Making Ladbrokes Favourite
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Annual report and accounts 2010 Making Ladbrokes Favourite Ladbrokes is the most recognised betting brand in Britain and offers an all-embracing range of betting and gaming services via its retail, digital and telephone operations. In 2010 we took £15 billion in stakes which generated Group revenues of over £980 million. We are investing for the future with six clearly identified critical success factors that will help to make Ladbrokes favourite. Retail .com Mobile Telephone For further information about the Group go to: www.ladbrokesplc.com Contents Overview KPIs financial and non financial Page 06 Overview Chairman’s statement Page 02 Business and financial highlights 02 At a glance 04 Chairman’s statement 06 KPIs financial and non financial 04 Business review UK Retail Page 08 Chief Executive’s review 16 UK Retail 16 review Business 17 Other European Retail Chief Executive’s 18 Digital review 20 Telephone Page 21 Regulation 22 Financial review 24 Risks and how we manage them 27 Fair Play – Corporate responsibility at Ladbrokes 08 Governance Directors’ report Governance Board of directors Page Page 30 Board of directors 32 Corporate governance 37 Directors’ report 39 Directors’ remuneration report 30 37 Financial statements 52 Consolidated income statement 102 Company balance sheet 53 Consolidated statement of 103 Notes to the Company financial statements comprehensive income 111 Statement of directors’ responsibilities in relation 54 Consolidated balance sheet to the Company financial statements 55 112 Independent auditor’s report to the members of Ladbrokes plc Consolidated statement of changes in equity 56 Consolidated statement of cash flows 113 Five year financial record statements Financial 57 Notes to the consolidated financial statements 114 Shareholder information 99 Statement of directors’ responsibilities in relation to the 115 Corporate information consolidated financial statements 116 Glossary 100 Independent auditor’s report to the members of Ladbrokes plc Ladbrokes plc Annual Report and Accounts 2010 01 Business and At a glance financial highlights Strong growth in Group operating profit(1)(2) (excluding High Rollers) in 2010 with double digit percentage increases across all trading segments of the business despite challenging economic conditions UK Retail Focus on instore management of machines drives improvement in performance and sets growth platform for Global Draw rollout Enhanced customer offer in Digital with launch of innovative betting apps for mobile devices: Sports Bet, Kick Off and Blackjack Enhanced business fundamentals with continued strong cash generation and significant reduction in Group net debt Resumption of progressive dividend policy with 2010 full year dividend of 7.60p which is 4.62p up on 2009 Net revenue(1) With over two thousand shops (£million) £976.6m across the UK the Ladbrokes +1.3% brand is a familiar one on 2009 £963.7m most high streets. Revenue is predominantly driven by 2010 £976.6m Over the Counter betting and gaming machines which are a growing part of the mix. Operating profit(1)(2) (£million) £202.3m + 2 0 .1% 2009 £168.5m 2010 £202.3m Group net debt Number of shops (£million) £492.0m -29.1% 2,098 2009 £694.2m (1)(2) 2010 £492.0m Operating profit Dividend £149.1m (pence per share) 7.60p +155.0% Amounts staked 2009 2.98p 2010 7.60p £11.7bn (1) Continuing operations excluding High Rollers. (2) Profit before tax, finance costs and non-trading items. Ladbrokes plc Annual Report and Accounts 2010 02 (1) Net revenue split 4 1 (%) 3 2 1 UK Retail 68% 2 Other European Retail 13% 3 Digital 17% 4 Telephone 2% Other Digital Telephone European Retail Overview We also operate retail estates Since the initial launch of the As one of the UK’s leading in Ireland, Belgium and Ladbrokes online service in bookmakers, Ladbrokes in Spain through our joint 2000, Digital has become an provides a broad channel venture Sportium which is increasing part of the profit offering which includes taking the market leader in Madrid. mix, accounting for over 30% bets over the telephone. of operating profit(1)(2) in 2010. We operate call centres in Our Digital offer now includes London and Kuala Lumpur not only the Ladbrokes.com as well as taking calls in 180 website but also our range of our UK shops. We also of apps for mobile devices: operate a telephone service Sports Bet, Kick Off for our High Rollers which and Blackjack. contributed operating profit(2) of £5.0 million in 2010 (2009: £66.9 million). Number of shops Net revenue split Number of telephone calls Sportsbook 38%, Casino 33%, Poker 11%, 589 Games 10%, Bingo 8% 5.0m Operating profit(1)(2) Operating profit(1)(2) Net revenue(1) £13.9m £62.7m £16.2m Amounts staked Unique active players(3) Unique active players(3) £821.0m 799,000 85,900 (1) Continuing operations excluding High Rollers. (2) Profit before tax, finance costs and non-trading items. (3) A player who has contributed to rake and/or placed a wager in the period. Ladbrokes plc Annual Report and Accounts 2010 03 Chairman’s statement Peter Erskine Chairman Dear Shareholder, Our Chairman, Peter Erskine, 2010 has been a significant year of change for Ladbrokes. looks back at the In April, following a thorough recruitment process with many high calibre candidates, we appointed Richard Glynn as the performance of the Group new Chief Executive of the Group. Aside from his relevant over the past 12 months online experience (after nine years at Sporting Index) and analytical skills, what impresses me most is Richard’s and considers how recent ambition and enthusiasm for the business. His desire to succeed and restore Ladbrokes to a position of leadership changes to the Board, senior within the industry is infectious. management appointments He has executed an honest, thorough and expeditious appraisal of the business. This confirmed that whilst our and a newly aligned brand remains amongst the best in the gambling industry operational structure, we have fallen behind the competition in areas such as position it for the future. technology and digital marketing. Strategy Over the next few pages Richard has taken a candid approach to discussing the challenges which the business now faces, as well as outlining how he and his team plan to overcome them. He has prioritised six objectives or ‘Critical Success Factors’ and the Group is now fully focused on achieving them. Organisational change To implement these changes effectively the management team has been restructured. This revised organisational structure addresses the historic lack of alignment in what had been an operationally siloed business as well as promoting a greater level of responsibility and accountability throughout. Offices have been consolidated with everybody moved to the head office at Rayners Lane, reflecting a one customer one company ethos. A number of new hires have been made to strengthen the existing team. Ladbrokes plc Annual Report and Accounts 2010 04 In August Gary McIlraith joined us from Alix Partners as The report on Corporate Governance is set out on Managing Director of Digital Channels, International and pages 32 to 36. During 2010 the Board has been applying Strategy. Gary’s expertise at delivering enhanced customer the principles relating to its role and effectiveness. performance in the highly segmented online environment This included taking a lead in Richard Glynn’s appointment, is particularly valuable in the rapidly changing digital age. reshaping the structure of the Board and developing the As a consequence of the restructuring and flattening new strategy for the Company’s long term success. of reporting lines, John O’Reilly decided, after a very successful 18 years, to leave Ladbrokes to seek Dividend new challenges. In line with our stated intention to resume a progressive dividend policy the Group will be paying a final dividend In December Stephen Vowles started as Director of of 3.75 pence per share taking the full year dividend to Customer Experience, a role which reflects the Group’s 7.60 pence per share. This dividend is approximately commitment to adopt a customer centric approach 2.0 times covered by underlying earnings, excluding the throughout its operation, offer and brand positioning. impact of High Rollers and the effect of the HMRC Stephen’s brand experience includes eight years with settlement in April 2010. Proctor & Gamble where he played a pivotal role in the launch of Nectar. The dividend will be payable on 1 June 2011 to shareholders on the register as at 25 February 2011. In February 2011 Nick Rust joined us from Gala Coral as Managing Director of Retail. He is a highly experienced retail Summary betting and gaming executive with a very good industry Within the context of a tough economic climate and reputation. This appointment has allowed Richard Ames a material organisational restructure, the continued to take up a key central role as Managing Director of commitment, enthusiasm and team spirit of people in Consumer Operations with responsibility for delivery of all parts and at every level of the Ladbrokes business cross-Group operations in areas such as technology, has been encouraging. trading and business intelligence. I am satisfied with the progress made during 2010. Finally, after 16 years association with the Group, Brian The business has delivered an improved performance Wallace, Group Finance Director, has advised the Board of (1)(2) with operating profit up 20.9% on last year driven by Overview his intention to stand down as a Director. Brian has agreed double digit profit growth across all divisions. The strength to remain in his role until late summer to help the change of the balance sheet has been enhanced by a 29.1% go as smoothly as possible. On behalf of the Board and reduction in net debt.