Flutter Entertainment PLC (FLUT) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Paddy Power interim results hosted by Patrick Kennedy. My name is Emily, and I'm your event manager. (Operator Instructions).

Now, I would like to hand the call over to Patrick. Patrick, please go ahead.

Ladies and gentlemen, good morning, and welcome to the Paddy Power 2014 interim results presentation.

I'm joined by, from right to left Jack Massey, our Director of Finance & Company Secretary; and Cormac McCarthy, our Chief Financial Officer; Andy McCue, Head of Paddy Power Retail; and Peter O'Donovan, Head of Paddy Power Online.

Let me introduce the presentation with the highlights, and then pass on to Cormac.

The Group had a strong underlying performance in the first half, with accelerating top line momentum.

Sportsbook stakes were up 17% with double-digit growth in every division. There was standout growth within online, paddypower.com sportsbook acquired more new customers in the first six months, than in all 12 months of 2013. While Sportsbet, in Australia, grew its new customers and grew its profits by over 50%.

Our successful World Cup campaign showcased the strength of Paddy Power and Paddy Power's proposition, Paddy Power was ranked the 7th highest brand globally for social mentions, and we generated almost EUR200 million of stakes, which was 130% higher than the 2010 tournament, with almost 150,000 new online customers acquired.

Revenues in the first half increased by 7%, but the sports results were very much in favor of the punter. As a result of that swing in sports results, operating profits decreased by 14%.

But we're increasing the interim dividend by 11%, reflecting the strong underlying performance. We also intend to further increase cash returns to shareholders by recommencing share buy backs.

The second half has started well, and with favorable sports results to date revenues in the second half have grown by 45% versus the same period last year. For the full year overall, we expect mid-teen percentage growth in earnings per share.

So I'll talk later about the drivers of this growth and about our positions within each of our markets, but let me now pass over to Cormac to review the financial and operational performance of the first half.

Thanks, Patrick; good morning, everybody, and thanks for joining us today.

As Patrick has said, the first half of 2014 has gone well at the top line, with sportsbook stakes up 17%, and gaming revenue up 23%.

As has been well trailed, the sector was significantly impacted by adverse sports results in the period, with own gross win percentage 1% below the rate which we normally expect, and which we achieved in the first half of 2013. The gross impact of this was EUR34 million, and that's before any customer recycling of winnings and related reductions in costs.

Our successful drive in football and multiples led with our favorites pricing and accumulator bonuses coincided with great results on favorites and multiples for punters in weeks two and weeks 12 of the year, and probably disproportionately affected us.

Our football multiples as a percentage of total non-betting-in-running increased from 44% to 48%, compared with the first half of 2013.

Given the strength of racing within our business mix, about 50%, we also took a significant EUR14 million hit in the period between the date of our May IMS when we last addressed the market and June 30, driven largely by Epsom and Ascot.

Sports results will go for and against bookies, and in the second half of the year so far EUR11 million of that impact has reversed. This together with our experience and detailed analytics reinforces our confidence in our long-run gross win percentage expectation of circa 10%.

The weakness in the Australian dollar and sterling versus the euro during the period impacted earnings by around EUR6 million.

Our effective tax rate of 13% is in line with last year.

Our interim dividend of EUR0.50 is up 11% on 2013, reflecting, as Patrick has said, our confidence in our underlying performance.

Turning on slide 6 to our divisional breakdown, you can see we had strong double-digit stakes growth in all of our divisions.

While I gave you a Group picture of the impact of year-on-year sports results earlier, things can be quite different within individual divisions, depending on their mix of business.

For example, the Australian year-on-year picture was very good, with favorable sports results in the first half of 2014, as compared with adverse sports results in the first half of 2013.

While online, excluding Australia and our telephone businesses, had the opposite experience, and their profit reductions offset the profit growth in retail and Australia.

Operating cost and EBIT margin trends have, of course, been affected by these results, both lowering net revenue and lowering cost growth.

However the underlying trends and costs remain as we've set out before, whereby we are seeing upward pressure on OpEx as a result of increased complexity from mobile; market media inflation; increased competition for new customers.

On the other hand, we are also generating downward cost pressure through, for example, scaling efficiencies and our online marketing capability, coupled with our distinctive brand personality. Patrick will talk about this later on with specific reference to the World Cup.

Overall, if we put aside gross win percentage changes, and compare paddypower.com's lower EBIT margins now versus 2010, its increased marketing and promotional costs due to TV spend and free bet costs, which have driven the change.

A well-enforced point of consumption tax regime may give some opportunity for this to unwind in future years.

I'll now go through each division in turn. Firstly, on slide 8 (sic) turning to online ex-Australia; this includes our paddypower.com and Paddy Power Italy businesses, as well as our B2B activities.

Underlying growth was very strong with sportsbook amount staked up 22%; active customers up 21%; and new customers acquired up 33%.

The strength of that acquisition performance manifested itself in free bet costs, where acquisition free bets are the main component. We also switched more of the value we offer customers into free bet offers enabling us to market even more compelling specials.

Just a note to those of you who pay attention to these things, you'll see in our statement today an appendix, which increases the disclosure in response to some queries we have; so there's more data there for you to chew on.

Mobile continued to drive growth with almost three-quarters of our customers transacting via mobile in June. We also had good gaming revenue growth of 15%, driven by mobile and proprietary content.

In the period, 34% of gaming revenues came from mobile devices and over a quarter of our games channel revenues were from games developed by our Bulgarian development center.

Overall, paddypower.com sports top-line performance accelerated substantially, with 44% growth in new customers; 24% growth in actives; and 20% growth in stakes. Patrick will take you through some of the drivers of this accelerated growth later on.

Our Italian business made good progress in the period. Net revenue increased by 126%, or some EUR4.5 million (sic - see press release, "EUR4.6 million"), with cost of sales as a percentage of net revenue falling 26% and operating cost growth slowing to 20%.

This performance has been driven by strong execution, with growth in the market slower than we had expected. We now anticipate continued substantial growth in net revenue; improved conversion at a gross profit level; and flattish operating cost growth to drive ongoing improvements to the bottom line, with the business now expected to move into profitability during 2016.

Our three B2B deals continue to perform strongly and the initial six month trial for the three-year deal with Nike in Slovakia has now been successfully completed.

On slide 8, turning to Australia. Our Australian business is having another standout year, growing its net revenue and operating profit by 32% and 57% respectively. This has been delivered despite the increased competitive intensity we've seen in the market. We continue to take market share with our online stakes up 23%; net revenue up 33%; and active customers up 44%.

Mobile growth was particularly strong, with mobile stakes up 72% to almost half of online stakes in the period, boosted by our in-house developed smartphone and tablet apps.

Betting-in-running is still not allowed online in Australia, but grew strongly on the phone, delivering an increase in net revenue of 8%, despite a fall in stakes.

Cost growth in Australia of 26% in the period was less than revenue growth.

We continue to invest in brand, product and people to further enhance the strength of the position we've established in Australia.

Turning to slide 9, UK retail. UK retail operating profits increased by EUR1.7 million, driven by both higher profits in the existing estate and new shop openings. Like-for-like net revenue grew 5%; machine gaming revenue grew 15%; and sportsbook net revenue fell 5%. The underlying like-for-like stakes grew strongly, up [8%].

The growth in our like-for-like machine gaming revenue reflected the benefit from the impact of our new Eclipse terminals; the optimization of our leading loyalty program; and new gaming content.

It's also worth noting the performance has benefited from soft machine comparables in the period January to July last year, before machine revenues returned to growth in August of 2013.

Increased tax and regulation of machine gaming was announced in March and, as a result, we've increased the required activity levels hurdle for new shops, to maintain our returns and we've withdrawn from some planned openings.

Nonetheless, given our very healthy pipeline, we still added 33 new shops in the period and expect to open up to 40 shops next year subject, of course, to the proposed new planning laws not being more limiting than expected. And, for these shops to generate GBP100,000 EBITDA as compared to a capital cost of GBP270,000 including lease premium.

On slide 10 we cover Irish retail. Irish retail's profits increased by 13%, driven by a strong stakes growth; tight cost control; and the benefit of new shop openings. The second half of last year was the first period with both like-for-like stakes and revenue growth since 2007.

The positive trend continued in the period with like-for-like amounts staked up 5%, that's our highest growth rate since 2007, and net revenue up 2%.

Following on from the 10 new shops opened last year, we opened a record 16 new shops in the period, including 14 of which we acquired.

In both of our retail estates we expect continued revenue growth as we meet resilient core retail customer demand; use our leading position to enhance our offer; and take further market share, while also benefitting from improved economic conditions in Ireland and the United Kingdom.

Our telephone channel, on slide 11, includes betting via the phone, text and our exclusive PP messenger app. Such product development, as the app, has seen the channel take significant share from competitors in recent years and stakes grew a further 10% in the period, consolidating our leading position in the combined Ireland and the UK market.

While this channel does face increased betting taxes later this year, we expect it to make an ongoing positive contribution to the Group, given, for example, phone registered customers spend a similar amount with us online as on the telephone channel.

Cash flow is covered on slide 12. Our profits continue to convert strongly into cash. Operating post tax cash flow generation has exceeded after-tax earnings for each of the last five years, being on average 128% of after tax profits.

The first half of 2014 was no exception, at over 150%, but it's worth noting that cash conversion was boosted by the period-end date falling during the World Cup, when customer balances are higher.

We continue to invest heavily to further develop our strong market positions and in the period we spent EUR33 million on opening shops; on improving and expanding our products; and on further enhancing our technology capabilities.

The bulk of our other cash generated was used to pay dividends and our dividend per share has grown by 22%, compound, in the last three years. At the end of the period we had EUR175 million of cash on our balance sheet, excluding EUR69 million in customer balances.

As we noted in our statement today, given the strength of our balance sheet and our ongoing cash generation, we don't believe that maintaining flexibility for future growth and returning additional cash to shareholders are mutually exclusive objectives.

Accordingly, it's our current intention to recommence share buybacks. The timing and amounts of shares bought back will depend on both our pipeline of development opportunities, as well as prevailing equity market conditions.

On slide 13, before I hand over to Patrick, just to cover tax and regulatory developments. This environment continues to keep everyone in the industry busy, and much of what's been happening has been very well trailed. The impact of new taxes is highlighted in our statement and on the slide, I don't propose to go through those line by line.

We are working closely with governments and regulators in all of our geographies on proposed changes affecting our business. Our scale, our efficiency and our focus on operating only in licensed and well-regulated markets leaves us in a very strong position to both absorb new taxes and step up to the requirements, which new regulations will bring.

It is critical that, as new taxes and regulations are introduced, they be equitable and enforceable. We continue to urge with governments and regulators to implement as wide a range of enforcement mechanisms as possible.

So in summary, the first half of 2014 was another good period for Paddy Power. The last two months have shown that sports results can go both ways.

Our scale, diversity, ongoing investment and our efficiency leave us in a very healthy financial and operating position to capitalize on the change that the industry is currently going through.

I'll now hand you back to Patrick.

Thanks, Cormac. I'd like to talk about the Group's strategy and the Group's outlook and start on page 15 with a reminder of our long-established Group strategy.

I have spoken at length previously about how we are operating in the most-attractive markets globally that are large; that are fast-growing; that are regulated; and where we can have an edge.

I've also continuously emphasized the significant levels of investment we make to develop positions in those markets, which are long term and sustainable, and give strong payback. We are investing more substantially than ever this year.

Let me update you now on how that's translated into good customer growth and good top-line momentum.

Starting on page 16 with a summary of the momentum right across the Group. Group sportsbook stakes in the first half of 2014 up 17% versus growth in the previous six months of 13%.

Drilling into the individual business lines, in our online business stake's growth of 17% in the second half of last year accelerated to 22%. The increase in new customer sign-ups, the best leading indicator of future growth, accelerated from 7% growth, in the second half of last year, to 35% growth in the first half of 2014.

And despite the law of big numbers, despite our significant existing customer base, we managed to acquire almost 800,000 new online customers in the six months with no increase in marketing costs per customer.

In retail we had strong momentum both from a trading perspective and also from a development perspective. From a trading perspective revenue growth accelerated, with good increases in sportsbook stakes and machine gaming revenues.

From a development perspective in the first half, we opened a record number of new shops, 49 new shops.

Let me now summarize the momentum across each of the markets and some of the investments that we've made to enhance those long-term positions.

I'm starting on page 17 with our paddypower.com business and specifically our sportsbook.

We significantly over-index in racing. But, as previously highlighted, we have been relatively under-penetrated in football, and we've taken specific steps to capitalize on that opportunity.

We identified that as competitors had increased their media spend in advance of the point of consumption tax, our TV share of voice decreased last year, which, in particular, was impacting on our football growth.

We have increased our TV investment and we have ensured also that the spend emphasized our product leadership and our value leadership.

A key component of the value offering was our leading football accumulator bonus, whilst product developments in the first half included Pick your Money Back Special and Power Play Plus. More recently, for the new football season, we're adding new betting-in-running pages within in-game statistics, with commentaries and with visualization.

Our value message is cutting through very well. Market research shows that customers continuously rate us number one for both attractive odds and best offers.

Finally, we made sure football punters remain entertained, especially supporters of anyone but Man United. We made the most of David Moyes' demise. We had our grim reaper behind him at what turned out to be his last match in charge. Our tribute statue to him at Anfield and our Fergie look-alike in a glass cabinet -- a break-glass cabinet outside Old Trafford, which we think we might hold on to for Louis van Gaal, just in case.

The graphs on the right hand side speak for themselves. This focused investment is already paying off. We saw, as you can see, strong acceleration in both the stakes -- football stakes and football customer acquisition, even before the World Cup. We still have a long way to go for, in terms of the percentage of football within our business mix, compared to others.

Staying with the sportsbook, looking at racing and looking at other sports, on page 18. We've also seen continued acceleration with the additional investment in the period in product and value further enhancing the very strong position we already have in racing.

It's not on the page, but stakes in racing in the first half were up 19%, and that compared to 16% growth in 2013, so further acceleration.

We saw strong growth in running stakes following the launch of our new mobile racing and running product at the end of April, you can see a [grab] of it there. The product is a first in the market. It integrates prices with the live stream, which allows punters to place a bet without interrupting their viewing.

We continue to be a leader in the value and offers we give our racing customers. Our money-back special every day if your horse finishes second or third, in some cases also fourth, has proven very popular.

Moving to e-gaming, we continue to see the benefit of our early investment in mobile. We lead the market in mobile with over one-third of our gaming revenues in the half via mobile devices.

Our in-house development center in Bulgaria continues to grow in importance. It's now the largest supplier of games content to the Group with over a quarter of our games revenues now coming from their content.

But it's not just quantum, it's quality; their games outperform the games of leading third-party suppliers. As an example, we've developed and just introduced the new unique cash-out blackjack, which allows the customer the option to cash-out at each decision point in a game of blackjack.

On the back of this investment momentum in paddypower.com is accelerating. New customer acquisition, as you can see, having grown 2% in the first half of last year grew by 37% in the first half of this year.

We've also seen improved retention rates across the sportsbook. That's going to help us maximize the value of this accelerated new customer growth. So we saw 5% improvement in the rate at which new customers are active post-one month, and that's delivering good growth in active customers as well.

The overall momentum in customers, be it in new customers, in active customers, overall is paying back in the top-line sportsbook stakes; and gaming revenue growth rates accelerating versus the previous six months. As you can see on the right-hand side, sportsbook stakes up 20% and gaming net revenue up 12%.

The themes are no different in Australia. We continue to invest in product, marketing and value to ensure we extend our leadership of the market.

Sportsbet over-indexes in the hotspots of growth in this fast growing online market. Sportsbet is the number one corporate bookmaker and corporate bookmakers are disproportionately growing ahead of the parimutuels with the best fixed-odds offering; the broadest product range; the broadest sports range; and the best mobile product.

For us, the key product development in the first half was in mobile and tablet, with the release, and Cormac mentioned it, of our in-house developed smartphone apps plus iPad native and tablet web apps.

That has further strengthened our mobile offer and Sportsbet is rated the number one brand associated with mobile betting and also specifically with tablet betting in Australia. It's also the most often-used brand in mobile.

We continue to give blockbuster value offers to customers. Over one-third of our customers in the first half benefited from our money-back specials, and we've got some examples of them there on the page.

In marketing we are addressing our relative under-penetration in the rugby league focus States of Queensland and New South Wales. We've seen good increases in our brand awareness in both States. For example, strong top-line growth at the state of origin rugby league series, where the number of new customers which we acquired more than doubled versus last year.

As you know, and we've talked about before, we've developed the same distinctive brand personality for Sportsbet in Australia as Paddy Power has on this side of the world, with customers rating Sportsbet number one. As you can see, on the top right-hand of the page, not just number one but number one by a distance, for entertaining; for innovative; for fun; as well as for the widest range of markets and best value.

Moving to page 21, and looking at the payback momentum from this investment. Our position of leadership in Australia is strengthening, and that's despite the recent consolidation and investment by competitors. We are the clear number one corporate bookmaker. Indeed, looking at the percentage of customers with active accounts we're the clear overall market leader with 36% of online bettors having a Sportsbet account.

The bottom left-hand side graph highlights how our brand awareness is substantially ahead of the other corporate bookmakers, and it's increased significantly for us. This time last year our brand awareness was around 49%. It's increased to a record high of 61%, as you can see here, by June. It's now almost as high as the TAB who benefit from, obviously, their monopoly retail presence.

We continue to grow faster than the market. As you can see in the middle of the page here, our 23% stakes growth is ahead of that of all of our competitors.

We continue to dominate the market for acquiring new customers. Our acquisition is accelerating significantly, as the graph on the right-hand side highlights. In total, in the first half, we acquired almost double the number of new customers as William Hill did and at a significantly lower cost per customer.

The business, as you can see on page 22, is generating very strong payback off this momentum. Active customers have almost doubled in the past two years and online stakes growth averaging 24% in the last two years is significantly ahead of market growth.

That's translated into strong profit growth. Profits in the first half of EUR22 million accounted for almost 40% of the Group profit and over double that achieved in the first half of 2012.

Turning to Italy, our team has executed very well and, within two years of launch, we have become the market leader, number one in the online sportsbook market. Our e-gaming product offer is now almost fully in place.

However, we are seeing slower than expected growth in the overall market. If you look at the total gambling market in Italy, retail and online, it isn't growing in any material way, because of the economic backdrop.

If you dive into the online sportsbook market, which is obviously our principal target there is, as you can see on the chart, here on the left, decent stakes growth, albeit not as fast as we would like.

But, furthermore, as the second graph shows, this growth has been driven by more activity from existing players rather than from new players. So, for example, despite the World Cup, the estimated volume of market growth in new online bettors to the industry in June was not materially ahead of other months.

If you look at this market issue in more detail, and when we compared Italy to the UK, Italy had, and continues to have, a higher mobile phone penetration, but much lower e-commerce penetration, at only 20% of UK levels.

It's largely an infrastructure issue; the broadband penetration in Italy is materially below all other G7 countries. It's more voice rather than data usage on mobile. This is a big focus for the government with 600 cities to be covered with fiber technology over the next two years.

As online migration drivers accelerate, as a consequence in the coming years, we will see significantly stronger market growth. Meanwhile, we are building a very good position to prepare for that.

We have the leading, the number one and the fastest growing sportsbook brand in the market. As the graph in the middle shows, we had a 13% market share in the highly competitive World Cup month of June. That 13% market leadership is already very close to our UK market share, where obviously we've been active for 14 years.

Indeed, when you look at the total online sportsbook market growth by turnover and you look at the first half of this year and how much the first half of this year has grown as an industry compared to the first half of 2013, over 40% of that growth has been driven by Paddy Power.

Our growth is driven by strong execution in the two fastest growing segments of the market, Palinsesto, the broader betting offering, and mobile. We have the widest Palinsesto offer in the market, and we're growing share accordingly, we estimate we'd almost 40% market share on the Palinsesto supplementary betting markets in the first half.

Whereas on mobile almost half our first half stakes were via mobile devices, and that was significantly, 50% -- or 49%, significantly higher than the market average. We think our mobile market share as you can see on the page here is somewhere in the order of 18%.

In gaming we continue to expand our product range, we launched Poker and Vegas in the first half. Our offering will be completed later this year with the addition of Bingo and Virtuals. Overall, that will increase our addressable market by some 60%.

In summary, in Italy, we expect to see further material moves to online in the country. Italy is the largest gambling market in Europe and we've put in place very good foundations to benefit from that shift.

Moving to retail, which for Paddy Power is a great story and where we have the same approach to invest heavily to build long-term winning positions, in both sportsbook in retail and gaming in retail.

In sportsbook our investment in the value we give our customers, the fit out and format of our shops; our SSBTs; and our broader product offering leads, as you can see on the page here, to turnover rates double that of our competitors.

In machine gaming we are pleased, as Cormac said earlier, with the performance of our new Eclipse terminals; our leading FOBT loyalty scheme; and the new content released in the period, which is translating, again as you can see on the page here, to growth rates significantly ahead of our competitors.

Our turnover and revenue outperformance in turn leads to higher profitability, and a virtual cycle, which enables us to continue to invest and drive further top-line outperformance.

The strength of our offer alongside our under-represented position in the UK market, we still only have 3% of the UK shop estate, also provides a substantial strategic opportunity, and indeed attractive financial returns from new units as you can see on the right-hand side there.

(Technical difficult) heavy investment, and again we challenge for payback and I think the positions we've built in both our estates are generating excellent payback.

Our top-line momentum is accelerating both in Ireland and the UK. In Ireland, where in the first half we had our fastest stakes growth rate since 2007; and in the UK, where in both sports and gaming the top line is accelerating as the graph in the middle highlights.

In Ireland our market share is now in excess of 41% of the market. In the UK our profits in the first half, of EUR9.5 million, were over double those achieved three years ago.

Having talked through each of the markets, I'd now like to spend a few minutes on our World Cup experience. It's a one-in-four-year opportunity to showcase how Paddy Power really is different.

How do you acquire 150,000 new customers in a four-week period? We used customer analytics to make sure we went to market with the right offers; so the right sign up enhanced prices. We thought we were being generous offering 100 to 1 on England; money back on all nil-all matches in the group stages; and headline bumper money back specials on all England matches. All of those clicked giving modest respite to the England supporter.

Our media strategy was also based on analytics and insights from previous campaigns that allowed us to go to market with the correct media choice, and timing, and content for different markets, and twisting it to different markets. For example, ensuring strong TV share of voice in the UK with a presence on all ITV matches, but more of a press focus in Italy.

The guys sprinkled a bit of mischief supported by social media to amplify our messages and to reach new audiences.

Before the tournament three stunts caught the imagination. The scientific study of our latest pundit, Professor Stephen Hawking, on what might happen at the World Cup was covered in every UK and Irish national newspaper and a three minute segment on Newsnight was the highlight of over 150 broadcast pieces on the story.

We then caused outrage on Twitter when appearing to have carved a huge message of support for England in the Amazonian rainforest. By the time we set the record straight 36 hours later by revealing it to be a hoax, both Paddy Power and Save the Rain Forest were trending on Twitter. In total, we had over 35 million impressions.

The guys from Sportsbet were not to be outdone, they flew a 14-storey high Christ the Redeemer balloon over Melbourne, Sydney, and Adelaide, and it made the TV news on all the national channels in Australia.

They were some stunts in advance of the tournament. Our execution also involved reactionary activity as the tournament progressed. If FIFA hadn't banned Luis Suarez we would have got our logo on the pitch, as we were striking a deal for him to wear our branded gum shield versus Colombia.

The Italians put a different spin on Suarez and their justice payout on Italy, following their exit in the defeat to Uruguay, got widespread media covered.

The exclusive signing of Paul Scholes was quite a coup, and that consistently made front and back pages in major newspapers. It got mentioned at numerous, or several at least, England press conferences and achieved over 250,000 views of our Paddy Power blog, which is a new record by a distance.

Again, we challenge for payback and the payback on page 27 was fantastic. On social media Brazil 2014 turned out to be the most social event in history.

Our presence meant that we dominated our industry both on Facebook and Twitter. Paddy Power received 3 times the amount of engagements and interactions than the next six competitors combined.

But looking outside our industry at all brands globally, Paddy Power also dominated. We ranked as the seventh highest brand globally for social mentions; just behind McDonalds in sixth, but ahead of many of the official World Cup partners and sponsors including Budweiser, including Emirates, including Visa.

The ultimate measure of performance is on new customer sign ups, customer stakes and profitability. On those metrics we surpassed our targets: 148,000 new customers; almost EUR200 million of stakes, which was up 130% on the amount we took in the 2010 World Cup; and similar growth in profitability.

Overall, the World Cup was a key component of what was a very successful first half for the Group with June being our highest month ever for turnover.

To conclude with current trading, the second half of the year has started well, sportsbook stakes are up 18% online and 7% in retail on a like-for-like basis, with total Group revenue up 45%, showing what happens when results swing the bookmakers' way.

The Board expects mid-teen percentage growth in earnings per share for the full year, despite a EUR11 million headwind from product fees, new taxes, and currency translation.

We remain confident of the Group's prospects for 2014, but also beyond, due to our strong positions in the hotspots of growth in the market, and our substantial targeted investments behind them.

There will be a small number of long-term winners in each of our markets, and with our strong positions and substantial investment we will be one of them.

Ladies and gentlemen, thank you for joining us this morning. Happy to open now to questions. We'll start with whatever questions there may be in the room, and then go onto the telephones.

Gavin Kelleher, Goodbody; just a few from me. On bonusing in the online division ex. Australia, it looks like it's running at in the first half 1.1% of amount staked. Do you have any guidance on what that could be in the second half, and how that may look into 2015?

In terms of net revenue marketing as a percentages of net revenue, can you give some guidance on that as well?

Cormac?

Yes, Gavin, firstly on the bonusing, obviously with the level of acquisition we had in the first half of the year bonusing was high, and, actually, that was heavier in Q2. That was weighted more heavily towards the second quarter for obvious reasons.

We would expect us to be closer to 0.9% in terms of your calculation, so we would expect it to come back. But, obviously, acquisition continues to be strong. We're happy to invest the money, given, as Patrick said, our payback is strong, our retention is very good.

I think we would expect it to come back a little closer to the 0.9% in the long run.

On your second question on marketing, obviously the net revenue figure coming down does accentuate the percentage figure, which is closer to 26%. But if you normalize for net revenue that's closer to 24%.

So, yes, our marketing spend is up, and we indicated that late last year when we were stepping up on football. Over the longer run, we would expect that to come back closer to the 20% normal range that we would have.

But, obviously, for the whole year given the weight of the first half, it will be closer to 24%. But at the curve we'd expect that to trend back towards 20%.

The good thing from our perspective as we said is our overall Group CPA is flat, so we've managed to spend more money on TV, and acquiring media assets to build share of voice. But we've saved that in our online marketing group, because of our expertise in that area.

It's balancing the mix in the right way and we're very happy with the investment we made this year, but we expect it to trend back over time.

Perfect. Just two on UK retailer for me. How many shops do you expect to open in H2, in UK retail? And can you give any guidance on how much machines are performing in H2 today?

Andy?

We'd expect to open about 20 shops in H2 in the UK. And our guidance for the half 2 in terms of the machine performance would be between mid to high-single digits.

So we come up against some harder comps in the second half, as we lap the Eclipse terminal rollout. Also, we're aware that the competition are rolling out competing terminals, and upgrading their terminals, which they'll benefit from in the course of the second half.

Thanks.

David?

David Jennings, Davy. Just two questions please. Firstly, on Italy, what does your new Italian guidance assume for market growth in 2015 and 2016?

And what are you assuming in terms of your own market share in both sports betting and gaming?

And then second question, just in relation to UK retail, perhaps could you give us an update, in terms of how you think the new regulatory regime is going to work around the high staking our machines? And what impact, if any, you think that these changes will have.

Thanks David. Peter will you take the Italian question, and Andrew the UK retail question please?

Yes David, as Patrick outlined there, on an overall basis, the market in Italy is growing in single digit, so at 1%/2%, we feel if we look at Sportsbook, which is our primary market, that over the course of the next number of years, growth around 5% to 7%, is what we'd expect.

And in terms of our market share in that, currently we're about 13% market share for sportsbook; somewhere between 3% and 4% for casino. As we look at our plans, increasing that sportsbook market share is obviously key, anywhere up to 14%/15%.

But as Patrick alluded to, key for Italy's progress is the rollout that we've had this year, of the gaming product. So with poker, Vegas, which is a mobile optimized casino, we feel that our ability to drive yield from our current base, to drive share in e-gaming, is going to be critical.

And we'd expect over the course of the next number of years, to double our share, up to about 6%.

David, in relation to the stakes over GBP50 on machines, so it's our understanding from DCMS, that stakes over GBP50 will require one of either staff interaction with the customer, or a verifiable account.

We expect the impact to be around mid-single digits, although we await the publication of the specific regulations in September, from DCMS.

Thanks.

Ian?

Ian Hunter, Investec. Maybe on the online customer acquisition growth, extremely strong in the first half, at 35%.

I'm just wondering was that over the whole period, is that really the World Cup effect? If you can just give us an idea of the impact the World Cup had on that.

And also the sustainable rate you see going forward, both the second half and into 2015.

You also mentioned about repeat punters, etc., 5% maybe in retention, but I'm just wondering have you got a feel of the new customers you got from the World Cup side of things, as that was just June. Whether they are going to be repeat punters?

And maybe have you an idea of whether the large number of customers you did retain, were actually new punters, or switchers in from other operators, or multiple provider users, who maybe saw your proposition as better than those out in the market at the time?

Peter?

So in terms of growth, as you said there obviously, we've seen about 3% first-time staker growth. Some of that is World Cup, as you said, but underlying growth of first time stakers is still strong. So high-teens growth, if you exclude the World Cup.

In terms of customer retention and FTS, in the first half of the year, we've seen, as Cormac alluded to, our CPA stay flat. We are seeing some increase in free bets being offset by reductions we've been able to impose on digital CPAs.

So our digital CPA is down year on year, and where CPA broadly is flat, because as part of the CPA, we're also including acquisition at free bets as well. So on the CPA side of things that's broadly flat.

We are seeing yield from those new customers effectively held flat. Encouragingly, we're seeing our retention rates increase; so some of the investment we've put into product, into loyalty, etc., are playing out in terms of retained customers, and those rates increasing.

In the balance of the half, obviously the majority of the volume of the customers are in the second quarter, so we'd hope to see there, revenue impact play more into H2 and in to the first half of next year.

In terms of where they're coming from, it's too early really, to say. Any World Cup, there's a lot of new entrants into the market.

But, as we know, traditionally, this industry is very much about shared wallet, and the customers that we are stealing from others are from the typical other providers. It's the William Hills; it's the Betfairs; it's bet365s; etc.

Okay, there are no more questions in the room, as I can see, so we'll now go to whatever questions there may be on the line.

(Operator Instructions). John Denny-Brown.

Merrill Lynch; just two questions if I may. One is a follow up on Italy. I apologize, I missed the comments at the end of the Italy slide.

But if I look back at the May IMS, I think depending on World Cup, you're targeting a break-even by end of 2014. If I heard correctly, Italy is now a target of profitable by 2016. I wanted to make sure I caught that correctly, and if you could provide any color on that.

And then the second question is on POC and market share. So share gains net of customers moving to illegal operators, in particular, now that we're a bit closer to POC, what would be a reasonable estimate of the move to illegal operators? Thank you.

Peter?

Yes, just on the Italy question, as we flagged at IMS, the World Cup was going to be a critical period for the market as a whole, in Italy.

As we've seen in the UK and other markets, in good growth markets, you see very good growth during the World Cup. Our hope and expectation was that we would see that in Italy, that didn't transpire. Turnover in comparison for example, to the Euros, was up far less significantly than we would have seen in the UK and Australia, so that would also show that the underlying growth wasn't there.

So the World Cup didn't trigger any strong growth in Italy. The net effect of that is, at the top line, the market isn't growing to the extent that we require to hit our guided break-even, prior to this. As a result of that, we're guiding that we'll move into profitability during 2016.

In terms of point of consumption and market share, we will have to wait for POC to play out, and for operators to decide if they're going to move offshore, or stay onshore, and for the illegal market to play out.

So we're not guiding on any expected market share gains at the moment. What we do know, competitively we're in a very strong position. We've a great brand; a great product; do great marketing; and we're as -- we're well positioned to take advantage of any share that does come into the market.

Great, thank you.

There currently are no further audio questions.

Okay, we'll wait a moment just in case anyone raises their digital hand.

(Operator Instructions).

Okay, well in the absence of further questions, I'd just like to thank you all for joining us, here in the room, and on the line. And if you have further questions during the day, or thereafter, please do reach out and contact us. Thank you very much, and good morning.

Thank you, to all presenters. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day.