Flutter Entertainment PLC (FLUT) 2012 Q2 法說會逐字稿

Good morning, ladies and gentlemen. You're very welcome to Paddy Power's 2012 interim results presentation. I'm joined by Jack Massey, our Finance Director; and also by Andrew Algeo, our Commercial Director; Andy McCue, who is Head of UK Retail; and Peter O'Donovan, who's the MD of Paddy Power Online.

Let me start by turning to the highlights on page 3. It's been a record first half for Paddy Power. Profit before tax grew by 21%, earnings per share by 25%, and the interim dividend by 30%. Growth in our existing businesses accelerated, with net revenue up by 29%, that's up versus 16% last year, and all of the Group's divisions achieving double-digit revenue growth.

New business development activity has also accelerated with the successful launch of our Italian Online operation in May, and three further new ventures we've been investing in, which will start contributing revenue in the second half.

So there's some key points which I'll be expanding on later in the presentation, but now I'd like to pass to Jack to talk through the financials.

Thanks, Patrick. So to start with, we've the consolidated P&L, whereas you can see we've strong double-digit growth in both revenues and profits. Euro 2012 increased the top line, but the overall bottom line wasn't boosted by year-on-year events' impact, after you allow for the marketing costs, to drive strong customer acquisition during that tournament. And separately, the adverse impact of weather-related cancellations in the period.

Performance was helped, though, by a stronger gross win percentage, and that compares to an 18% growth in Sportsbook amounts staked into 29% growth in Sportsbook net revenue.

Gaming, both online and on retail machines, of course, that doesn't benefit from a sports results impact. But it did achieve the same very strong 29% growth in net revenue.

Operating profit was up 13% in constant currency, or up 19% after the impact of the weaker euro versus sterling and the Australian dollar.

EPS growth at 25% was higher again, and that was with the benefit of the buyout of the minority interest in Australia, and a further reduction in the effective tax rate to 13%.

Finally, on this slide, you'll note that 30% increase in the interim dividend to EUR0.39 per share.

Moving on to look at OpEx, this was up 34% year on year, in constant currency, and the main components of that growth are split out on the bridge.

So firstly, we operated an average of 44, or 13% more shops, compared to the first half of 2011. Then the four new online ventures we've mentioned; they added EUR5 million of incremental cost. And then in the next box you've marketing costs, excluding those new units, which were up around 60% in constant currency.

And this broadly reflects the related 48% growth in online acquisition in the period. But we also made some longer-term investments in our brand, for example, during Euro 2012. And Patrick will take you through those investments and their payback in detail later.

Other variable costs also grew with that growth in customers and bet volumes. Our Online bet volumes have actually grown by around 50% in each of the last three years, and that means significant infrastructure development is periodically required to maintain availability, resilience, and capacity for further growth. And you can see that that spend is part of the next box.

In addition, we introduced a host of new and improved products, covering both online and mobile, including more betting events, more betting markets, new racing and football pages, and new gaming content.

Turning now to look at overall financial performance by division; you'll see the strong performance in amounts staked, with just Irish Retail registering the impact of the economic conditions with a small decline. While at the revenue level, we've strong performance right across the Group, with double-digit growth in every division.

Within operating profit, you'll note the impact of EUR6 million of incremental startup losses on the new ventures. That's within the Online ex Australia line, and that offsets similar underlying profit growth in that division. However, very strong profit growth in the other divisions yielded an EUR11 million increase in the Group's bottom line.

Now if we take a look at cash flows; as we've noted before, the Group is highly cash generative, benefiting, for example, from working capital inflows as we grow Online. And these inflows were boosted by the period end date falling during Euro 2012, when customer balances were higher than normal. Hence, our operating cash flow in the period of EUR97 million was 163% of reported earnings, as compared to an average of 134% over the last five years.

That operating cash flow was, as usual, used for both investments and increased returns to shareholders. Firstly, we spent EUR4 million on retail acquisitions. That was on deals done in the period, and contingent consideration on profitable deals done in earlier years.

Around one-third of the enhancement CapEx, the EUR15 million, was related to new retail units, with the balance driven by product enhancements, our new Online businesses, and infrastructure for increased headcount. These are all areas of continued investment which, combined with the impact of the weaker euro, will likely mean at least a similar level of CapEx in the second half of the year.

The final 2011 dividend per share, which was paid in May, was up 40% year on year to EUR34 million. And overall, then, that left a net cash position increasing by EUR50 million in the period giving the Group a cash balance of EUR186 million as of June 30, a position of strong financial flexibility.

I'll pass back to Patrick now for the operational review.

Thanks, Jack. Let me start on page 10 with the Euros, because every two years a football tournament comes along, be it the World Cup or the Euros, which presents us with a great opportunity to showcase the Paddy Power brand and the Paddy Power offer. And I think we succeeded as never before this June.

Money-Back Specials, our signature Money-Back Specials clicked in eight different matches, we refunded over EUR2 million to our customers, including Money-Back on two of the England matches. Our Euros app achieved 50,000 downloads. We drove a giant vuvuzela around the streets of Ukraine, Poland, England and Ireland. We erected Roy the Redeemer, down there in the bottom left corner, 100 foot statue on the Dover coast with Roy Hodgson's face to divinely inspire the England squad.

But the real crack started when Nicklas Bendtner's revealed his Paddy Power lucky underpants after scoring against Portugal. And our good friends in UEFA inevitably responded in a disproportionately excessive manner and, in doing so, created a global story for Paddy Power. It featured on 2,000 online news stories around the world that day, and it made Mr. Bendtner's lucky underpants the eighth biggest news story across the world on Twitter that day.

So the result of the Euros, for Paddy Power financially, EUR78 million of turnover, up by 164% versus the Euros in 2008, although the bottom line impact was reasonably modest, given marketing and customer acquisition costs. But much more than financially, many thousands of new customers came to Paddy Power, and the Paddy Power brand dominated consumer conversations during the tournament.

Let me look at the performance of each of the divisions, starting on page 11 with Online excluding Australia, which had a very good first half. Looking at the financial box on the left-hand side, underlying profit was up 10% to EUR42.2 million, although incremental operation losses of EUR6.3 million arising in our four start-up businesses, of which (inaudible) resulted overall in a EUR600,000 reduction in operation profit. Active customers were up 42% to just shy of 1 million active customers in the six months, further building upon the 48% growth in 2011 H1 and the 41% growth in the first half of 2010.

If you look at the different business components within Online ex Australia, betting there was very strong online betting turnover growth. Online bet volumes were up by 46%. Gaming and other revenue increased by 26% in constant currency, driven by strong growth in games, in casino, in bingo and B2B.

Mobile; mobile continued to be a key driver of our performance. As we've discussed in the past, mobile and tablets increase online adoption, they increase revenues per customer. In June, 55% of our online betters transacted with us via mobile, which is a significantly higher proportion than other industry operators.

And this positions us well for the future; mobile customers are tomorrow's customers. They are, on average, four years younger than other Online customers. And it's not just about mobile betting, it's about mobile gaming; mobile gaming continued its very strong growth trajectory, and I'll give more color on that later in the presentation.

And finally, our B2B business performed very strong. The PMU continued to grow its market share in the French online sports betting market in H1, and our B2B contract with British Columbia Lottery Corporation in Canada went live last month.

Our other Online business is in Australia where we invested very heavily following the buyout of the minority shareholders last year. We invested in a new technology platform, new marketing assets, in our mobile products, and in increased recruitment. And as you can see from the financial box, these investments have clearly paid off. Our Australian division generated strong profit growth, 24% in constant currency to EUR13.2 million.

In local currency, amounts staked grew by 24% Online. Online net revenue growth grew by 42%; Online active customers were up by 37%, so strong growth figures at the top line. The gross win percentage in the Sportsbook increased markedly from 7.4% last year to 9.1% this year benefiting both from favorable sports results, but also some structural improvements by dint of the investments we've made.

The mobile marketing is also very interesting in Australia; the Australians are consistently aggressive late adopters of technology. They now have the highest penetration of smartphones in the world, and 2.6 million tablet users. That 2.6 million of tablet users is forecast to grow to 11 million by 2016, which is enormous in the context of a total population of less than 23 million people.

Our Mobile turnover increased 17-fold to EUR136 million, or 21% of Online stakes and by June, 51% of our Online customers were transacting with us via mobile.

As is the case with paddypower.com we have built a great position in a very attractive market, and we will invest and continue to invest behind it. We now employ 340 staff in Australia; that's up from 250, so an increase of 90 staff in the period since the buyout last year. We've opened an office in Sydney to both access more pools of talent, but also support a focus on the New South Wales market.

Turning on page 13 to Retail; both our Irish and UK Retail businesses are uniquely well positioned in their respective markets. Irish Retail operating profits rebounded strongly, up 79% to EUR9 million, a result of the return to a more normal Sportsbook gross win percentage.

At the top line, our Irish shops are busier than ever; like-for-like bet volumes were up another 5%, although the recession continued to impact average bet size, average stake per bet, which was down by a further 7% in the period. So total amount staked down by 3%.

We continue to invest in products; for example, we rolled out our own virtual product channel in all of our UK and Irish shops in the first half, and we continue to choose our shop locations very carefully. In the last four years, we've opened 23 new units, including one in the first half of 2012, and we've closed none.

Turning on page 14 to UK Retail; another strong increase in profitability with operating profit up by 48% in local currency to EUR7.6 million, and 23 new shops opened so far this year. The consumer environment in the UK remains tough, but we continue to offer our customers better value. We're the only bookmakers in the UK to offer the same odds in shops as Online. Better product; we lead the market in self-service betting terminals with a machine in all of our shops in Great Britain for over a year now, and a better environment. Our shops are newer and better invested than the rest of the market. And also, as our estate is newer, it has been located to attract today's customer and tomorrow's customer rather than the customer mix of 20 or 30 years ago.

And on the back of those benefits, and the continuing growth in our brand in the UK, we grew the top line. We grew like-for-like net revenue by 10%. And that top-line growth, coupled with continued tight cost management, and also the success of our new openings, drove the 48% growth in operating profit.

On page 15, we're providing an update on how the investment strategy is working, and the scope for future growth. Box 1, our shop performance has never been better. The average EBITDA per shop was GBP73,000 in the first six months, which is very strong in the context of capital costs per new shop; in the first half, GBP327,000, or if you take out the acquired units, GBP255,000.

Our outperformance versus the competition is increasing, as you can see in the second box. What this box shows is our sports stakes per shop and compares them to the average of our quoted competitors. And you can see that, in 2009, our shops were turning over 71% more than the average of our competitors, which wasn't shabby, but by 2012 that had grown to 92% outperformance.

Our rollout has accelerated. With development teams across the UK we will open, on average, close to one new shop per week this year in the UK. And yet, given the relatively small size of our estate with some 2% of the market, there remains a lot of future potential.

The final division is our Telephone division on page 16, which grew its turnover strongly in the UK, more than offsetting the impact of competition from the Internet, and the downturn in Ireland. In constant currency, amounts staked increased by 25%. Operating costs grew as a result of top line growth, but not to the same extent as top line growth. And, as a consequence, profits grew strongly to EUR1.3 million.

On page 17, the online global betting and gaming industry is becoming more regulated and more taxed, which presents opportunities and threats for Paddy Power. If I work through the different geographies; in the UK, the Government confirmed that it intends to move to a point of consumption tax, which it currently expects to implement in December 2014. We were encouraged by the report of the Culture, Media and Sport Committee last month that suggested, and I'm going to quote this, the Treasury still needs to work with industry stakeholders to establish the correct level for online gambling taxation, taking into account the need to encourage companies to accept UK regulation and taxation, and to discourage the formation of a gray market.

In Ireland, the legislation was published last month which will facilitate the extension of the 1% turnover tax across all channels. And the same Bill will also give us the option of opening our shops until 10 pm throughout the year during the winter, irrespective of whether there's an evening Irish race meeting.

In Australia, as a result of the Racing New South Wales case, there will be some upward pressure on product fees, although the impact of higher fees is more severe on lower margin operators, which suggests possible market share gains for us to somewhat mitigate the impact.

Also in Australia, the interim report of the Interactive Gambling Act Review was published in May. Its recommendations were positive. They included the regulation of online betting in running, a five-year trial of online tournament poker, and increased enforcements against unlicensed offshore operators. That's the interim report. We await the final report. It's due imminently, but we have been disappointed with some of the political reaction, and we think that makes changes less likely in the short term in Australia.

In Italy, the opportunity has become more attractive since our launch with the announcement both that slot games would be permitted from December, and the range of sports betting products that is allowed would be extended also. And I'll come back to those themes.

In the USA, a number of individual States are actively exploring the legislation of some forms of online gambling. And we successfully secured a Preliminary Finding of Suitability from the Nevada Gaming Commission last month.

So in summary, some positives, some negatives and, in all cases, some of the very best people in the Group working to optimize the outcomes for Paddy Power.

So that's a run through operational review, and also tax and regulatory developments. I'd like to turn to strategy and outlook and give a feel for a number of things. Firstly, the positive dynamics in some of our key markets. Also, the investment we continue to make to grow our scale. And, importantly, the payback that that investment is delivering.

So if I start with the market dynamics in the UK online betting market. That market continues to grow strongly. As you can see from box 1, regular bettors, those who bet at least once a month, were the core of this market, grew by 15% in the 12 months to March, following 14% growth in the 12 months to March 2011. And that will have kicked on again with the European Championship.

The second box shows how Paddy Power continues to grow its share of customers in that growing market. We have significantly outperformed the market in the last two years. So in March 2010, 17% of sports bettors were active in paddypower.com; by March 2012 that had grown to 34%. That's customer numbers.

But in addition to growing our share of customers, our number of customers in a growing market, we also continue to increase the share of the wallet of each individual customer. And this is a direct result of our investment in product including mobile, in value, in brand, and a very targeted online marketing expertise that we've built for both acquisition and retention. And, as you can see here, our share of customers' betting wallet increased from 44% in H2 last year, to 46% in the first half of this year.

So in summary, lots of opportunity for the growth for the Group, and, if you like, growth, upon growth, upon growth.

The dynamics in the Australian online market, on page 21, are also very attractive. This market is growing strongly, and Sportsbet is growing fastest of all, with 37% online revenue growth in the last 12 months. Our approach has always been to build strong positions in structurally growing markets, and invest heavily behind those positions.

Australia Online is another example of that. We're investing in aggressively expanding the team, as I mentioned earlier, in product, mobile has been a big success for us, in value, and in brand. And on the theme of brand investment, as you can see on the right-hand side, we now have the leading awareness of all online betting brands in Australia.

So those are the positive dynamics in a couple of our key sectors. Let me talk about the investments that we are making in those and other sectors. And let me start with our investment in people, which has been enormous. For example, the number of employees working in Online & Technology has more than doubled in Paddy Power in the last two years, from 379 in June 2010, to over 800 by June of this year.

Our top line in Online, Online bet volumes, Online customer numbers, Online turnover, has actually grown by more than that. And that growth both necessitates, but also provides return for the sort of investment you see on the page here. As a substantially larger business, we need to keep investing in our technology platform and expertise. Whilst the enormous increase in customer numbers merits more segmentation, and more specialist teams, focused on emerging e-commerce areas such as mobile marketing, social media, and display marketing. We have, for example, 67 people dedicated to online acquisition and life-cycle analysis today. That number of 67 people is up from 15 people two years ago.

Our Group headcount has grown from 1,500 in 2006 to 3,500 today, with significant international growth. And so far this year, we've opened offices in Rome, in Sydney, and are establishing a presence in New York, which points not just to the geographic growth of the business, but also the additional pools in which we can find talent for the Group. And we are more than ever convinced that having the best people in the sector is the single best lead indicator of future outperformance. And that is how Paddy Power will continue to outperform.

Another consistent area of investment for us is value. We've always had a very strong and distinctive value offer for our customers. And value for us is so much more than the price you offer and how competitive an individual price is. It's about justice payouts. So when the local hero, Adam Scott, blew the British Open by giving up four shots in the last four holes, Sportsbet immediately refunded losing bets on him. It's about extra places, like the seven places in the British Open, six places in the Masters.

And most of all for Paddy Power, it's about out signature Money-Back Specials, which we have stepped up recently as they are a clear differentiator between Paddy Power and the rest of the market. We offer big, generous specials in all the major events. In Cheltenham, Sprinter Sacre cost us EUR3 million. In the Champions League Final, Chelsea cost us over GBP1 million. In the Masters, and as mentioned, we had eight Money-Back Specials click during the Euros.

On page 24, another area of investment for us is our brand. Our brand remains the most distinctive part of our offering, and the most difficult part for a potential competitor to replicate. And consumer feedback consistently is that it's the only brand in the sector with a real personality. You don't see from Paddy Power too many plain vanilla race sponsorships or event sponsorships.

We want our marketing dollar to really show the personality of the brand and the difference of the brand. And that comes from our stunts, from the Uffington Horse stunt, for example, or it comes from our TV ads, which have built, as you can see on the page, enormous followings online.

Another area of investment for us is our new ventures. Italy, as we've discussed before, is the biggest gambling market in Europe, although online is still a small proportion.

We went live with our Italian Online Sportsbook in mid May, and our positioning in Italy is the most innovative provider in the market; most innovative product, most innovative mobile offer, the most innovative value offer, most innovative brand, most innovative use of social media and the most innovative customer service.

And we are very happy with early progress. We achieved a 4% share of the market in the first full month of operation in June, which, as a predominantly football customer base, we expect to reduce somewhat in July and August during the off season, but that was ahead of our expectations.

And our early experience suggests that our initial hypothesis, that there is a strong appetite amongst Italian consumers for a disruptive, engaging betting brand is correct.

We have a team now of 65 people full time on this business, including 25 in our office in Rome. And whilst there remains an enormous amount to do -- we've only just started here -- our early progress has been encouraging and we, therefore, intend to invest most substantially behind the business.

We went live, for example, last week with a national television advertising campaign in advance of the start of Serie A at the weekend, which we ran across, and will continue to run across, seven national TV channels.

And, as we did in the UK, we're incurring cost to build a brand for the future, following the insights from our 18-month evaluation prelaunch and, indeed, our learnings since launch.

We expect strong growth in Italy to continue next year from both customer acquisition, but also incremental product introductions, so Casino, Bingo, Poker, and we expect to reach break-even before the end of 2014.

I mentioned briefly earlier, but to give more color on it, in addition to an encouraging trading start, the market structure continues to improve with the introduction both of slots and a broader palinsesto, a broader betting product offer, since we launched.

Slots, online slots, are particularly important, given the enormous size and popularity of offline slots in Italy. So offline slots account for more than half of all the gambling revenue in Italy with 360,000 slot machines.

A broader betting product will also enable the introduction of novelty bets, which will further enhance the Paddy Power brand. That's something we do very well. And it will enable the introduction of secondary sports markets which will play to the proprietary models that we have built here in Dublin.

We are, on page 26, we're making substantial investment in new product, and quite an amount of that new product is targeted at the online games and casino market. So let me give some context for that.

The growth in the UK online casino and games market has actually been even stronger than the online Sportsbook in recent years. So as you can see from box 1, the number of online casino players has grown from 556,000 in March 2010 to 806,000 by March 2012, so 45% growth.

And we in Paddy Power, as you can see in box 2, have experienced very substantial growth over the last number of years, with 43% revenue growth, on average, in the UK over the last three years, consistently increasing our market share. And yet, we remain one of the very few operators whose online Sportsbook revenues still exceed its Gaming revenues.

Mobile casino and games are showing very rapid penetration, even faster than mobile sports betting. We launched a mobile casino offering in May, and if you look at box 3 in the bottom right corner here, the shape of the red curve -- the red curve is basically our mobile casino revenues as a percentage of our total Casino revenues, and the shape of that curve, it shows it growing at a pace in the first few months. That's way ahead of any of our other mobile launches, even with only nine games.

And the reasons for such fast growth include that Casino is well suited for the short time-killer sessions common to mobile usage. It's a single-player game and, generally, it's a relatively simple interface.

So we see very substantial potential in e-gaming and mobile e-gaming, and that supports the investment we're making in our Roller and Cayetano new ventures, and let me talk about those new ventures as well as BetDash, on page 27.

These are three new ventures which we've been planning for some time and which we invested resource in heavily in H1. And they will start to contribute in H2.

Just working my way through them; Roller, for the reasons I touched on, on the previous page, we felt for some time that mobile is a particularly strong opportunity for online casino, and we've been researching the opportunity for the last 18 months. We started up at the end of last year and we have developed, with a third party, a very distinct differentiated product, primarily for Apple devices and the app store, rather than mobile web.

The product will have very high quality immersive features, including graphics and music and, as you can see in the screen grab here in the top right corner, launch your own roulette ball.

We would also have an equal focus on iPad, as iPhones. iPad users expect more than an enlarged version of an iPhone app and they're not getting that to date, but they will through this product.

We know we need, and should be targeting, direct acquisition and not just a cross sell to the existing Paddy Power Sportsbook customers. And customer research shows that Paddy Power, in common with other Sportsbook operators, is not seen, rightly or wrongly, as a casino specialist.

So we will launch a new brand, Roller, which is a premium brand, but what it will be a premium product for premium Apple devices. The target customer base is in the sweet spot of ABC1 males, of which there are 13 million in the UK, iPhone/iPad users, of which there are 7 million, and online casino users, of which there are 800,000. And the sweet spot, the intersect between the three, is around 250,000 potential customers, and that is our target market. And we expect to go live very shortly.

BetDash; we've been thinking about the intersection of social and real money gambling for the last number of years. Social, as everybody knows, is a very big market. It is growing fast, and it's a complementary demographic to real money gambling. So for example, 75% of the players are female; 85% of the players are over the age of 30.

BetDash was an early-stage startup which we acquired in 2010 to incubate within Paddy Power. And it combines the ingredients of a successful social game with a real online Sportsbook experience. So players buy in with real money. They get a virtual bankroll of GBP100,000. They have to turn that into GBP1 million within a predefined period by betting on actual sporting events.

And it's designed also to be more fun with friends, so it has a lot of social features to drive that community feel, so there's leader boards and [coupling] bets and challenging bets, and forming groups and commenting on bets.

We launched a beta version of BetDash last year. The product is live, but it will move out of beta and fully launch with a marketing spend behind it in quarter 4.

Cayetano, the third new product on the page; Cayetano was bought, as you know, at the end of last year. It's an online games development firm. The rationale for that investment was differentiation for Paddy Power by developing proprietary online and mobile content.

The first games went live from Cayetano last month, with an encouraging performance so far. Our headcount in Sofia now stands at 57, up from 32 when we acquired the business. We have recently hired a team of 10 mobile developers.

We currently have six mobile games in development and, over the coming months, our mobile output will increase to that of our desktop pipeline, so two new games, two new mobile games, per month in addition to two new desktop games per month.

And Cayetano will also provide us, in the next few months, with some social free-to-play slots with, again, the typical social features built into that.

So the common themes for those three investments, the strategy and rationale for each of those businesses, are very consistent. They deepen our mobile presence, they expand our social expertise, they increase the proprietary technologies of the Group, and they continue to differentiate Paddy Power.

So we're investing very heavily in very attractive markets, and it's key for us that we get, and continue to get, payback from that investment. And, as you can see on page 28, we are getting that payback.

So customer acquisition, a forerunner of future growth, continues to accelerate, as you can see in the first two boxes on the left. In paddypower.com we had acquired more new customers by early August than in all of last year.

In both Australia and the UK our Online customer base in its totality has grown substantially and consistently over the last four years, as you can see from the middle boxes, whilst, on the right-hand side, our bet volumes in paddypower.com have grown by 230% since 2009, with Australia increasing by almost 200%.

On page 29, on the theme of payback, the payback isn't just financial. The payback also comes from growth in followers of our brand, and it comes from the distinctiveness and the increasing distinctiveness of our brand.

So the two boxes on the top here, our Facebook and Twitter followers, they have increased almost 10-fold in the last 12 months. And we now have a 43% market share in Facebook and a 35% market share in Twitter versus our next four competitors combined.

Why is that important? Well, every man over the age of 18 in the UK on Facebook, of which there are over 13 million, every man over the age of 18 on Facebook in the UK is now connected to at least one Paddy Power fan. So we now have the capacity to target every one of those 13 million men in the UK on Facebook via a friend of theirs directly.

But it's not just our size, it's our distinctiveness, as exemplified by the box in the bottom-left corner, our engagement rates. So our engagement rates on Facebook, for example, is defined as the proportion of our followers, not just the absolute number, but the proportion of our followers who like or comment or share each post. This, for me, is one of the outstanding achievements, or representation of one of the outstanding achievements, in the first half of the year.

So across the Euros, our engagement rates were spectacular. They were significantly higher than not just all of our competitors' [rates] but they were significantly higher than all of the global brands who sponsored the tournament.

And our total share of voice, not just the rates of engagement, leads all of these brands also. So the graph on the bottom right shows how often, how many times, Paddy Power was mentioned online in tweets, Facebook, blogs, online chats, relative to all those other brands, relative to Nike and relative to McDonald's and Umbro and Orange during one of England's matches.

So I said earlier that we dominated the consumer conversation during the Euros. I think this is one of the charts that demonstrates that.

So in conclusion, net revenue, I mentioned at the outset, grew last year by 16%. In half 1 this year, that rate had almost doubled to 29%. The Group is performing very strongly. Mobile is flying, social is flying, our brand is stronger than it ever has been. There is strong momentum in every division, as you can see on this slide, on the left.

Our expectations for the full-year outcome for our existing businesses are ahead of the expectations we had at the AGM in May and we are, in turn, investing at an increased rate in our new ventures, most particularly in Italy following a strong start. The second half has started well, and for all these reasons the Board remains confident in the Group's prospects, both for the remainder of 2012 and, indeed, beyond.

So ladies and gentlemen, that concludes the presentation of the results. There are a number of people in the room, there are a number of people on the phone; we're very happy to take Q&A and we will start with the room here. We have a microphone, so if anyone would like to ask a question, you can put up your paw and we will get a microphone to you.

Gavin Kelleher, Goodbody. Just a couple of questions from me. First of all, in terms of the H2 performance, can you give any color by division in terms of margin and underlying?

And in terms of the new investment, can you give some expectation on how you expect net revenue to build in H2 this year into next year if you can, particularly around Italy?

And in terms of Ireland and Irish Retail, will the extended opening hours have any significant benefit?

So net revenue build I'm going to let Jack deal with. H2 performance -- margin in H2 sports results. Sports results since our AGM in the middle of May, between then and the end of May were below our expectations. So for example, we refunded GBP1 million on Chelsea winning the Champion's League, and racing results were poor.

But to your question, that has been broadly offset by sports results in gross win margin in H2 to date, and Goodwood was okay-ish, but Galway was better than usual. The football has started pretty well, unfortunately from a Liverpool supporter's perspective. And the principal blot on the landscape for sports in H2 has been Rory McIlroy winning the PGA.

In terms of the opening hours, we expect this to, obviously, come in for its full year effect in 2013. We think there'll be about 20 evenings that we will open that we wouldn't have otherwise opened. And we think, when you take betting tax and additional costs with it, we think it'll probably have a contribution about EUR1 million extra [on that].

Jack, the question on investment.

Yes, Gavin, in relation to net revenue expectations for H2 from those new ventures, I wouldn't expect it to be material, obviously in the context of the much larger established business that we have online. And particularly when you allow for the fact that, of course, we're offering signup bonuses for any of those ventures, that means they're not prone to preset costs that get deducted from net revenue.

So we certainly highlighted we expect all those businesses to contribute net revenue in the second half of the year, but because of the much more material nature of [the existing Group] it's not going to really affect your top line percentages materially. It's much more at the bottom line, where we're investing and adding material investment for the Group. And I think it's consistent with the attractiveness of the opportunity that that will provide.

Gerard Moore, Merrion Capital. First of all, you detailed there very well how the additional investment that you're making in the brand right across the offering and how, to a certain extent, that [held down] profitability in the first half of the year. And I guess this is going to be a long-term investment and part of the story for some time.

But would you expect a similar type of impact in the second half of the year, or will there be some kind of phasing and maybe in the second half of the year we will get some kind of a break in that investment before it comes back next year?

Secondly, then, just on the Italian market. You've already got 4% market share; could you give us an indication, maybe, of where you'd expect that to be in a year's time, or further out, if you have any specific targets there? And that's it, thanks.

In relation to Italy, Peter do you want to comment on it?

Yes. In terms of our market share aspirations, not to mention obviously we were very happy with our start to our first full month of operation reaching 4% market share, our expectation, given that we have acquired a very football-reliant customer base, is that we will [command] that 4%.

Our medium term goals, in terms of market share, are to get to the same market share that we have in the UK, so it's getting up to 10% to 15%, dependent on our success and the nature in which we invest. That will take place over the next two years, but at the moment our focus isn't necessarily on market share.

It's on rolling out our product offering, so we have to complete our rollout of our full product suite. So regaining products, we expect all of those to be fully available by the second half, or by the end of the first half of next year.

We continue, as Patrick mentioned, to invest in brands, in terms of creating brand awareness driving customer acquisition, and also driving home our value proposition as well, around pricing, around Money-Back Specials. And ultimately, given that we're only a couple of months live in Italy, we'll see the extent of those levers of success that we proved in the UK, prove to affect similarly our market share in Italy.

So in terms of marketing, yes, in the second half of the year all other things being equal, we'd expect to have less marketing expenditure. You don't have the Euros and overall, in that existing part of the Online business, we could expect to see EBIT margins improve.

On the other hand, of course, as you've highlighted, we've the new business activity that's been ramped up, given the encouraging performance at this early stage in Italy, and the other [ventures] that we're adding. So overall, we'd expect those two effects to fairly offset each other, and our expectations haven't changed significantly for the Online business overall in terms of its profitability in 2012. And that's, as I say, notwithstanding the significantly increased investment in future.

Okay, if there are no other calls in the room, if we can go to the phones. Are there any calls coming through from the telephone?

(Operator Instructions). Matthew Gerard, Credit Suisse.

Two from me. Firstly, in Australia, how much of the gross win margin improvement was results related and how much was structural? And following on from that, what are the reasons why Australian gross win margins can be maintained above the long-term average of the UK and Irish Sportsbook, so what are the factors behind that, because I guess that's what you're guiding to now?

And secondly, can you give us an update on your thoughts on Spain? I know there's a holding website up at the moment, but has there been any progress about how you plan to approach that market? Thank you.

So Australia, the reasons for the improvement in gross win, as I mentioned during the presentation, are both structural and results based, so we went from 7.4% to 9.1%. The structural reasons are that the proportion of the business that's Online is growing, versus the Telephone business and the Online margin is higher.

Mobile is growing, which is contributing to a little bit of an uplift in margin. We've invested in the OpenBet platform, which number one, allows more multiples; number two, gives us a much better view of the overall risk position.

And we've invested very substantially in Paddy Power [SB] so we have 18 or 19 people with 110 years of combined experience, who are in Melbourne today who have worked in Paddy Power with 110 years [within] Paddy Power. So that's what's led to a view that structurally the 7.8%/7.9% margin that we thought we would achieve in Australia may be something close to 8.5%.

Obviously in relation to the United Kingdom, the market is very different. The racing product is very different, the pools are very different, the offering that we have is very different. So the margins in Australia are very slightly higher than what we expect margins Online to be.

Also, I would say that there's not betting in running in Australia, which our betting in running I think is a very, very respectable margin. But net net for the industry betting in running tends to drag the average down very slightly. And as I said, so far we have no betting in running in Australia. Andrew, in relation to Spain?

So in relation to Spain, we were successful in applying for a license there while we carried out a detailed analysis of that market last year, looking both at the structure of it, but also crucially, under the new regulations, what the likely market size was.

We decided not to launch as the market opened just now. It would be fair to say that we still have our options open there, and [we're] not going to open immediately.

Okay, thank you.

There are no further questions at the moment from the phone lines.

Okay, well, ladies and gentlemen, thank you again for joining us. You know where we are; you have our numbers, and we're very happy to discuss any components of the results in any further detail with you. [Just reach out]. Thank you again.

Thank you, ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.