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Preliminary Results Announcement

Preliminary Results Announcement. Year ended 31 December 2002 10 March 2003. Operating Highlights. Detailed Financials Outlook and Issues. Operating Highlights. EBIT (1) up 26% to £141.4m Further product/revenue diversification

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Preliminary Results Announcement

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  1. Preliminary Results Announcement Year ended 31 December 2002 10 March 2003

  2. Operating Highlights Detailed Financials Outlook and Issues

  3. Operating Highlights • EBIT (1) up 26% to £141.4m • Further product/revenue diversification • Encouraging income/cost movements post gross profit tax anniversary • (1) Pre exceptional items

  4. EBIT (1) up 26% to £141.4m Third consecutive year double digit growth (1) Pre exceptional items

  5. Further, significant, product/revenue diversification

  6. 135.0 130.0 125.0 120.0 Inflation Index 115.0 Gross Win 110.0 Index 105.0 100.0 95.0 Apr-00 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Jun-00 Jun-01 Feb-00 Feb-01 Feb-02 Dec-99 Aug-00 Dec-00 Aug-01 Dec-01 Jun-02 Aug-02 Feb-03 Dec-02 Favourable income/cost movements post GPT anniversary Total Group gross win versus inflation 21 wks Oct 6 – Mar 2 02/3 vs. 01/2 GW* + 17.7% Expenses* + 7.8 % * 13 weeks audited * 8 weeks mgmt accounts Index to 1999 = 100 Rolling 12 months

  7. Operating Highlights Detailed Financials Outlook and Issues

  8. Interpretation of Results 1H, 01 2H, 01 1H, 02 2H, 02 • Lost fixtures/weather • and Foot & Mouth • epidemic • 27 week period • Introduction of GPT • (6 October) • Favourable results (1Q,02) • Horseracing Levy based on 10% GP (April) • World Cup (June) • IPO (June) • Betting exchanges • Unfavourable horseracing results (3Q, 02) • Acquire H&K chain and Sunderland greyhound stadium (September) • FOBT rollout

  9. Summary of Financial Results: FY02 v FY01(pre-exceptional items) • Includes Casino drop and AWP cash-in-box net of VAT • Includes Casino drop and AWP cash-in-box inclusive of VAT • 53 week financial period

  10. Summary of Earnings and Dividends: FY02 v FY01(pre-exceptional items) • 53 week financial period

  11. Proforma v Actual Earnings: FY02 (pre-exceptional items) • Assumes average net indebtedness of £525m and an interest rate of 6.75% • Assumes an effective tax rate of 28% • Assumes 418.4m and 421.3m shares in issue for basic and diluted EPS calculations, respectively

  12. Analysis of Gross Win: FY02 v FY01 • Includes Traditional business, AWPs and FOBTs • Includes Sportsbook and Casino • 27 week financial period • Adjusted to eliminate effect of additional trading week in 2H,01

  13. Taxes and Duties: FY02 v FY01 (1) 53 week financial period

  14. Net Operating Expenses: FY02 v FY01 • Primarily central support functions and property costs • 53 week financial period

  15. Underlying Growth in Operating Expenses:FY02 v FY01

  16. Retail: Results FY02 v FY01 Growth rate (Y on Y): Gross win 0.5% Operating profit 20.1% • Benefit of GPT regime/recycling • Weak horseracing margins since Q2 02 coupled with unfavourable results in Q2/Q3 02 (normalised in Q4 02) • Strong growth in Numbers (e.g. virtual racing, FOBTs) and Football betting • Extended trading hours • 7 new licenses for LBOs and 61 other development actions • Acquisition of 40 LBOs Gross win Operating profit (1) 53 week financial period 2002 2001(1)

  17. Telephone (1): Results FY02 v FY01 Growth rate (Y on Y): Gross win 6.0% Operating profit 11.6% • 164,000 active customers (1 January 2002: 150,000) • 2001 adversely impacted by Foot & Mouth epidemic • Offshore business repatriated and gross win became subject to GPT and Levy • Call centres Leeds and Sheffield (opened Jan 02); Athlone closed April 02 • Good World Cup in Q2, 2002 • Unfavourable horseracing results in Q3, 2002 Gross win Operating profit (2) (3) (1) Aggregates onshore and offshore business (2) After repatriation provision of £3.1million (3) 53 week financial period

  18. Interactive (1) : ResultsFY02 v FY01 Growth rate (Y on Y): Gross win 55.1% Operating profit 122.8% Sportsbook • Increase in active accounts on Sportsbook site (31 December 2002: 130,000; 1 January 2002: 100,000) • Excellent World Cup • Continuing growth in the market, with the focus on the UK Casino • Increase in active accounts on Casino site (31 December 2002: 43,000; 1 January 2002: 35,000) • Cross selling to Sportsbook and Telephone customers Gross win Operating profit (2) • Sportsbook and Casino • 53 week financial period

  19. Cash Generation:FY01 v FY02 (Pre-exceptional items) (1) 53 week financial period

  20. Current trading • Gross win up 20% in the nine weeks ended 4 March 2003 compared to the corresponding period due to:- • Favourable sporting results • Introduction of FOBTs • Growth in Football and Numbers betting • Double digit growth in gross win across all three channels

  21. Operating Highlights Detailed Financials Outlook and Issues

  22. Fixed Odds Betting Terminals • 1820 installed, will be over 2000 by June • From inception, net profit/terminal/week averages £220 • Assume 50% of net profit substitutional - further research underway • Contractual terms improving • Gaming Board case – focus roulette • DCMS focus proliferation – terminals and products in 4/shop

  23. Horseracing Margins/Exchanges • WHAT’S THE PROBLEM • YTD book margin 118.7 vs. LT average 121.3 • - results & betting patterns determine actual margin • - recycling of ‘supernormal’ winnings unknowable • WHAT’S HAPPENING • 10% levy/data charge from 1 April • Application for judicial review denied • Increasing pressure on NJPC to enforce rules • Independent concerns re integrity issues • Potential tax will mirror levy on exchange layers

  24. Relationships with content providers • Greyhounds • * Brough Park and Sunderland give WH 15 % of BAGS fixtures • * 3 year BAGS contracts with seven tracks • * BGRB deadline extended • Horseracing • * Constructive collaboration on fixture planning • * Rule 14 expected soon

  25. Other key areas of focus ‘03 • Retail • Technology programme • Machine optimisation • Ongoing estate development • Telephone/Internet sports betting • Single account • Mobile • Targeted marketing • Alternative payment methods • On-Line Casino • Hosted poker • ‘Arcade’ • Supply chain

  26. Questions?

  27. Preliminary Results Announcement Year ended 31 December 2002 10 March 2003

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