Ladbrokes PLC Annual Report & Accounts 2014
2014 saw the operational focus in H1 lead to improved performance in H2.
Ian Bull FCMA, Chief Financial Officer
Ian Bull FCMA
Chief Financial Officer

Financial review

  Year ended
31 Dec 2014
Year ended
31 Dec 2013
Revenue (excluding high rollers) 1,158.9 1,111.2
High rollers 15.7 6.5
Revenue (including high rollers) 1,174.6 1,117.7
Operating profit(1)    
UK Retail 119.3 133.9
Digital 14.0 8.2
European Retail 13.0 15.6
Core Telephone Betting 2.0 (1.6)
Corporate costs (22.9) (17.8)
Operating profit    
(excluding high rollers) 125.4 138.3
High rollers 14.2 5.9
Operating profit    
(including high rollers) 139.6 144.2
Exceptional items (74.5) (51.6)
Net finance expense(2) (27.4) (25.0)
Profit before tax 37.7 67.6
Income tax expense 3.3 (0.6)
Profit after tax 41.0 67.0


Revenue recognition - reconciliation to gross win

The Group reports the gains and losses on all betting and gaming activities as revenue, which is measured at the fair value of the consideration received or receivable from customers less fair value adjustment for free bets, promotions and bonuses. Gross win includes free bets, promotions and bonuses, as well as VAT payable on machine income.

A reconciliation of gross win to revenue for continuing operations is shown below.

  Year ended
31 Dec 2014
Year ended
31 Dec 2013
Gross win 1,262.7 1,194.8
Adjustments(3) (88.1) (71.4)
VAT(4) - (5.7)
Revenue 1,174.6 1,117.7

(1) Profit before tax, net finance expense and exceptional items.
(2) Includes £1.1m of exceptional interest (2013: nil).
(3) Includes free bets, promotions, bonuses, gross sales tax and other fair value adjustments.
(4) From 1 February 2013, VAT on machines was replaced by MGD which is included as an operating expense, rather than as a deduction from revenue.

The table below sets out the gross win and net revenue for each division.

    Year ended
31 Dec 2014
  Year ended
31 Dec 2013
  Gross win
Net revenue
Gross win
Net revenue
UK Retail 824.2 811.5 826.2 800.9
Digital 288.3 215.1 224.0 175.0
European Retail 122.9 122.1 130.9 128.8
Core Telephone        
Betting 11.6 10.2 7.2 6.5
High rollers 15.7 15.7 6.5 6.5
Total 1,262.7 1,174.6 1,194.8 1,117.7

Group revenue increased by £56.9m (5.1%) to £1,174.6m (2013: £1,117.7m). Excluding High Rollers, revenue increased by £47.7m (4.3%) to £1,158.9m (2013: £1,111.2m). The increase is attributable to the World Cup which contributed additional £23.7m, full year effect of Bookmaker and the Betstar acquisition during the year in Australia added £30.6m and continued strength of machines within the UK Retail estate with net revenue increasing £23.6m. This was partially offset by customer friendly results across all divisions, weakness in the horse product in UK Retail and a decline in Gaming within Digital.

Operating profit(1)

Operating profit decreased by £4.6m or 3.2% to £139.6m (2013: £144.2m).

Excluding High Rollers, operating profit decreased by £12.9m or 9.3% to £125.4m (2013: £138.3m) with reduced profits from UK Retail and European Retail, partially offset by increased profit in Digital and Core Telephone Betting. There was also an increase in corporate costs.

Corporate costs

Before exceptional items, total corporate costs increased by £5.1m to £22.9m (2013: £17.8m). The increase is primarily due to a higher share based payments charge and the 2013 comparative benefitting from a £2.7m credit from Hilton hotel guarantees.

Finance expense

Before exceptional items, net finance expense of £27.4m was £2.4m higher than last year (2013: £25.0m) mainly due to an increase in the net debt.

Profit before tax

The reduction in trading profits has resulted in a 5.9% decrease in profit from continuing operations before taxation and exceptional items to £112.2m (2013: £119.2m).

Exceptional items before tax

Total exceptional items before tax of £74.5m (2013: £51.6m) comprises the following:

  • £44.5m of asset impairments comprises £20.8m of shop impairment and £23.7m impairment of IT assets principally arising as a result of the decision to decommission a platform for desktop Sportsbook;
  • £30.7m loss on closure of shops in UK and European Retail;
  • £3.8m relating to early termination of contractual commitments within jurisdictions where we have closed our Digital operations in the year;
  • £0.5m of corporate transaction costs associated with the acquisition of Betstar Pty;
  • A credit of £(4.8)m in relation to the net curtailment gain on closure of the defined benefit pension plan to future accrual;
  • A credit of £(3.1)m relating to the re-measurement of the contingent considerations in relation to business combinations from 2013;
  • A profit on the sale and leaseback of freehold shops in the UK Retail estate of £(3.9)m;
  • A provision for potential European indirect tax liabilities of £5.7m; and
  • £1.1m within exceptional finance expense including £0.6m relating to the write off of arrangement fees asset following the re-financing of the Group's committed facilities and £0.5m interest on the repayment of output VAT on amusement machines to the HMRC.


The Group taxation charge before exceptional items was £5.6m. This represents an effective tax charge of 5.0% (2013: 5.1%). There was a tax credit of £8.9m in relation to exceptional items in 2014 (2013: £5.5m credit).


The Board announces a final dividend of 4.60 pence per share (2013: 4.60 pence per share) taking the full year dividend to 8.90 pence per share (2013: 8.90 pence per share).

The dividend will be payable on 14 May 2015 to shareholders on the register on 27 March 2015.

Earnings per share (EPS) - Group


EPS (before exceptional items and High Rollers) decreased by 13.7% to 10.1 pence (2013: 11.7 pence), reflecting the decreased profit before tax.


EPS (before exceptional items) decreased by 5.7% to 11.6 pence (2013: 12.3 pence), reflecting the decreased profit before tax. EPS (including the impact of exceptional items) was 4.4 pence (2013: 7.3 pence). Fully diluted EPS (including the impact of exceptional items) was 4.4 pence (2013: 7.2 pence) after adjustment for outstanding share options and other potentially issuable shares.

Cash flow, capital expenditure, borrowings and banking facilities

Cash generated by operations was £159.0m. After net finance expense paid of £26.4m, income taxes paid of £2.1m, £59.9m on capital expenditure and intangible additions, £10.4m spent on business combinations and £5.2m cash inflow from sale and leaseback of freehold properties; cash inflow was £65.4m. After dividend payment of £81.4m and other net cash outflow of £4.6m, net debt at the end of the period increased by £20.6m. The Group expects to invest c.£60m in capital expenditures in 2015 and for depreciation and amortisation to be between £80m and £82m.

At 31 December 2014, gross borrowings of £439.3m less the net of cash and short term deposits of £21.1m and bank overdraft of £(1.0)m resulted in a net debt of £419.2m (31 December 2013: £398.6m).

Going concern

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements.