6) (47.7) Profit after tax - continuing operations 131.3 129.0 195.3 Profit for the period from discontinued operations - 388.5 421.9 Profit after tax 131.3 517.5 617.2 EBITDA (1) - continuing 219.4 171.3 310.5 Earnings per share (1) (3) - continuing 21.5p 9.8p 22.0p Earnings per share (3) - total Group 20.9p 43.0p 67.2p Proposed dividend per share (2) (3) 4.85p 4.60p 8.60p (1) Before non-trading items which are profits/losses on disposal of non-currentassets, unrealised gains and losses on derivatives, litigation and transactioncosts and profit on disposal of discontinued operations. Details on thenon-trading items are given in note 4 to the financial statements. (2) Half year to 30 June 2007 is the proposed interim dividend of 4.85p (30 June2006: 4.60p). 2006 full year figure includes a proposed final dividend of 8.60pence, which was paid on 1 June 2007. (3) Total Group earnings per share in 2006 included the profit on disposal ofthe hotels business. A 6 for 17 share consolidation took place on 13 April 2006. Highlights • Operating profit increased 28.9% to £195.0 million (H1 2006: £151.3million), with significant contribution from Telephone Betting High Rollers. • Gross win increased by 19.3% to £624.0 million (H1 2006: £523.1million). • UK Retail operating profit fell 11.6% to £100.9 million (H1 2006:£114.1 million), with gross win growth of 1.1% but higher costs. • Operating profit in Ireland increased by 83.8% to £12.5 million (H12006: £6.8 million). • Retail business launched in Italy, with twelve shops currentlytrading. • Cash generated by operations of £152.5 million with net debt of£968.8 million at 30 June 2007. • Interim dividend up 5.4% to 4.85 pence (2006 interim dividend: 4.6pence). • Effective tax rate of 16% for 2007. • Share buy back programme will commence in the second half. Christopher Bell, Chief Executive, commented: "The first half of 2007 has seen record operating profit of £195.0 million,including the benefit of a period of significantly increased activity amongstour Telephone Betting High Rollers. UK Retail profits fell, as a strongcontribution from our new Fixed Odds Betting Terminals (FOBTs) was outweighed bylower Over the Counter (OTC) gross win and higher costs. The Irish shop estateis performing well and our eGaming division continues to grow. "Italy represents the most progressed opportunity amongst our Internationaldevelopment plans and our first acquired shops are now open. We have submittedour application to operate in Madrid, Spain and we are advanced in ourpreparations to bid for Taiwan's new sports lottery. "From 1 September, all gambling operators in the UK will be required to meetconsistent standards established by the industry regulator - the GamblingCommission. Along with increased regulation will come opportunities which willinclude all year round evening opening of betting shops, £500 jackpot machinesand the opportunity for broadcast advertising. We are fully prepared for thesechanges, which we believe will help to drive growth in our core business in 2008and beyond. "Recognising the strong cash flow generated from operations and our capitalstructure targets, Ladbrokes will commence a share buy back programme in thesecond half of the year, whilst continuing to invest in growth opportunitiesboth in the UK and overseas." Board changes During the period, the Board was pleased to welcome the appointment of BrianWallace, who has replaced Rosemary Thorne as Group Finance Director. NicholasJones was appointed Senior Independent non-executive director following PatLupo's departure from the Board during May. Enquiries to: Brian Wallace, Group Finance Director (office +44 (0) 8515 5532)Julian Arlett, Head of Investor Relations (mobile +44 (0)7976 348 913)Ciaran O'Brien, Head of Public Relations (mobile +44 (0)7976 180 173)Switchboard +44 (0) 20 8515 5532 Notes to editors: A live conference call of the analyst presentation will be available at 9:30am(UK time) by dialing +44 (0) 20 8817 9301 and asking for the 'Ladbrokes plcInterim Results'. In addition, a live audiocast of the presentation with slideswill be held within the 'Investor Centre' on www.ladbrokesplc.com and arecording will be available from 3pm (UK time) the same day. For further information on Ladbrokes plc, please visit our corporate website atwww.ladbrokesplc.com. High-resolution images are available to download from themedia centre section under the heading 'image library'. Executive images arealso available at www.vismedia.co.uk in the Ladbrokes section. Performance overview Ladbrokes achieved its highest ever first half operating profit of £195.0million and the business is ready for the opportunities offered by the GamblingAct, which will be implemented from 1 September 2007. Our UK Retail business saw an encouraging performance from our new FOBTs, whichwere fully rolled out by 31 March 2007, with average gross win per week havingincreased by 19% to £651 for the period. We continue to see a positive responseto the new dual screen machines. OTC gross win saw a decline due in part to challenging comparatives without aWorld Cup and the substitution effect with the new FOBTs Our Irish Retail estate has delivered strong growth, through the combination ofa strong product offering and shop acquisitions. Our eGaming business continues to perform well, with good growth again inSportsbook, Casino and Games products. Poker continues to be impacted by thecompetitive environment in the Nordics and the UK. Telephone Betting High Rollers contributed significantly to the first halfperformance with net revenue of £95.3 million. International development remains focused on Italy, Spain and Asia. Italy iswell progressed with the primary focus on the acquisition of existing shops, theidentification of 'new licence' premises and the planned launch of Ladbrokes.itin the second half. In Spain, we have submitted our application for an operating licence in Madridand await news on deregulation amongst the remaining regions. In Asia, we areintent on participating in the tender for the sports lottery in Taiwan, our bidfor the Vietnamese sports lottery continues and we continue to explore sportsbetting opportunities in China. Dividends and capital structure The Board announces the implementation of a share buy back programme, to startduring the second half of 2007. It is intended that, over time, Ladbrokes willrepurchase shares in order to move towards its stated target gearing range of3.5 to 3.75 times historic EBITDA. The purchase of shares will be dependent onmarket conditions and will also take into account the cash generated in thebusiness and other investment opportunities that may arise over time. Ladbrokes will pay an interim dividend of 4.85 pence per share (2006: 4.6 penceper share) on 3 December to shareholders on the register on 17 August. Thisrepresents an increase of 5.4% over last year's interim dividend. Outlook Following consistent investment in our UK Retail estate, we look forward to theregulatory changes made possible by the 2005 Gambling Act next month. We expectto see benefits from year round evening opening and £500 jackpots in 2008 andwill commence broadcast advertising later this year. We are actively interestedin the proposed 17 new UK casinos and continue to monitor the progress of thisregulation. Internationally, we are establishing businesses in Italy and Spain and areinvolved in bidding for new sports lotteries in Taiwan and Vietnam and exploringopportunities in China. Ladbrokes continues to seek an early resolution to the loss of pictures from theUK racecourses which have sold their betting shop broadcast rights to Turf TV.We have chosen not to sign up to Turf TV because it represents a four-foldincrease in the costs of the broadcast rights to 31 of the 59 UK courses and isconditional on broadcasting a new channel into our shops, which will incuradditional expense and integration issues. For the one month period from 1 July, total gross win increased by 38%, mainlyreflecting the benefit from continuing Telephone Betting High Rollers' activity,albeit at a lower level than experienced at the end of the first half. Excludingthe benefit from the increased Telephone Betting High Rollers' activity, therest of the business continues to trade in line with management's expectations. Operating Results Amount staked by business Half year to Half year to Year to 30 June 30 June 31 December 2006 2007 2006 £m £m £m European Retail 5,702.3 5,172.1 10,189.1 eGaming 607.5 587.4 1,216.9 Telephone Betting 585.9 578.8 939.9 Other (1) 40.3 21.2 37.9 Total 6,936.0 6,359.5 12,383.8 Gross win by business Half year to Half year to Year to 30 June 30 June 31 December 2006 2007 2006 £m £m £m European Retail 420.1 407.6 799.8 eGaming 78.1 72.6 144.4 Telephone Betting 112.2 33.6 46.1 Other (1) 13.6 9.3 18.6 Total 624.0 523.1 1,008.9 Net revenue by business Half year to Half year to Year to 30 June 30 June 31 December 2007 2006 2006 £m £m £m European Retail 403.3 392.7 771.5 eGaming 72.5 66.6 134.1 Telephone Betting 111.6 33.5 45.8 Other (1) 13.5 9.3 18.6 Total 600.9 502.1 970.0 Profit from operations by business (before Half year to Restated(2) Restated(2) Year non-trading items) 30 June Half Year to to 2007 30 June 31 December 2006 2006 £m £m £m European Retail 114.4 122.6 216.8 eGaming 26.3 18.5 44.3 Telephone Betting 63.3 16.4 17.3 Other (1) (0.6) 1.8 4.3 Corporate costs (8.4) (8.0) (14.6) Total 195.0 151.3 268.1 (1) Vernons, casino and international development operations.(2) Refer to note 13 of the financial statements for details of the restatement. Business Review European Retail • Total gross win increased by 3.1% to £420.1 million (H1 2006: £407.6million) and operating profit decreased by 6.7% to £114.4 million (H1 2006:£122.6 million). European Retail - UK • Total gross win increased by 1.1% to £370.3 million (H1 2006: £366.4million). Our new FOBTs performed well, whilst OTC experienced a period ofchallenging comparatives. Like for like total gross win, excluding acquisitionsand new licences, increased by 0.3%. • OTC gross win decreased by 4.7% to £249.6 million (H1 2006: £261.8million), with like for like OTC gross win down by 5.2%, partly due to toughcomparatives and FOBT substitution. • OTC gross win margin was 17.5% (H1 2006: 16.9%) with good marginsachieved at the Cheltenham festival and Royal Ascot. • Following the smoking ban introduction in Wales during April, therehas been no significant impact in our Welsh shops. It is too early to establishthe impact in England but we do not expect that there will be a substantialongoing effect. • The rollout of 6,700 new bespoke dual screen FOBTs was completed inMarch 2007 and the customer reaction to these terminals continues to bepositive, with gross win per terminal up 18.8% in the first half, compared tothe first half in 2006. • Machine gross win increased by 15.4% to £120.7 million (H1 2006:£104.6 million), with average weekly FOBT gross win of £651, significantly abovelast year's £548 for the same period. • Operating costs increased by 8.5% to £216.0 million (H1 2006: £199.0million), including a full half year of the new FOBT licence duty (AMLD) of £6.8million (H1 2006: nil). Like for like costs, excluding AMLD, new licences,acquisitions and relocations, increased by 4%. • Operating profit of £100.9 million decreased by 11.6% (H1 2006: £114.1million). • At 30 June 2007, Ladbrokes had 2,130 shops in the UK (2,141 at 31December 2006). European Retail - Ireland • Gross win in Ireland increased by 41.4% to £32.8 million (H1 2006:£23.2 million), including the benefit of a larger shop estate and good UK andIrish horse racing results. Like for like gross win, excluding acquisitions andnew licences, increased by 16%. Business Review (continued) • Operating costs rose by 37.7% in Ireland due to the increase in shopnumbers, with like for like costs up by 5%. Operating profit increased by 83.8%to £12.5 million (H1 2006: £6.8 million). • Shop numbers in Ireland (Republic of Ireland and Northern Ireland)increased from 195 at 31 December 2006 to 206 at 30 June 2007, including 9acquisitions, 4 new licences and 2 closures. European Retail - Belgium • Gross win in Belgium showed a decline of 5.6% due to the highlycompetitive marketplace. Operating profit decreased by 41.2% to £1.0 million (H12006: £1.7 million). • At 30 June 2007, the number of shops in Belgium reduced to 279 from286 at 31 December 2006. eGaming • eGaming net revenue increased by 8.9% to £72.5 million (H1 2006: £66.6million), with 441,000 unique active players (up 5.0%). • Excluding the impact of the World Cup, which delivered £3.4 million netrevenue in the first half of 2006, net revenue grew 14.7%. • Sportsbook (including Ladbrokes Financials) net revenue rose by 13.9%to £27.1 million (an increase of 32.8% excluding the impact of the World Cup),with gross win margin up 1.2 percentage points to 7.9%, benefiting from strongmargins at the Cheltenham festival and Royal Ascot. Average monthly activeplayer days were marginally down at 640,000 with no World Cup but yield perunique active player grew 14.7% to £86. • Poker net revenue was £15.7 million, down £2.7 million, with increasedcompetition affecting both player numbers and yield. Average monthly activeplayer days fell by 14.9% to 422,000 and yield per unique active player fell10.6% to £144. Localisation remains a focus and we have delivered new softwarefor Swedish and Danish languages in the first half, with four further languagesplanned by the end of 2007. • Casino net revenue of £22.2 million grew by 14.4%, with average monthlyactive player days up 6.9% at 77,000 and yield per unique active player up 8.0%at £363. The focus on localisation continues with '1-click' suites of gamesreleased in four new languages in the first half with another five to come inthe second half. Our VIP programme now rewards players from over 30 countries. • Games net revenue of £7.5 million was 50.0% higher (H1 2006: £5.0million), with average monthly active player days up 88.6% to 132,000, drivenparticularly by our first TV advertising campaign for Bingo and 'Deal or NoDeal', which was launched in July 2006. A second Bingo TV advertising campaignstarted at the beginning of July and second half plans include more new productlaunches and a greater focus on product and service localisation. Business Review (continued) • Operating costs of £42.1 million decreased by 5.0%, benefiting from theacquisition of Sponsio, our Nordic marketing partner, in January 2007.Excluding the impact of the Sponsio acquisition, like for like operating costswere up 1.9%, with savings in banking and chargebacks offset by higher staffcosts as we have recruited to support the business expansion. • Operating profit increased to £26.3 million (H1 2006: £18.5 million),with net revenue conversion of 36.3% (H1 2006: 27.8%) favourably impacted by theacquisition of Sponsio and low like for like cost increases. Telephone Betting • Net revenue excluding High Rollers was £16.3 million, down £3.9million, with gross win margins of 7.4% compared to 8.8% in 2006, which alsobenefited by £0.9 million from the World Cup. • Net revenue from High Rollers was £95.3 million (H1 2006: £13.3million). • Unique active players were 97,400 (H1 2006: 100,100), with averagemonthly active player days down by 6.8% and call volumes (excluding HighRollers) down by 4.1% as prior year comparatives all benefited from World Cupactivity. • Operating costs increased by £19.5 million, largely due to levy andprovisions associated with High Rollers' business. Agent cost per call was up14.5% to 63 pence, with efficiencies impacted by lost racing both at thebeginning of the year and in the wet June. • Including High Rollers, operating profit was £63.3 million (H1 2006:£16.4 million). Other - Vernons, Casino and International development operations • Vernons operating profit increased by 28.6% to £2.7 million (H1 2006£2.1million) largely due to more effective marketing campaigns and improvementsin customer handling productivity. • Casino loss of £0.7 million includes development costs and a small lossfrom Ladbrokes Casino and Sports Bar during the first half. • International development in Italy, Spain and Asia resulted in a £2.6million loss. Operating and Financial Review Financial review Revenue and profit before tax for Half Year to Restated Half Year to Restated Year to continuing operations 30 June 30 June 31 December 2007 2006 2006 Net Profit Net Revenue Profit Net Profit Revenue Revenue £m £m £m £m £m £m European Retail 403.3 114.4 392.7 122.6 771.5 216.8 eGaming 72.5 26.3 66.6 18.5 134.1 44.3 Telephone Betting 111.6 63.3 33.5 16.4 45.8 17.3 Other (1) 13.5 (0.6) 9.3 1.8 18.6 4.3 Corporate costs - (8.4) - (8.0) - (14.6) 600.9 195.0 502.1 151.3 970.0 268.1 Net finance costs - (34.4) - (19.9) - (45.6) Interest income on the hotels sales proceeds - - - 24.0 - 24.0 Revenue and profit before tax 600.9 160.6 502.1 155.4 970.0 246.5 Profit for continuing operations is before non-trading items. (1) Vernons, casino and international development operations. Trading summary - Continuing operations Revenue for continuing operations increased by £98.8 million (19.7%) to £600.9million, mainly as a result of High Rollers' activity in Telephone Betting, theperformance of the Irish shops in the European Retail estate, and growth ineGaming. Profit before finance costs, tax and non-trading items increased 28.9% to £195.0million (H1 2006: £151.3 million) reflecting increased profits in both TelephoneBetting and eGaming offset by a decline in European Retail. Finance costs The net finance costs of £34.4 million were £38.5 million greater than last year(H1 2006: £4.1 million net income). 2006 benefited from interest income of£24.0 million earned on the proceeds of the Hilton International disposal.Excluding this income net finance costs increased by £14.5 million reflecting afull period of the increased leverage implemented following the HiltonInternational disposal. Profit before tax The increase in trading profits offset by the higher finance costs in the periodhas resulted in a 3.3% increase in first half profit for continuing operationsbefore taxation and non-trading items to £160.6 million (H1 2006: £155.4million). Non-trading items before tax £1.1 million of non-trading items before interest and tax include a £1.5 millionprofit recognised upon disposal of shares in SIS reducing our shareholding from25.3% to 23.4%. This is offset by a £2.6 million loss on closure of 17 shops inthe first half of 2007, and commitment to close a further 7 shops in July 2007in the UK Retail estate. Other non-trading items of £(3.5) million (H1 2006:£3.2 million) relate to unrealised (losses) / gains on derivatives. Taxation The Group taxation charge for continuing operations before non-trading items of£25.7 million represents an effective tax rate of 16% (half year to 30 June2006: 24%; year to 31 December 2006: 17.8%). The effective tax rate of 16% is abest estimate of the annual tax rate for 2007, which is lower than 2006 duemainly to a reduction in the rate of mainstream corporation tax rates. Earnings per share (EPS) - Continuing operations EPS (before non-trading items) was 21.5 pence (H1 2006: 9.8 pence). Comparisonwith the prior year is affected by the share consolidation and convertible bondconversion that took place in 2006. EPS (including the impact of non-tradingitems) was 20.9 pence (H1 2006: 10.7 pence). Fully diluted EPS was 20.7 pence(H1 2006: 10.1 pence) after adjustment for outstanding share options. Earnings per share (EPS) - Group EPS (before non-trading items) increased to 21.5 pence (H1 2006: 10.4 pence).EPS (including the impact of non-trading items) fell to 20.9 pence (H1 2006:43.0 pence), reflecting the profit on disposal of Hilton International in 2006.Fully diluted EPS was 20.7 pence (H1 2006: 40.3 pence) after adjustment foroutstanding share options. Dividend The Board has proposed an interim dividend of 4.85 pence per share (H1 2006: 4.6pence). The dividend will be payable on 3 December 2007 to shareholders on theregister on 17 August 2007. Restatement of divisional operating profits and balance sheet reclassification Following a review, the allocation of shared costs has been adjusted in 2007 toreflect more accurately each division's activity. For comparative purposes, thesegmental operating profit statements for the year to 31 December 2006 and thehalf year to 30 June 2006 have been restated to reflect this change to reportedprofit and are shown in the table below: Operating profit before Restated non-trading items Half year to Half year to Year to 31 Restated Year to 30 June 2006 Adj 30 June 2006 December 2006 Adj 31 December 2006 £m £m £m £m £m £m European Retail 120.1 2.5 122.6 212.7 4.1 216.8 eGaming 19.8 (1.3) 18.5 47.0 (2.7) 44.3 Telephone Betting 16.6 (0.2) 16.4 17.7 (0.4) 17.3 Other (1) 2.1 (0.3) 1.8 5.9 (1.6) 4.3 Corporate costs (7.3) (0.7) (8.0) (15.2) 0.6 (14.6) Total 151.3 - 151.3 268.1 - 268.1 (1) Vernons, casino and international development operations. In addition, the balance sheets for 30 June 2006 and 31 December 2006 have beenrestated for a reclassification of non-current liability provisions to currentliability provisions. These adjustments have no impact on reported Group profit, cash flows or netassets. Cash flow, capital expenditure and borrowings Cash generated by operations was £152.5 million. After net finance costs andincome taxes paid of £32.2 million and £97.0 million on capital expenditure,intangible additions and acquisitions, cash inflow was £23.3 million. Proceeds of £5.0 million were received on the exercise of share options and theissue of shares and £54.1 million was paid out in dividends. At 30 June 2007, gross borrowings of £981.7 million and cash, deposits and shortterm investments of £12.4 million and derivatives of £0.5 million have resultedin a net debt of £968.8 million. Unaudited financial statements Interim consolidated income statement Half year to Half year to Year to 30 June 2007 30 June 2006 31 December 2006 Before Before Before non-trading Non-trading non-trading items(1) Total items(1) Total items(1) Total £m £m £m £m £m £m Continuing operationsAmounts staked(2) 6,936.0 6,936.0 6,359.5 6,359.5 12,383.8 12,383.8 Revenue 599.3 599.3 500.5 500.5 966.0 966.0Share of results from associated 1.6 1.6 1.6 1.6 4.0 4.0undertakings Total revenue 600.9 600.9 502.1 502.1 970.0 970.0Cost of sales before depreciation (334.7) (335.9) (288.5) (288.5) (573.3) (573.3)Administrative expenses (46.8) (45.3) (42.3) (42.3) (86.2) (88.7) EBITDA 219.4 219.7 171.3 171.3 310.5 308.0 Depreciation and amounts written (24.4) (25.8) (20.0) (20.0) (42.4) (42.4)off non - current assets Profit before tax and finance costs 195.0 193.9 151.3 151.3 268.1 265.6Finance costs (34.7) (47.3) (32.2) (41.8) (62.3) (80.6)Finance income 0.3 9.4 36.3 49.1 40.7 58.0 Profit before taxation 160.6 156.0 155.4 158.6 246.5 243.0Income tax expense (25.7) (24.7) (37.3) (29.6) (43.9) (47.7) Profit for the period - continuing 134.9 131.3 118.1 129.0 202.6 195.3operations Discontinued operationsProfit for the period from - - 7.0 388.5 7.0 421.9discontinued operations Profit for the period 134.9 131.3 125.1 517.5 209.6 617.2 Attributable to:Equity holders of the parent 134.9 131.3 125.1 517.5 209.6 617.2 Earnings per share from continuingoperations:- basic 21.5p 20.9p 9.8p 10.7p 22.0p 21.2p- diluted 21.3p 20.7p 9.3p 10.1p 21.5p 20.7pEarnings per share on profit forthe period:- basic 21.5p 20.9p 10.4p 43.0p 22.8p 67.2p- diluted 21.3p 20.7p 9.8p 40.3p 22.2p 64.7p Proposed dividends(3) 4.85p 4.85p 4.60p 4.60p 8.60p 8.60p (1) Non-trading items are profits/losses on disposal of non-current assets,unrealised gains and losses on derivatives, litigation and transaction costs andprofit on disposal of discontinued operations. Details on the non-trading itemsare given in note 4 to the financial statements. (2) Amounts staked does not represent the Group's statutory revenue andcomprises the total amount staked by customers on betting and gaming activities. (3) The dividends paid in the half years to June 2007 and June 2006 were £54.1million (8.60p per share) and £4,179.6 million (240.00p per share) respectively. An interim dividend of 4.85p per share (2006: 4.60p) was declared by theDirectors on 9 August 2007. These financial statements do not reflect thisdividend payable. Interim consolidated balance sheet 30 June 2007 Restated Restated 30 June 2006 31 December 2006 £m £m £mASSETSNon-current assetsGoodwill and intangible assets 496.4 394.3 427.5Property, plant and equipment 255.2 218.5 243.1Interests in associates and other 9.9 8.2 11.0investmentsOther financial assets 8.2 8.2 8.5Deferred tax assets 24.0 16.7 13.1Derivatives 4.1 20.4 12.7Retirement benefit asset 38.4 12.4 22.6 836.2 678.7 738.5Current assetsTrade and other receivables 149.0 94.9 75.0Assets classified as held for sale 2.2 2.2 2.2Derivatives - 12.9 0.8Cash and short term deposits 35.2 26.6 36.4 186.4 136.6 114.4 Total assets 1,022.6 815.3 852.9 LIABILITIESCurrent liabilitiesInterest-bearing loans and borrowings (47.9) (141.3) (36.7)Derivatives (3.3) (17.1) (9.9)Trade and other payables (210.0) (214.8) (173.4)Corporation tax liabilities (190.2) (191.8) (161.6)Provisions (2.7) (3.1) (2.9) (454.1) (568.1) (384.5)Non-current liabilitiesInterest-bearing loans and borrowings (956.6) (825.4) (952.2)Derivatives (0.3) (0.8) -Other financial liabilities (19.7) (14.2) (16.3)Deferred tax liabilities (114.9) (79.7) (114.6)Provisions (10.5) (21.2) (12.2) (1,102.0) (941.3) (1,095.3) Liabilities of disposal group classified asheld for sale - (18.9) - Total liabilities (1,556.1) (1,528.3) (1,479.8) Net liabilities (533.5) (713.0) (626.9) EQUITY Issued share capital 178.6 177.2 177.9Share premium account 2,131.9 2,131.0 2,126.8Own shares (5.3) (5.5) (5.4)Foreign currency translation reserve 2.3 0.6 2.2Retained earnings (2,841.0) (3,016.3) (2,928.4)Total equity (533.5) (713.0) (626.9) Interim consolidated cash flow statement Half year to Half year to Year to 30 June 2007 30 June 2006 31 December 2006 £m £m £m Net cash flows from operating activities 120.0 83.1 156.5 Cash flows from investing activitiesInterest received 0.3 43.8 54.7Dividends received from associates - 0.5 0.8Payments for intangible assets (13.6) (2.3) (9.0)Purchase of property, plant and equipment (32.7) (45.5) * (91.9) **Purchase of subsidiaries (50.7) (6.2) (26.0)Proceeds from the sale of property, plant andequipment 2.4 0.7 1.0Proceeds from disposal of hotels division - 3,241.4 3,241.4Costs of disposal of the hotels division - (67.3) (74.7)Cash disposed with discontinued operations - (54.2) (54.2)Cash obtained through acquisition of subsidiaries 2.4 - -Purchase of interests in associates and otherinvestments - (0.5) (0.5)Proceeds from disposal of interest in associates 2.2 - 1.0 (89.7) 3,110.4 3,042.6 Cash flows from financing activitiesProceeds from issue of shares 5.0 65.3 70.3Proceeds from borrowings 11.9 150.7 179.6Proceeds from repayment of loans by associate - - 7.8Purchase of ESOP shares (1.1) - (5.0)Repayment of borrowings (13.2) (185.3) (185.3)Payments of new loans to associates - (1.3) (1.8)Decrease in deposits - maturity greater than threemonths - (0.1) -Dividends paid (54.1) (4,179.6) (4,208.4) (51.5) (4,150.3) (4,142.8) Net decrease in cash and cash equivalents (21.2) (956.8) (943.7) Net foreign exchange difference (0.1) (0.1) 1.3Cash and cash equivalents at beginning of the period 33.4 975.8 975.8 Cash and cash equivalents at end of the period 12.1 18.9 33.4 Cash and cash equivalents comprise:Cash at bank and in hand and current assetinvestments 34.9 26.2 36.1Bank overdraft (22.8) (7.3) (2.7) 12.1 18.9 33.4 * Continuing operations - £38.4 million, discontinued operations - £7.1 million** Continuing operations - £84.8 million, discontinued operations - £7.1 million Interim consolidated statement of recognised income and expense Half year to Half year to Year to 30 June 30 June 31 December 2006 2007 2006 £m £m £mCurrency translation differences 0.1 (0.3) 1.3Recycled foreign exchange - - (3.8)Actuarial gains on defined benefit pension scheme 13.0 4.5 9.6Net gains on cashflow hedges 0.4 0.5 1.1Tax on items directly taken to equity (3.7) (1.3) (2.9)Total income and expenses recognised directly in equity 9.8 3.4 5.3Profit for the period 131.3 517.5 617.2Total recognised income and expense for the period 141.1 520.9 622.5 Attributable to:Equity holders of the parent 141.1 520.9 622.5 Notes to the financial statements 1. Corporate information The interim consolidated financial statements of the Group for the six monthsended 30 June 2007 were authorised for issue in accordance with a resolution ofthe directors on 9 August 2007. Ladbrokes plc is a limited company incorporated and domiciled in the UnitedKingdom whose shares are publicly traded. The principle activities of thecompany and its subsidiaries ("the Group") are described in Note 3. 2. Basis of preparation (a) The accounting policies adopted in the preparation of the interimfinancial statements are consistent with those followed in the preparation ofthe Group's annual financial statements for the year ended 31 December 2006.The interim financial information was approved by a duly appointed andauthorised committee of the Board of Directors on 9 August 2007 and isunaudited. The auditors have carried out a review and their report is set out onpage 27. The financial information set out in this document in respect of the year ended31 December 2006 does not constitute the Group's statutory accounts for the yearended 31 December 2006. The auditors' report on the statutory accounts for 2006was unqualified and did not contain a statement under section 235 or 237 of theCompanies Act 1985. Statutory accounts for 2006 have been delivered to theRegistrar of Companies. (b) To assist in understanding the underlying performance, the Group hasdefined the following items of income and expense as non-trading in nature: - Profits/losses on disposal of non current assets- Profits/losses on disposal of businesses and investments- Unrealised gains/losses on derivatives arising from hedging interest rate and currency exposures- Litigation and transaction costs The non-trading items have been included within the appropriate classificationin the consolidated income statement. 3. Segment information The Group is organised and managed separately as three principal segmentsaccording to the nature of the services provided as outlined below. The European Retail segment comprises all activities connected with the UK andother European shop estate. The eGaming segment comprises betting and gaming activities from onlineoperations. The Telephone Betting segment comprises activities relating to bets taken on thetelephone. The Other segment comprises Vernons, Casino and International developmentoperations. Half year to 30 June 2007 Profit before Profit before taxation and taxation and after non-trading items non-trading items Revenue £m £m £m Continuing operations:European Retail 403.3 114.4 113.3eGaming 72.5 26.3 26.3Telephone Betting 111.6 63.3 63.3Other (1) 13.5 (0.6) (0.6)Corporate costs - (8.4) (8.4) Total 600.9 195.0 193.9 Net finance costs - (34.4) (37.9) 600.9 160.6 156.0 Segment information (continued) Half year to 30 June 2006 Restated profit Restated profit before taxation and before taxation and non-trading items after non-trading items Revenue £m £m £m Continuing operations:European Retail 392.7 122.6 122.6eGaming 66.6 18.5 18.5Telephone Betting 33.5 16.4 16.4Other (1) 9.3 1.8 1.8Corporate costs - (8.0) (8.0) Total 502.1 151.3 151.3 Net finance costs - 4.1 7.3 502.1 155.4 158.6 Discontinued operations: 263.7 10.8 393.4 765.8 166.2 552.0 Year to 31 December 2006 Restated profit Restated profit before taxation and before taxation and non-trading items after non-trading items Revenue £m £m £m Continuing operations:European Retail 771.5 216.8 216.8eGaming 134.1 44.3 44.3Telephone Betting 45.8 17.3 17.3Other (1) 18.6 4.3 4.3Corporate costs - (14.6) (17.1) Total 970.0 268.1 265.6 Net finance costs - (21.6) (22.6) 970.0 246.5 243.0 Discontinued operations: 263.7 10.8 426.8 1,233.7 257.3 669.8 Refer to note 13 for details of the restatement. (1) Vernons, casino and international development operations. 4. Non-trading items Half year to Half year to Year to 30 June 30 June 31 December 2006 2007 2006 £m £m £m Continuing operations:Profit on disposal of shares in associate 1.5 - -Loss on closure of UK Retail shops (2.6) - -Unrealised (losses)/gains on derivatives (3.5) 3.2 (1.0)Litigation and transaction costs - - (2.5)Total non-trading (loss)/profit before taxation (4.6) 3.2 (3.5)Non-trading tax credit/(charge) 1.0 7.7 (3.8)Non-trading items after taxation (3.6) 10.9 (7.3) 5. Taxation The total tax charge on continuing operations was £24.7 million (Half year to 30June 2006: £29.6 million; full year to 31 December 2006: £47.7 million). Thetaxation charge relates to £24.3 million of UK tax and £0.4 million of overseastax. 6. Dividends paid and proposed Half year to Half year to Year toPence per share - proposed 30 June 30 June 31 December 2007 2006 2006 Pence Pence Pence Interim 4.85 4.60 4.60Final - - 8.60 4.85 4.60 13.20 The dividends paid in the half years to June 2007 and June 2006 were £54.1million (8.60p per share) and £4,179.6 million (240.00p per share) respectively. An interim dividend of 4.85p per share (2006: 4.60p) was declared by theDirectors at their meeting on 9 August 2007. These financial statements do notreflect this dividend payable. 7. Earnings per share The calculation of adjusted earnings per share before non-trading items isincluded as it provides a better understanding of the underlying performance ofthe Group. Continuing operations Earnings Diluted earnings Basic EPS Diluted EPSHalf year to 30 June 2007 pence per pence per £m £m share share Profit attributable to shareholders 131.3 131.3 20.9p 20.7pNon-trading items net of tax 3.6 3.6 0.6p 0.6pAdjusted profit attributable to shareholders 134.9 134.9 21.5p 21.3p Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per Half year to 30 June 2006 £m £m Share Share Profit attributable to shareholders 129.0 130.8 10.7p 10.1pNon-trading items net of tax (10.9) (10.9) (0.9)p (0.8)pAdjusted profit attributable to shareholders 118.1 119.9 9.8p 9.3p Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per Year to 31 December 2006 £m £m share Share Profit attributable to shareholders 195.3 198.4 21.2p 20.7pNon-trading items net of tax 7.3 7.3 0.8p 0.8pAdjusted profit attributable to shareholders 202.6 205.7 22.0p 21.5p Total Group Earnings Diluted Basic EPS Diluted EPSHalf year to 30 June 2007 pence per pence per £m £m share Share Profit attributable to shareholders 131.3 131.3 20.9p 20.7pNon-trading items net of tax 3.6 3.6 0.6p 0.6pAdjusted profit attributable to shareholders 134.9 134.9 21.5p 21.3p Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per Half year to 30 June 2006 £m £m share share Profit attributable to shareholders 517.5 519.3 43.0p 40.3p Non-trading items net of tax (392.4) (392.4) (32.6)p (30.5)pAdjusted profit attributable to shareholders 125.1 126.9 10.4p 9.8p Year to 31 December 2006 Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per £m £m share share Profit attributable to shareholders 617.2 620.3 67.2p 64.7pNon-trading items net of tax (407.6) (407.6) (44.4)p (42.5)pAdjusted profit attributable to shareholders 209.6 212.7 22.8p 22.2p * Diluted earnings included an adjustment to the attributable profit to reflecta reduction in the interest charge net of tax of £3.1 million in December 2006and £1.8 million in June 2006 which would have resulted from the conversion ofthe convertible bond to equity. Earnings per share (continued) The number of shares used in the calculation is shown below: Half year to Half year to Year to 30 June 30 June 31 December 2007 2006 2006 Millions Millions Millions Weighted average number of ordinary shares for thepurposes of basic earnings per share 629.0 1,203.3 919.1 Share options 4.3 10.5 7.9Convertible bond conversion to ordinary share capital - 73.7 30.0Issue of contingently issuable shares 1.4 1.2 1.2 Weighted average number of ordinary shares for thepurposes of dilutive earnings per share 634.7 1,288.7 958.2 8. Property, plant and equipment During the half year to 30 June 2007, the Group acquired assets with a cost of£33.7 million (Half year to 30 June 2006: £37.8 million, year to 31 December2006: £84.7 million). In addition the Group acquired assets from businesscombinations at a cost of £4.4 million (Half year to 30 June 2006: £nil, year to31 December 2006: £0.2 million). Assets with a net book value of £4.0 million were disposed of by the Groupduring the half year to 30 June 2007 (Half year to 30 June 2006: £0.7 million,year to 31 December 2006: £2.4 million). 9. Net debt The Group's net debt structure is as follows: 30 June 30 June 31 December 2007 2006 2006 £m £m £mNon current assetsDerivatives 4.1 20.4 12.7 Current assetsDerivatives - 12.9 0.8Cash and short term deposits 35.2 26.6 36.4 Current liabilitiesBank overdrafts (22.8) (7.3) (2.7)Interest-bearing loans and borrowings (25.1) (134.0) (34.0)Derivatives (3.3) (17.1) (9.9) Non current liabilitiesDerivatives (0.3) (0.8) -Interest-bearing loans and borrowings (956.6) (825.4) (952.2) Net debt per balance sheet (968.8) (924.7) (948.9) 10. Reconciliation of profit to net cash inflow from operatingactivities Half year to Half year to Year to 30 June 30 June 31 December 2007 2006 2006 £m £m £m Profit before tax and finance costs - continuing 195.0 151.3 268.1Profit before tax and finance costs - discontinuing - 11.2 11.2Profit before tax and finance costs 195.0 162.5 279.3 Depreciation 22.0 17.8 38.1Amortisation of intangible assets 2.4 2.2 4.3Costs of share based payments 1.3 1.4 2.3 Decrease in financial assets 0.2 - -Decrease in assets classified as held for sale - (6.3) (6.3)Increase in receivables (62.9) (3.3) (1.8)Increase in payables 7.9 16.6 3.2(Decrease)/Increase in provisions (1.9) 4.9 5.7Contribution to retirement benefit schemes (3.0) (60.2) (67.6)Share of results from associates (1.6) (0.9) (3.3)Other items (6.9) (6.9) 10.8Cash generated by operations 152.5 127.8 264.7 Income taxes paid (11.5) (33.3) (48.9)Finance costs paid (21.0) (11.4) (59.3) Net cash inflow from operating activities 120.0 83.1 156.5 Cash and short term deposits in the balance sheet comprise: 30 June 30 June 31 December 2007 2006 2006 £m £m £mContinuing operations Cash at bank and in hand 34.9 26.2 36.1Short-term deposits and current asset investments - - -Deposits with maturity greater than three months 0.3 0.4 0.3 35.2 26.6 36.4 Cash and cash equivalents in the cash flow statement comprise cash at bank andother short-term highly liquid investments with a maturity of three months orless and overdrafts: 30 June 30 June 31 December 2007 2006 2006 £m £m £m Continuing operationsCash at bank and in hand 34.9 26.2 36.1Bank overdrafts (included in current liabilities) (22.8) (7.3) (2.7) 12.1 18.9 33.4 11. Issued capital and reserves Foreign Convertible currency Share Share bond Other Own Retained translation Minority Total capital premium adjustment Reserve shares earnings Total interests equity £m £m £m £m £m £m £m £m £m £m At 1 January 2006 160.6 1,767.7 34.3 158.2 (16.0) 483.2 4.7 2,592.7 3.0 2,595.7 Total recognisedincome and expense forthe year - - - - - 625.0 (2.5) 622.5 - 622.5 Issue of shares for 4.3 66.0 - - - - - 70.3 - 70.3cashIssue of shares on 13.0 287.0 (25.8) - - - - 274.2 - 274.2conversion ofconvertible bondShare-based payment - 6.1 - - - (0.7) - 5.4 - 5.4awardsReserves transfer - - (8.5) (158.2) - 166.7 - - - -Cost of share-based - - - - - 5.8 - 5.8 - 5.8paymentsNet increase due toshares held in ESOPtrusts - - - - 10.6 - - 10.6 - 10.6 Minority interests disposed - - - - - - - - (3.0) (3.0)Equity dividends - - - - - (4,208.4) - (4,208.4) - (4,208.4) At 31 December 2006 177.9 2,126.8 - - (5.4) (2,928.4) 2.2 (626.9) - (626.9) At 1 January 2007 177.9 2,126.8 - - (5.4) (2,928.4) 2.2 (626.9) - (626.9) Total recognised - - - - - 141.0 0.1 141.1 - 141.1income and expense forthe periodIssue of shares for 0.6 4.4 - - - - - 5.0 - 5.0cashShare based payment 0.1 0.7 - - - (0.8) - - - -awardsCost of share based - - - - - 1.3 - 1.3 - 1.3paymentsNet increase due to - - - - 0.1 - - 0.1 - 0.1shares held in ESOPtrustsEquity dividends - - - - - (54.1) - (54.1) - (54.1) At 30 June 2007 178.6 2,131.9 - - (5.3) (2,841.0) 2.3 (533.5) - (533.5) 12. Business combinations In the first half of 2007, the Group acquired the following interests with netassets at fair value of £6.8 million for a consideration of £59.0 millionresulting in goodwill on acquisition of £52.2 million. Interest Date of acquisition Paddington Casino Limited 100% 3 January 2007Sponsio Limited 100% 18 January 2007Keenan Sports and Leisure Limited 100% 28 February 2007Micheletto SRL 100% 27 June 2007 In the year to 31 December 2006, the Group acquired the following interests withnet assets at fair value of £19.3 million (including licences of £27.6 million),for a consideration of £28.6 million (cash paid of £26.0 million, with adeferred consideration of £2.6 million), resulting in goodwill on acquisition of£9.3 million: Interest Date of acquisition Harney Bookmakers Limited 100.0% 26 April 2006MD Betting Limited 100.0% 15 September 2006North West Bookmakers Limited 100.0% 29 September 2006Nuova Pianeta Scommesse SRL 51.0% 18 October 2006Mantovani SRL 100.0% 1 December 2006 13. Restatement of Segment information note and balance sheetreclassification for prior periods The allocation of shared costs has been adjusted in 2007 to reflect moreaccurately each division's activity. The segmental information for the year to31 December 2006 and the half year to 30 June 2006 have been restated to reflectthis change to reported profit and are shown in the tables below: Half year to 30 June 2006 Reported profit Adjustment relating Restated profit before taxation and to allocation of before taxation and non-trading items central costs non-trading items £m £m £m Continuing operations: European Retail 120.1 2.5 122.6eGaming 19.8 (1.3) 18.5Telephone Betting 16.6 (0.2) 16.4Other (1) 2.1 (0.3) 1.8Corporate costs (7.3) (0.7) (8.0) Total 151.3 - 151.3 Net finance income 4.1 - 4.1 155.4 - 155.4 Discontinued operations: 10.8 - 10.8 166.2 - 166.2 Restatement of Segment information note and balance sheet reclassification forprior periods (continued) Year to 31 December 2006 Reported profit Adjustment relating Restated profit before taxation and to allocation of before taxation and non-trading items central costs non-trading items £m £m £m Continuing operations: European Retail 212.7 4.1 216.8eGaming 47.0 (2.7) 44.3Telephone Betting 17.7 (0.4) 17.3Other (1) 5.9 (1.6) 4.3Corporate costs (15.2) 0.6 (14.6) Total 268.1 - 268.1 Net finance costs (21.6) - (21.6) 246.5 - 246.5 Discontinued operations: 10.8 - 10.8 257.3 - 257.3 (1) Reported profit was Vernons, restated is Vernons, Casino and Internationaldevelopment operations. In addition, the balance sheets for 30 June 2006 and 31 December 2006 have beenrestated for a reclassification of non-current liability provisions to currentliability provisions. Independent review report to Ladbrokes plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income and Expense and the related notes 1to 13. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority, which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLPLondon9 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ladbrokes Coral