Flutter Entertainment PLC (FLUT) 2017 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to our results update, and in particular, welcome to those who joined in Hammersmith. I'd like to start by just saying a few words about the announcement we made yesterday that I'll be stepping down as CEO sometime in the next 12 months. And you'll appreciate that there's never a good time to leave out a great business, a business with the prospects that I believe this business have. You'd appreciate that there's never an easy time to leave a business, an industry that I've been as involved in as I have over the last 16 years. I was thinking this morning that I've be working in this industry longer than most of us would ever be married. So it's been quite a while. But I do think it's an opportune time for the business.

Given that the platform work is in its final stages and that, to all intents and purposes, we feel, in the business, that the merger, other than the tech work, that work has been done. And I've committed both to myself and to the Board that I'll oversee the final part of this, which is the delivery of the technology project. And for me, I'm just excited about taking on a new challenge in a different space. I'm very happy. I'm very excited and delighted that the Board has appointed Peter Jackson. I'm comfortable and confident that he would bring a lot of energy, intellect, new ideas, that he will shine a light at -- and he will consider the business and kind of shine a light to some places where I've had blind spots, and will also provide continuity, which is valued both by my colleagues and by the board and, I think, will be valued by our shareholders.

And moving to that, the business performance in the first half, many things are going very well. We're delighted with the Australian business momentum in sportsbook. Our retail business remains best-in-class. We're excited about the U.S. and particularly DRAFT, the early stage thing. I was there last week as people who are tracking me and stalking me on Twitter, I probably have shared with you. And although there are some areas in the online business that we're not satisfied with, and we'll talk about that later. There's also some good signs. And we're looking forward to getting more product developed.

A major theme in these results is the continuation of substantial investment to position the business as a long-term winner. We're using technology to leverage our scale. We have talked in the past, and I think we'll continue to talk about minimizing the cost of service, which gives us the choice to give more value to our customers. We believe that this low-cost production, low cost of service is an important advantage in a highly competitive industry like this, and one with probable increases in the cost of regulation and compliance costs. Technology will allow us to improve our customer proposition. We'll talk about that a little bit.

But before I talk through the strategic stuff in more detail, I'll pass over to Alex to take us through the financial and operating performance in the first half.

Good morning, everyone. And thank you, Breon. Let me take you through some of the highlights and financial performance. Here we go. Of course, we'll start with the group's financial highlights, and then go to the individual businesses. Revenue in the first half, as you have seen, went up 9% to GBP 827 million or 3%, excluding GBP 40 million benefit from FX translation. On a constant currency basis, we saw 15% growth in Q1, partially offset by 6% decline in Q2. A lot of it has to do with the European championship last year. And of course, you will remember that the first quarter benefited from a very favorable Cheltenham, in particular.

Revenue in the second quarter was affected by the year-on-year decline in sportsbook net revenue margin and the absence of the major tournament for both tournaments. And now just a few words on the margin. The sportsbook net revenue margin was 1.5 percentage points lower than the prior year. That's the group number, driven by both a strategic decision to increase our investment in pricing and promotion, which Breon has referred to, and unfavorable sporting results. The sporting results contributed 1.1% of that 1.5%. I mean, that is roughly GBP 30 million in the quarter.

Now that's a group number. I will then talk specifically about the online. The online number, sport effect by the sporting result is actually greater than the 1.1% that we're talking about here. Q2 last year included GBP 22 million of revenue from Euro 2016, which represented 5% of the quarter's total revenue, and EBITDA was GBP 4 million from the Euro championships.

Total operating costs in the first half decreased by 3% in constant currency, with the sales and marketing costs were flat year-on-year, but up 10% if you exclude Euro 2016 spend. And other operating costs were down 5%, benefiting from annualization of mergers, synergy and continued operational improvement.

Operational leverage meant that 9% revenue growth led to 21% increase in underlying EBITDA, GBP 280 million. The EBITDA margin increased by 2.8 percentage points to 26.6%. And people will ask, and I know you guys like to say, well, without this, without that, what would the operating margin would be? And I think the key point for me is that in constant currency, EBITDA margin is up 3.7%. If you exclude synergies, right, which some people like to exclude for reasons difficult for me to understand, but let's just exclude, the EBITDA margin is still up 0.8%, almost 1%. So the answer, constant currency, not constant currency; synergies, no synergies, operating leverage continues, right? Different amounts but absolutely continues. And we have declared an interim dividend of 0.65p per share, which is up 25% and will amount to about GBP 55 million, all in total.

Moving on to the bridges, and this is the EBITDA bridge on the slide. We bridged H1 2016 and H1 2017 to highlight some of the key items that resulted in a GBP 39 million or 21% year-on-year increase in profits. FX, well, EBITDA -- impact on EBITDA is actually quite small, only GBP 2 million. In terms of the makeup of our EBITDA, just under 2/3 of our EBITDA is GBP-denominated; 24%, Australia; 8%, U.S.; and 3% Euros. Secondly, Euro 2016 contributed GBP 13 million of EBITDA across the whole tournament, and approximately, as I said before, GBP 4 million of this landing in the first half. Marketing for Euros was about GBP 15 million for that period and GBP 20 million for the total European championship tournament altogether. Excluding Euro 2016, the year-on-year FX movement, underlying revenue growth resulted in a GBP 39 million increase in EBITDA in H1 after reflecting direct costs. And finally, turning to costs, you can see the increase in marketing costs outside of Euro 2016 and the savings in other areas, which, again, talking about merger, synergies as well as efficiencies as the business continues to be focused on those efficiencies.

And now, let's just go through the divisions. As Breon said, I mean, we'll start with online, which is, I guess, where some of the issues are, which Breon will touch on more and the rest of the divisions, while we'll talk about them, but I think the operative word, will be they're doing extremely well. And so there'll be probably much less to say on those.

Starting with our online division, which includes Paddy Power, of course, and Betfair brands as well as our B2B activities. Total sportsbook stakes were up 10% or 15% when you exclude Euros 2016. For those of you who are going to say, but this includes FX, but it also includes Dial-a-Bet decrease. So if you net all of this out, you're still at the same numbers effectively. So the 10% to 15% is kind of the right numbers to look at. The growth in stakes was offset by 0.5% decline in the sportsbook margin, which was driven by the pricing investments for Q2 sports results that I referenced earlier. And as I said, Q2 results impacted GBP 30 million or 2% of the margin decline. Of the total decline of 2.2%, 2% had to do with the results and 0.2% was this investment.

This investment of GBP 30 million for the first 6 months was very much weighted towards Australia. More than 50% of that investment was made in Australia. And the business, obviously, there is doing extremely well. So that meant that the sportsbook revenue were down 1% year-on-year. Overall sports revenue, which included a 3% increase in exchange revenue was up 1% in constant currency.

As we said in Q1 trading update, there is no quick fixes for our gaming business. The one thing that I would say is that Q2 of last year probably benefited from European championships again. If you look over in the last number of quarters, it's been steady by about GBP 60 million. The online revenue for gaming was about GBP 60 million a quarter. My expectations are, while I don't expect it to increase as we're fixing the issues, I don't expect it to decline either. So I expect that GBP 60 million per quarter continue to go on for the next few quarters and certainly, through the end of the year. And again, Q2 of last year benefited GBP 65 million because of, I think, European championships. Now we're back to that GBP 60 million run rate.

The division reported 2% decrease in operating costs due to the merger, synergies and continued operating efficiencies. EBITDA, up 6%, GBP 148 million. And you could see, we've given you the numbers, the FX impact on the right side here. Excluding GBP 5 million adverse impact from foreign exchange translation, EBITDA would've increased by 9%.

Australia. Prior year -- and just a few things to say, in prior year, Bet Live In-Play Betting app was available to customers, and In-Play! represented 15% of total stakes. This year, In-Play Betting was only permitted via telephone. And In-Play Betting contributed only 8% of total stakes. Notwithstanding this reduced In-Play Betting, sportsbook total stakes in the period increased by 16%, which is a tremendous performance. And stakes growth led to 15% increase in revenue. This growth reflects both good underlying market growth rates and our continued investment in product promotion and key marketing assets to ensure Sportsbet's online leadership position is maintained. As I said, a large proportion of the GBP 30 million overall group investment is in Australia. And we continue to, of course, continue -- and the Australian management continues to be very disciplined on costs ahead of potential further regulation. Operating costs benefit from some decrease in the marketing asset inflation. And therefore, decreased by 5% in the first half of the year, resulted in EBITDA growth of 52% to GBP 54 million.

Retail. Again, another, I think, market-leading performance, as, I think, Breon has referred to. U.K. and Irish estates showed good revenue growth in the period, increasing by 6% and 3%, respectively, on a constant currency basis. Like-for-like, net revenue was up 3% in constant currency, comprising 2% sportsbook growth and 7% increase in machine gaming revenue, primarily driven by the B3 content. We apply very conservative regulatory assumptions when assessing opportunities to expand our estate. Despite this, we continue to identify some attractive new shop locations and opened 7 shops in the first half.

Furthermore, a high-quality nature of our U.K estate, which has sector-leading profitability and a strategy focused around the strong sports-led proposition, means that we are well-positioned ahead of the changes to maximum state limits on B2 machines. Our analysis of the likely impact on our estate and the wider market means we do not currently envision the need for any shop closures as a result of anticipated regulatory changes.

U.S, U.S. division in local currency revenue increased by 11% and 6% growth at TVG, boosted by continued strong revenue growth in New Jersey casino. EBITDA for the total division decreased by 11%, with profit growth in TVG offset by inclusion of GBP 1 million losses for DRAFT and the startup losses at the Betfair New Jersey casino. That's another GBP 1 million, for those of -- just to quantify it. Our New Jersey casino is now operating, however, at breakeven. Certainly, it would be expected to be profitable next year.

That's the divisional story. A few things on cash flow. Our profits converts -- continues to convert strongly into cash flow with the underlying free cash flow in the period of GBP 172 million, representing 113% of underlying profits after tax. I would like to just highlight a couple of things in relation to -- a couple of items in relation to H1 cash flow. CapEx, we incurred GBP 50 million of CapEx in the first half. We expect full year spend this year to be more H1-weighted, due primarily to the platform integration work and the timing of certain software license fees. And for the full year, we expect approximately GBP 90 million of CapEx. Separately disclosed items, there are some costs on those items that are cash costs that are still coming through this year. That's really all -- I'm going to say, most of those are employee-related, obviously. But by the end of the second half, GBP 4 million will fall into second half by the time we're finished with that. That will be the end of that.

H1 cash flow also reflects, of course, [$19 million] or GBP 14 million outlay for -- upfront outlay for our DRAFT purchase and consideration. As of June, group has net cash of GBP 87 million, excluding customer funds and restricted cash of GBP 74 million and customer funds held off balance sheet of GBP 342 million. We continue to keep the efficiency of group's capital structure under regular review, taking into account the group's strong cash flow generation, its investment plans, potential for further market consolidation. My view is next -- and I think the consensus for the year-end cash will be about GBP 200 million or so.

And finally, Slide 10 really includes summary of our financial guidance. Firstly, as we've said and as we've -- as we had in our releases, we expect full year underlying EBITDA to between GBP 445 million and GBP 465 million. This includes the impact of DRAFT acquisition, where, this year, we have announced in May, we expect to incur approximately GBP 20 million of losses. The guidance is in line, we think, with the current analyst consensus when adjusted to include the guidance for DRAFT and assumes normal sports results and current FX rates for the second half of the year. I've already covered CapEx.

We expect 2017 underlying effective tax rate to be between 13% and 15%. In the first half, the rate was 14.4%. I would -- there is no basis to assume that rate for the remainder of the year. But it is what it is. 13% to 15% is the range where we're staying with. In the first half, just under 2/3 of our profits were sterling-denominated, as I said before, and GBP 2 million translation benefit on EBITDA from FX.

And finally, on this slide, we have listed some primary regulatory items you need to consider. In summary, what I would say that whilst there continues to be quite a bit of regulatory news flow within our key markets, we believe that operators with scale are well-positioned to withstand any additional regulatory or tax burden.

And with this, I'll pass it back to Breon. Thank you.

So you've heard most of us -- you've heard most of this stuff before. We felt we've kind of freshen up some of the slides to try and just revisit why and how we see the business is positioned for long-term success. And this slide kind of addresses, as we see the business today, why and how we're investing and then how we see future play out.

The foundations -- critically, we talked about scale. The businesses -- both businesses, Betfair and Paddy Power, had established over many years a history of investment, ravishingly strong positions. But we think this was further strengthened by the merger. The substantial scale is both global online scale and local online scale. We're the #1 operator in a number of key regulated markets. We believe and we believe there's evidence of leading capabilities, including scalable proprietary tech platforms, in-house product development, our digital marketing expertise, which I'll come to in a second, a leading proprietary risk and trading capabilities. We believe that this is a distinctive portfolio of sports-led brands. And that even within that, some of our differentiated products get further cut through.

When we think about investing in capability, this is investing in technology, digital marketing, risk and trading cost for operations to allow us to continue driving down the cost of service to our customers. That not just protects us from competition, it protects us, as I said earlier, from probable increase in regulatory and compliance costs. It also increases our resilience to external economic pressures, which we think is something we increasingly have to think about. And it allows us to compete aggressively and sustainably.

And investing in customer proposition, that's across several dimensions of product pricing and promotion, brands, investment in customer service. Again, we'll talk about that in a second. And we believe that scale and efficiency, along with the focus on investment strategy, will allow us to grow profit sustainably in our key markets in the long term. We may talk in Q&A about a grey market risk and our views on that, but we've been focused, over the last number of years and continue to be focused on sustainable growth in the long term.

Investments in the future. Investment in new growth could be organic opportunities or through utilizing our firepower to make acquisitions as evidenced by DRAFT earlier this year, where evaluation and opportunities are attractive. Potential areas of growth include new geographies, new products or brands and possibly adjacencies as evidenced by our entry to daily fantasy.

And I'll take you through now in a little bit more detail where we've been investing for the last 6 months. So the online customer platform, which we've been working on since May of last year, is on course for completion in Q4. That work will start at the beginning of October. We've talked about how we will do it in a series of batches, starting with the customers of lower value first or less frequent customers and then migrate more. But it should be definitively complete by the end of the year. The majority of the work is done. It's taken a considerable amount of effort. I'll get to that in a second. But the key benefits will include an increased pace of development, a faster rollout of new products to all our customers across most of our brands, channels and jurisdictions, a material reduction in time resource required to build new brands or enter new markets that may prove to be relevant in gaming. And we have significant technology resources with over 100 -- sorry, with over 1,000 engineers globally. And a higher return on investment generated for each pound spent allows more development to be deployed with greater certainty on new product.

It's worth noting that this is more than just about integrating the legacy Paddy Power and Betfair stocks, it's also about enhancing overall scalability, operation resilience, data security and capacity of the platform for future growth. Technology. I just spoke to a journalist earlier who asked me to talk about my 16-year journey in this industry, and I guess, once upon a time, we had websites that kind of were the online manifestation of what happened in the shops. But now this industry is completely defined by and underpinned by technology and technology investment. And that's across all of our operations, high street and online. This platform work is facilitating advancements in future technology. We'll talk about that a little bit in digital marketing and risk and trading.

And moving first to digital marketing. I'll let you read the slides and just kind of call out a few things. Primarily, this is about increasing the reach and the relevance of our customer messaging and doing that ever more efficiently. And we recently deployed an in-house data management platform and a new marketing automation engine. As a result, automated customized customer messaging, as shown on the right-hand side, can now be delivered across 8 distinctive channels as opposed to the existing 4 CRM channels. And therefore, technology enables us to get a material rate in our -- to materially increase in our digital risk -- sorry. The technology allows us to get a material increase in our digital reach to our customers and possibly new customers. And that allows us to efficiently target customers with appropriate messaging. And including, of course, as you'll see from other consumer Internet firms, we're now better able to contact customers or to at least make ourself aware -- make customers aware through advertising, customers who previously have chosen to be uncontactable. And we're already seeing evidence that this is driving incremental activity. For example, the Cheltenham March, the Bedford reactivation campaign drove a 5% increase in activity from reactivated customers when compared with controlled groups.

On this slide, we present 2 examples of automated customized digital marketing content. The left-hand side shows our automated best odds messaging. And this is where we're best odds on a key event. This content is automatically generated, and it compares our live odds against those of key competitors. The messaging applies on channels such as display, e-mail, social and page search is automatically created and shows a live odds comparison where we're best priced. But if we cease to best priced, it changes to a different event or toggles back to preset brand campaigns. And this is now done, basically, on a hands-off basis, real-time, 24/7, 365, with greater efficiencies than ever before and a greater -- lower probability of human error, which we think minimizing that risk of human error is ever more important, given the regulatory scrutiny on the industry.

The right-hand side shows our automated personalized messaging as deployed on Sportsbet and Betfair. Here, we increase the relevance of our commerce by personalizing it to the customer based on their previous successful bets. At Sportsbet, the Giddy Up Alerts automatically sends -- that's on the top. It's not quite as clear as I'd hoped. But it automatically sends an SMS and push notification to customers 45 minutes pre-race, if they've not already bet a previously winning horse. And the message is deep linked all the way through to the bet slip. So not just are you getting relevant personalized, timely communication, but we're driving down the friction to getting to the bet slip. And we think this is industry-leading stuff. We think all those will follow. I can't pretend that its IP that's on -- that others can't copy. But we think we're already delivering this today, day in, day out, across multiple brands and multiple geographies. And we think it just shows how the table stakes, how the capabilities required to compete effectively in this industry, I continue to go up.

On a typical Saturday, this is going to 15,000 customers in Australia, but could go to many, many more and can be deployed across all the sports and will be deployed across all the geographies. And Betfair, bottom right, is a slightly different variant into that. And over time, the product teams communicate across geographies. And if they find that Giddy Up or Golden Horse works better in one geography rather than in other, we can rebadge this in a geographically sensitive way.

Risk and trading. Again, critically underpinned by investment in proprietary technology. And we do this not just to enhance the customer experience, for example, to increase the range of betting or to improve the In-Play Betting experience, but also to maximize the efficiency of our operations. And efficiency gains through improved pricing accuracy or through automation such as allowing individual traders to manage more events simultaneously, that can be used to contribute funding better odds for customers and to increase our competitiveness. Our substantial historical investment, in truth led by a lot of the Paddy Power IP, means we currently trade 19 sports via our in-house models. In-house models, critically not licensed data from third parties. And we're continuously seeking to improve existing models and add additional sports.

We now have 6 new trading models in deployment -- or in development, including an updated tennis model and a new NFL model. Separately, in risk management, we're building new football and tennis models that automatically feed into our pricing and trading algorithms, such as the equivalent racing tool that we've operated for a number of years. Specifically on that, it takes market information. It takes bet information and changes prices automatically without any human intervention. Not just is that a quicker response, but we've shown and lots of academic research shows that the computer decision-making, and some people would dress this up and say, it was AI, but let's just call it what it is. Computer aided-decision -- or computer decision-making will be more timely and more accurate than if that computer just prompts a human to make a decision. And that's been ongoing for a number of years on horse racing. We're bringing it to more sports.

Our new football model launched in January is improving the In-play experience with a 90% reduction in the average market suspension time, and a 97% reduction in the average bet failure rate versus the previous model. What's happened there is that rather than suspend, as the model did previously when there is a danger of a goal, we now probability weight the outcomes. So the experience for the customer is a much more -- a much higher rate of bet availability and then a lower likelihood that the bet is suspended because of the in-running delay. That, in turn, allows us to shorten the in-running daily, which gives, again, a better experience. But all of this makes life harder for less capable, less invested competitors.

Our NBA model went live for NBA finals. Critically, for those who care, NBA is one of the hardest sports to model. Academic research shows that much more about the final few seconds of the game than one might think. And we've almost trebled the number of pre-match betting markets available and driven incremental staking at Sportsbet. Sportsbet in Australia, other than in the United States where the DRAFT guys are quite knowledgeable about NBA, Sportsbet knows much more about NBA than we do in Europe because of the betting preferences of Australia. So as I said, we've almost trebled the number pre-match betting markets available and driven incremental staking there. Across the finals, 29% of active customer staked on new markets offered. And in total, the bets -- these bets on new markets represented over 10% of staking. These are just small number of examples of incremental value created through the investment in tech.

Risk and trading again. These proprietary algorithms also facilitate or can often facilitate innovative betting products, such as the example shown. What odds Paddy leverages are social media leadership position and utilizes the proprietary models, the price of customer requests in real time and then release them to our apps. This customer-generated market have represented -- now represent the third largest betting markets on -- from our football markets on Paddy Power. At Sportsbet, the same features, branded BYO, Bring Your Own, again, culturally nuanced and it's proven popular on soccer. For example, in the recent Socceroos versus Brazil International, we had more bets placed on our BYO markets than on the Win-Draw-Win market.

Same-game multis on the right-hand side, this is where you can bet on multiple selections, included related selections in the same game, something that previously wasn't available in the industry and calls a lot of consternation in the shot where people bet, for instance, on Man United to win and Cantona to score, so related probabilities. We now have automated a bunch of this. It allows customers to bet on an accumulated or several selections in the same event, leveraging our modeling capabilities to overcome related contingency pricing issues, proven very popular with AFL and NRL customers and is driving incremental accumulate risk taking. And once we've been busy on tech platform in Europe, Cormac and the team in Sportsbet have continued investing in modeling, which we will be able to leverage as we get to the turn of the year and into the new year.

And I guess this is the critical slide in many ways. I think if we'd fully appreciated how much work was required with the re-platforming, we might have been even more daunted. And we talked at a time last summer about feeling that we had a one-off opportunity. We talked to -- with, quote marks around, "having the moral authority" to do this re-platforming, not just to re-platform the Paddy's site to the Betfair one, but also to refresh the Betfair one and make us -- give us the capability to -- for future flexibility. And thank god, we're very close to the end of it. But as I said, to ensure we're best positioned for long-term growth and to enhance the ability to release new products at pace, the tech resources have been focused, pretty much since the merger, on this platform work. And the extent of this focus is illustrated on the graph on the left hand side. A peak across recent months, up to 70% resources are being utilized on integration work. And with a lot of the residual resources focused on business-as-usual, lights staying on and operational projects.

I won't overplay it now. It may come up in Q&A, but this has limited us in terms of offering new features in the U.K. and Ireland or in Europe, and restricted our ability to address weakness in gaming in particular, which I think I'll talk about in Q&A. On our Betfair brand, it has also restricted our abilities to target some international growth opportunities. As I said to a journalist earlier, you'll probably read about it tomorrow. We've done what we felt was the right thing for the long-term good of the group and worry less about short-term OPEX. So in markets like Cyprus, we've withdrawn our product rather than distract focus from the key strategic initiatives of the re-platforming. We've withdrawn our product because we couldn't justify doing some licensing work there. There's also a couple of continental European markets where we haven't switched on online casino, although we have progress -- we've made progress with our sportsbook. And we haven't done that because it would have distracted from the re-platforming work.

So it will be primarily from 2018 and beyond that customers see this benefit. And there will be some immediate benefits rising from the integration work. Betfair customers are already seeing the benefits in some of the products. Some additional products improved pricing following access to Paddy Power proprietary risk and trading models. And whilst on migration, Paddy Power customers will see some incremental product benefits and there will be more to follow. They will, in the short-term, Paddy Power customers will see an improved sportsbook offering, access to new gaming ups, which will go some way to addressing the product app, and greater promotional flexibility. There, they'll benefit from the promotional tech work that Betfair did 2, 3 years ago and more recently.

On the sportsbook, there'll be an immediate introduction of a faster sports app, an enhanced cash out offer, and new proprietary desktop that's more consistent with the mobile betting experience. Post completion, the integration product -- post the completion of the integration project, the focus will shift to capitalizing our significant development resources to accelerate the pace and frequency of new products. For example, in sportsbook, we're focused on identifying -- addressing some of the identified product gaps. There are some stuff the guys in Australia have done that we haven't done yet here. And we're focused on delivering that. We'll further enhance our In-Play Betting experiences, and our target is about the new innovative features.

And then some products, some recent stuff that's been going on because, occasionally, such as the focus internally on the re-platforming, we have to remind ourselves and probably not a bad thing to remind some of you that there is good stuff being released here pretty much every week. So notwithstanding the impacts of the platform work, unless affected parts of the group, we haven't been standing still. At Sportsbet, I talked about the same-game multis earlier. They've also release an Android app and significant upgrades to our racing content. Sportsbet customers now have access to a short form, long form, expert tips, speed maps in all Australia and New Zealand racing.

In retail, since May, we're in a better position to control and showcase our leading content. We've launched -- and I find it fascinating that after having shops for 25 years, we're still finding -- the guys are still finding innovative ways to compete. We've launched Paddy Power TV, where we can control the visual -- the video content directly into our shops. In addition, Betfair customers can now deposit cash. After testing this and testing the brand dilution risks, Betfair customers can now deposit cash directly into their online accounts in Paddy Power shops.

On the exchange, which in truth is somewhere where we probably underinvested for a number of years. The team there led by Dom are really accelerating product development. This includes an updated desktop front end, an increased personalization on mobile apps, such as that shown here on the right-hand side. And the automated personalization tool adjusts the sports featured on the app homepage, the navigation menu and menu page, and an adjusted quick links shown to the customer. So depending on whether you're logged in or not and depending on when you last engaged with us, you get assigned to a cohort. And that is proven to drive a faster user experience and more click-throughs than previously. And again, this is the beginning of years of work in terms of automated, and ultimately, fully AI content management. But this is evidence that the capability -- this work has been done in-house. The capability is here to build out cohort-led, ultimately, personalize-led navigation, which, I think, is probably the future of a lot of consumer Internet.

On pricing and promotion, this remains a highly, highly competitive market. Pricing and promotion are essential factors between attracting and retaining customers. Therefore, in recent months, as Alex said, we've increased our investment across all of our brands, giving our customers an extra GBP 30 million of value in half 1 alone. And recognizing the different customers are attracted to different value drivers, and in line with our dual brand proposition in the U.K. and Ireland, this brand -- this investment has, in extra value, has encompassed -- has been applied in a number of different approaches. In Betfair, our investment is centered on sportsbook pricing to reemphasize the brand's strong value. So critically, the Betfair brand is still associated, still can play very strongly to its value heritage. But we've reduced our football overruns, and that has allowed our advertising. That's now being recognized or formally approved. That allows us to call out our best odds in all English football. And the value that's welcomed by customers and market research and while it's too early to get excited about it, there's some evidence that if we were glass half full kind of people, there's some evidence that that's already feeding through in customer behavior. Alternatively, at Paddy Power and Sportsbet, the focus is on headline offers, including the 2 Up You Win, which is where if a soccer team is 2 goals ahead, we pay out in running. The Australian variant of that is in AFL and Aussie football is 24 Up You Win, and that shows loyalty to our customers. And again, it's something we offer, perceived high-value, hard for smaller operators to compete and follow. And that's on top of loyalty -- rewarding loyalty Sportsbet's PowerPlay and Paddy Power's recently launched end of June a VIPP club. Some of you will have seen that CrownBet loyalty, as one of their key drivers of their recent success, we think they're right. And we're delighted with the pace of which we've been able to follow through and offer something that competes in Australia that we think is different in the U.K. and Ireland.

Brand investment, I'll flip through this very quickly. Of course, this enhanced value proposition has to be backed by continued investment in our brand across traditional media and through digital. And the U.K., as shown on the chart on the top left slide, will increase our share of voice, utilizing our scale and jewel brands to maximize the efficiency of the spend. In Australia, we continue to invest in supporting the Sportsbet brand leadership position and we now benefit from having key marketing assets in all major sports, having commenced in recent months a new racing.com with our partnership and sponsorship of the free to air TV coverage of AFL. We continue to invest in digital and social channels where our distinctive modern brands are uniquely well positioned. The charts on the right-hand side show that our brands dominate the industry in terms of relevant engagement across social channels. This reflects our, we believe, our brand's unique ability to engage in rich, valuable and sports-themed conversation. Many of you will remember the Paddy Power Ruby's revenge stuff around Cheltenham and to be honest, we were stunned but that got 4 million views across all social media platforms. And that was something that, I think, was only credibly done or executed by us. The guys did a very good job but it just shows that we try a lot of stuff and it's hard to predict what exactly will be successful. But starting with the capability under distinctive brands, we feel, are 2 advantages we consistently have. And we increasing look at ways to leverage our positions to drive engagements, as I talked about, socially driven pricing, and the Mates Rates on the bottom right here, this is where we enhance the price. It's slowly building virality into betting but it enhances the price available to customers if more people bet on the proposition. It increases your risks and one needs to be thoughtful about that. It's helpful to have the exchange as well. But the way they've implemented it in Australia, I think, is quite good. We call it crowd powered price in the U.K. It's Mates Rates in Australia and getting some cut through with consumers on that as well.

Moving to the newest part of the group. DRAFT, Play DRAFT. Unfortunately, this product's not available in the U.K. and Ireland because of licensing reasons, but it's almost worth the trip to the United States. The NFL season starts in 31 days, the Patriots V The Chiefs and this is an interesting market. The acquisition gives us exposure to an interesting market, 300 plus in revenues in the daily fantasy. This growth has driven by DraftKings and FanDuel who spent more than $1 billion on marketing, educating the market. It's also changed the regulatory agenda in the U.S., with 2006 being a year of a positive regulatory momentum, with 14 states now having passed bills clarifying and regulating daily fantasy. For context, the combined population of these states is some 17%, 20% higher than the U.K. population. But as the diagram at the center of the slide shows, we think this is only the beginning of the opportunity where, ultimately, we can go after season-long fantasy. We launched, in the last few weeks, a product called Best Ball. I can explain that to you but I'd rather do it in Q&A, or I'd rather do it one on one, but it's a season-long proxy, not quite as complicated as some of the traditional stuff. Requires an investment of time upfront but it gives you a game -- a contest, as they call it, a skill-based contest, that runs for the course of the season. And the product capabilities of that team, having sat down with -- there's now 24 of them as of last week, the product capability is something I don't think we could've organically built out by [trying to hire]. We believe their differentiated mobile ad offer is uniquely well-positioned to target recreational players. If you look at DraftKing and FanDuel, it's very much the kind of Bloomberg terminal-type approach to daily fantasy. The salary cap model, which is what they employ, requires real analysis and research. Our model's differentiated. Much easier interface, much more intuitive and a broader dispersion of winnings. It's easier to win on draft. McKinsey did some work in 2015 that showed that the probability of winning on draft was 3 times that higher than -- on snake draft, but our game of [draft] was 3 times over -- of salary cap. And we think that's consistent with our approach to betting, which is that it should be entertainment-led as opposed to winnings only, going to a tiny percentage of customers. So we're excited about that.

And on this slide, we also detail the transaction terms. The management team is very, very focused. It's hard hiring startup teams in the states, but the management team is very focused on building the value of this business. So we're aligned in that over the coming years.

So in summary, you may have heard of us making the point over the years but we're acutely aware that industry continues to be highly competitive and is exposed to both environments -- economic environment risks and specific regulatory risks. However, I'm more confident than ever that we've built a business that's strategically robust, has a structural advantage and will continue and enjoy sustainable, profitable growth. We've been focused on the long view. I think that's evidenced by the decisions we've made on technology over the past number of years and we continue to invest accordingly. Possibly, that's potentially come at a short term cost. And we all have undoubtedly seen an impact from the second platform work. And I'll talk about it in Q&A, but we're not competing as strongly as I'd like in the gaming market in the U.K. and Ireland. But we do enjoy a industry position in sports. My view has been -- continues to be this is the most attractive segment to the market with real barriers to entry. It's difficult, maybe perhaps impossible, to replicate our strong technology heritage, our risk in trading expertise, our unique exchange and our strong brands. One only has to look at the spectacular losses of some of the well-capitalized new entrants in different markets over the last number of years to just show how hard it is and how high the barriers to entry really are. The cost advantage of scale is funding the ongoing investment that we're making. But it is also driving an increase in the share of the profit pool that we're enjoying in the key markets in the U.K. and Australia. Other small operators may be driving stake [rolls] faster than we are from a long base but not many of them are growing profits. But we have to remain careful not to get too greedy and while Alex enjoys talking about operating margin expansion, we do challenge ourselves to think -- the customer must benefit from our efficiency. And I think that's the reason behind -- that's a lot of the reason behind our investment in pricing and promotion. So in the face of upcoming regulatory and fiscal changes, we believe it will be ever more important to be a scale operator. Australia, I think, is the starkest example of that. Many of our competitor's will struggle from profitability [and sports bets can thrive] as a result. Even overnight, there's more regulatory news in Australia that credit betting is now possibly within 6 months of being banned and many of you all know that that's 30% of the revenues of one of our competitors down there. So regulatory and compliance costs will go up. Being large is definitely a better place to be, even if it's easier to grow top line from a smaller base.

So with that, we think Australia shows what this might look like. We are confident of our strategic positioning.

And with that, I'm very happy -- Alex and I are very happy to take questions.

David Jennings, Davy. Three questions, please. Probably the first 2 for Alex and one for Breon. In our previous discussions, you've broadly said that we should net revenue margins for the group to be 9% and given the ongoing investment in free bets and promotions, should we now be revising down that assumption? Secondly, I was wondering if you could just comment on how you see the marketing [spend] for the group in H1, H2 this year. And by division, if necessary. And then finally, just want to bring -- given that you're choosing to leave the industry, I was wondering if you could share your view on the outlook for this sector, particularly the outlook for regulated and unregulated markets. And whether you feel that at this stage that the group needs to move more into unregulated markets to get the necessary return on investment to offset rising taxes and regulatory burden.

I think, on the first question on margin, one of the big strengths of the group is the geographic diversity, right? And therefore, diversity of margins, right? So the mix of revenue coming from different jurisdictions will absolutely affect the margin. So if you ask me a question, will this investment, right, reduce our margins, our net margin going forward? Yes, it's clear, we do see. But if I look at it though from the corporate perspective, if I see the higher growth revenue coming from higher margin places, the corporate net impact could be -- could not be as significant as perhaps individual. So that's kind of my answer on that. In terms of marketing, the very simple answer to that is, the second half marketing is only increasing because of draft. That's as simple as that, right, so -- for the year. My expectations, as I've always said on the marketing spend is, if there are any significant increases, they will come from new jurisdictions, new products, something very, very new but in terms of the overall -- kind of what I would call stand-alone marketing spend, we're spending as much as much as we possibly can spend in terms of -- in that regard. So there will be an increase in H2 due to draft.

So David, I'm conscious. I'm very focused on, we all are, but I'm personally very focused on business as usual and continuity and running this business sort of my last day as if it was my first day. But equally, I don't want to box the board or peter into a corner. I think we try not to be too self-congratulatory but we do pride ourselves on trying to be long-term thinkers. And I think that's evidenced in the legacy of both businesses. Over the last 5 years, we have derisked some of the regulatory risk at Betfair and at Paddy Power, undoubtedly, over many years, they've been thoughtful about investment from a regulatory perspective, including in the U.K. where we have passed on short-term opportunity to get greater exposure to the High Street, given the probable turmoil that would come from regulatory change. So I think even in licensed markets, we've shown to focus on the long-term, not the short term. I think Cormack in Australia has long held the view that credit would be unsustainable. And whilst years ago we offered [a bid] because it was a competitive necessity, I think his view will be vindicated shortly. In -- on the licensed markets, in the so-called grey markets, we do tolerate and do enjoy some grey market revenue, which, as you know, is higher margin. But we've shied away from a concentration risk there. It all depends on your time horizon. We had a visit -- the gambling commission goes around and visits the boards of these large companies and we had a visit from the gambling commission recently. International, the gambling commission's approach to international was on the agenda. And I think if one takes the long-term view, we are right to build brands in markets where there will be sustainable, competitive, privately operated betting operators. I'm very comfortable with that. In the future, should we have a bit more grey market experience, I think that it's very much a case-by-case basis. But I think, for the next 6 months, we'll continue in what we do, which is building a technology platform that enables us to compete in markets where you have to be able to compete well, with the extra benefit that we can bring that technology and that brand to other markets.

Thank you. Any other questions?

Ivor from Peel Hunt. On the margin investment brand, I remember a couple of years ago you say you didn't think margins were going up in this market. Is this really a choice on an investment, like more marketing spend would be or is this something forced on you by competitive pressure in order to maintain your market share?

It's a bit of both. I think if we look at the investment, there are different things going on. It's -- we're feeling a bit defensive about the U.K. and Ireland. At a time when we have chosen to tie our hands in terms of new product delivery, we are choosing to invest, there is a school of thought that we should have waited. And I think that might be the reason why there was a little bit of a difference between whatever consensus there was for the first half and here, that we chose to continue investing even though we feel we'd probably get a slightly better return on the new product stuff was delivered. But I think in Australia and the United States, where we have very strong market positions, I mean, the United States, with respect to TVG, we continue to invest for the long term, not just in terms of promotions and pricing stuff, where we've now changed the market dynamic in the U.S., but also in terms of people and technology. We think we're going to get to a stage in the U.S., which is one of the least [and] dynamic horseracing markets from a betting perspective, where racing tracks will pay us to show their races, if we offer money back specials on the races. And we think that the market is dynamic, both by competitive structure and regulatory frameworks. And the right thing to do is invest as hard as we can. We do that in Australia. We do in the U.K. and Ireland and we do that in the United States. So some of it is choice, some of it is necessity. And I think we will revisit the U.K. when the tech work is done but I can't believe -- I find it hard to believe that -- I go back to what I said the last time. I find it hard to believe that margins go up in this industry because the good operators shouldn't allow that oxygen to exist for smaller, less able competitors.

And on gaming, you've talked about product more than once, is there a regulatory backdrop to issues with gaming as well, in terms of how you're expected to deal with customers? Yes, is there a regulatory issue...

Yes. So I didn't really think I wouldn't get a chance to talk about gaming. Thank you for that cue. So gaming is the problem child. This time last year, I think many of us were concerned about sports betting and this time the previous year, I can't remember what it is, but we were concerned about something else and I'm sure that this time next year we'll be concerned about something different. And gaming, we looked hard at gaming. We've looked at acquisitions. We've looked at partnerships. We've looked at launching a new brand. And we've learned a fair amount. Our customer-facing product is not good enough. And the user -- the UI is a bit sloppy, if I'm honest. I'm not proud of that, but if I'm honest it has been a bit sloppy. Denise Dunne, who has recently rejoined us, has made great progress in improving that. Our mobile software, in particular, is a bit dated. And that's not great. The gaming customer is quite demanding. By their nature, they're fickle. There are lower costs, lower barriers to entry, and more gaming brands. It's more fragmented. They churn higher. And therefore, they're exposed to better product and more, because of their churn, than maybe sports betting customers are, and our product is not quite where it should be. We find, when we dig in to better gaming businesses, that their player management capability is better than ours. And if you think about that for a second, and we're self-critical, we think about life. We think about time mostly through the lens of sports betting guys. We think about events. We think about campaigns. The best gaming operators, which tend to be operators that started in gaming, and think about constantly running promotions, all of that is automated as opposed to thinking about -- they may not even know that the primary league is restarting. They may not even know that Cheltenham's on because they embedded automated promotions and messaging of the promotions, both through CRM and on-site and in-app in a way that we don't. We've looked at branded content. We've got a couple of gaps. Kitana was a great deal and produces great content but we still have a couple of gaps there. But to be honest, we're not missing an awful lot. On marketing, it's a mixed bag. The directed brand, directed gaming brand, most of our sports competitors, seem to be acquiring more gaming customers directed to their gaming brands. I think that's understandable because the Paddy brand, culturally, with the Irish thing had less gaming, and culturally, was more sports bet led. The Betfair brand, for reasons you'll all understand, was less relevant to gaming customers. So I'm not hugely surprised when our research shows that [Carl] -- that Sky Bet drive more traffic direct to their gaming sub-brands. And the multichannel guys are -- some of them are doing a very good job of driving customers from the shops, not just Fiorente customers, but Fiorente customers in particular across to online. And that's purely down to tech work. So of all of the things I've talked about, I think we can catch up with a lot of that. When we dig into gaming businesses, their marketing, their technical marketing capability isn't superior to ours and often is inferior to ours, but their understanding of their business is better. That's a good answer for us to have found because that means we can solve this problem mostly through talent. So we get into a place where we finish the tech work, have hired some people. There's a lot of people working on this. I've spent some time in the Playtech live casino center in Riga. We've hired some people from competitors who have focused on live casino in particular. And I think there's evidence that Denise and her team are making progress. But we're not prone to telling you it's fixed until we can definitively show in the numbers that it's fixed. So we find that we have a much better understanding of what the problems than we were. We're making progress on most of those dimensions. Now to your question about the regulatory thing, I don't want to hide behind regulation. It's just not really our style. But we do see that some of the smaller, faster growing guys, businesses, are doing stuff that we wonder about the sustainability, particularly in the affiliate space. When I talk to other senior guys in the industry, whose opinion I value, they wonder, given the risk we take, the regulatory risk we take with our brands when we outsource marketing to affiliates, they wonder about the sustainability of that. And they realize, as I do, that in other markets, affiliates seem to be licensed in the end. So I think, when I think about customer facing product, UI and mobile, that, we can fix. When I think about player management automation, that, we can fix. Branded content, we can license more, we can create some. Technical and marketing, digital marketing, we have. Direct to brand, I probably still think there'll be a gaming-only brand here and the only regulatory bet at the margin is there are some things that we're not quite comfortable doing that others seem to still continue to do. We're proud of the fact that we haven't been dragged into the CMA investigation and we think, long-term, the right thing to do is stay on the right side of the fence. So I think this is -- Alex has spoken, you'll notice with more confidence about gaming than previously. We think we're now at a steady state. And I think we'll rebuild from that. There's work to do but I think we have a much identification of the problem than we had 6 months ago.

You say that Paddy Power Betfair will have a gaming-only brand?

I think that at end stages we'll have a gaming-only brand, yes.

Like Varion?

And I think Varion is the -- that's kind of the rub as to whether it should be Roller, Two 6s, Blue Square, Flutter, and I don't know that guys like me are the optimal person to make that decision. But we're testing those brands and others in the market to see what the right brand for the gaming-led customer is.

And despite that languorous space of your presentation, I didn't quite pick up what you said about automated customer profiling. It sounds like personalization on the way. Where are we on that path to complete [the ones]...

We've taken concrete steps towards that. You get to a very -- again, it's about time horizon. You get to a very interesting set of questions in the long-term about personalization, and where that fits as being a responsible operator. But in the short-term, we've got to a cohort led decision where based in the geography of a customer and based on the past behavior of a customer, we give them more relevant messaging when they log in or before they're logged in. And that self -- that technology we've built in-house for the exchange and over time, we can apply that to other verticals in the business.

[Ron] here from Crédit Suisse. Just want to ask quickly. On the sports betting side, this contingent liability betting the two of you've got that's automated, is that in-house developed or did you use a software supplier to build that? And do you know if any of your competitors have that as well in the same automated way?

It's in-house. Some of our competitors do have it. I can't say whether it's automated or not. We're at the stage now where, when we can, we build it properly first as opposed to hacking it or -- in terms of spreadsheets and whatnot. We're very focused on building stuff properly once when we can. But I can't comment on other operators and how they do it.

And you mentioned in your talk that this sports app is going to be faster now following the migration. What do you mean by that? In what way is it going to be faster?

Just faster load speeds. Just the technology's more contemporary.

And then just moving on to retail quickly. Clearly, you do see some growth there or just in terms of what you see there, is it purely market share capture from the other operators? Or do you actually think that sports stakes as a market as a whole, will increase in retail going forward?

I think it's much easier to think of that as market share. When I visit shops, I'm always pleasantly surprised by the demographic. It's not quite as old as you would expect. But I don't spend so much time in shops that I can definitively say there are new entrants in the market that haven't been betting elsewhere. I think it's easier -- we're very comfortable with our capability -- we're very confident of our capability to compete on High Street and to take share of where it already is, where there's proven about.

And you're sort of complementary of the strategy of some of the multichannel operators moving some of that online, so do you think that's something that you're going to do in the future?

I think we've probably done a reasonable job of that in sports betting where Track My Bet in particular, was a market-leading proposition where when people place bets on SSBTs they can track that bed on their phone. As to whether one should be complementary of a business that's defined by retail, moving its revenues from the high-cost business to the Internet, I mean, that's for them and their shareholders to judge. But do I think there's room for us to improve our technology to do this better? I absolutely see a way. We have a clear path to improving the user journeys, the customer flows from High Street to online and back again. So I think there's more work to do there.

Richard Stuber from Numis. Three, please. The first one is on Spain and Italy you didn't mention in the presentation, could you give any quantification on how we did in the first half, either growth rates or where you think market share is for those 2 markets? The second question is on gross win margins, retail was broadly flat. Online was down. So I assume it was in-play margins, which hit more. Any comment on that? And is the modeling -- are the models for in-play, are they -- are you happy with? And the third question, as you mentioned on retail, you said, even with your conservative assumptions, you don't expect to close any shops. Could I ask you what your conservative assumptions are?

Do you want to take the margin one?

Yes. I mean, the margin is disproportionate affected by multi, that's right. So I mean, that's fundamentally. And the majority of those bets are online. So this is the -- so you're right in suggesting that online is a bigger percentage of that.

We're happy with the -- specifically on the in-play ones, we're very happy with the algorithms and the kind of certainty around pricing. So there's no real concern there. On the conservative assumptions, on High Street, I'm not going to be drawn about what we think the end-stage is but if you think about it for a second, the more extreme the limits on the stake, the more pain our competitors take. And that, in turn, if you think of this is kind of a zero sum game, more or less, that, in turn, plays strongly to us. And given that most of our shops, if not all of our shops in the U.K., are set up in direct competition with others, we're almost ambivalent about what happens and we have chosen, unlike most of our competitors, we've chosen not to be prescriptive. We haven't engaged with GC&S in telling them what the stakes should be or how many machines there should be. We haven't engaged with presuming to tell the treasury how they should think about this. But we have a high degree of certainty that we can keep -- that we will keep all of our shops. And we've conveyed that message, which has given some comfort to our staff, which, in turn, makes it easier to keep our staff and hire staff. So the only request we've made of government is clarity. And then we get on -- clarity and a level playing field and then we get on there. Italy and Spain. Italy is profitable. Very good work done. I have to credit the teams in Rome led by Marcello, who left us after the merger to go to Uber Eats a place that makes even here look pretty straightforward. And Claudio in Milan and the team have merged, are integrated. We still have both brands but the migration process has started, and probably kept a bit more of the Paddy revenue than we expected. So quite happy with that. Continue to invest. In Italy I've done a partnership or signed a partnership with Juventus, which some of us are quite excited about. Spain, good momentum, continue to invest, interesting cross synergies in some of the Mediterranean countries where you can cross-reference marketing deals one versus the other. It will be a while before these parts of the business are material in group context but the international team, the kind of continental European team, largely moving [Betfair] brands, except for the Paddy brands initially. Very happy with the momentum we're making there. It gives us the optionality of inorganic -- progressing the business inorganically and there are things to do. We're just quite choosey, but the organic momentum is encouraging.

And I think in Italy it's also encouraging that we're making huge progress with a much lower cost base. I mean, the number of people that are currently working in Italy as compared to the two, is it just significantly of how low a number. So it's very encouraging to see that progress.

Hi, its Simon French from Cenkos. Two for me, please. Firstly, Alex, the cost of sales in the online business was down 4% despite revenue being flat. Can you just highlight what's changed there? Whether it's any deals on the streaming or the mix of regulated versus unregulated revenues. And then secondly, once you've completed the investment in the tech platform, what will the third party -- is there anything left with OpenBet and then still Playtech on casino?

[Let me check those margins]. Yes, we still use PlayTech for a lot of the gaming stuff as do many operators. We still will have OpenBet. I think we'll still have OpenBet in the building for years to come. And we have a pretty relationship with NYX who now own OpenBet. But I think OpenBet will solve a particular problem for us, kind of the application there, the bet capture level. But it doesn't define R&D limit us in terms of front end in the way that it once did. So we -- some of the gaming stuff will be a third party, largely PlayTech but others as well. OpenBet will remain part of the tech stack. But we will get to a place where the customer-facing and the back office stuff and the promo stuff and customer operations stuff, we've rebuilt the customer, the back office tools. It used to be OpenBet for Paddy Power, it was a think called Console for Betfair. It now has a somewhat techy name of Yoda and that has -- that allows our customers, operations people, primarily in Malta, to have one interface to manage customers across multiple brands, better surfacing of promotional offers to the customer service agents, When they're talking or chatting with customers and that's now all in-house. Well increasingly in-house, not quite all done but increasingly in-house. Do you want to take the margins question?

Yes, the cost of sale is really just a mix issue. There isn't anything -- any fundamental changes in anything other than the mix. And to be honest, we can -- I can go back and take a look at what exactly the mix was. But that's all it is.

Joe Thomas from HSBC. Three questions, please. Firstly, on the exchange, it looks like it declined a bit in Q2, at least on my calculations, which may be wrong, but could you perhaps just give a bit of visibility about what is happening there and if there's any update on the pace of growth? I notice that you're advertising it a bit more now. The second thing is about the Betfair, sort of in-shop deposit that you've got going on now. Can you just give a bit of color as to why that is? Is it perhaps because the profile of Betfair customers is changing from being the sort of highly tech savvy people that you would once associate with the brand? And then final thing, is there any difference in the growth rate between the Betfair brand and the Paddy Power brand? I think a couple of presentations ago, you talked about perhaps operating them in different ways. Just appreciate your thoughts on those two things.

So I'll take the final two, and then you take the first one. We consciously chose before we completed the merger, we made a conscious decision and announced that we wouldn't go into brand by brand growth numbers. We don't want internal competition. The positioning is that Betfair is kind of the value every day for people who value value every day. Whereas the Paddy brand is closer to the sports led one which is large event driven and kind of more generous promotional stuff. There are times when one trades better than the other. And in the long-term, there'll be decisions to be made about how aggressively and how seasonably we advertise one versus the other. But it would be counterproductive to get into growth rates one versus the other at the moment. The issue of shop deposits, I think we were appropriately cautious, perhaps excessively cautious about the risk of brand dilution at the time of the merger. There was an epiphany for me when I was on the rare occasions ago racing, I think it was the grand national, where we had hospitality for Paddy Power customers in one room and in the adjacent room, there were Betfair customers, and we had a kind of a cord separating them. And we really were just speaking to the Paddy Power customers and we had Paul [Nicholas] talking to Betfair customers. And we were pretending to be two separate companies and all the customers wanted to do was ask us what it was like working in a merger. So when we then checked that the customers didn't mind that we owned multiple brands, we found that it facilitated the customer to take deposits in the shop. So we've got on with that and we did it and this is, I think, the future of the industry. We had to do that in a way and we chose to do it in a way where we were as responsible about that as possible and obviously, managing RG in the shops is a bit trickier than managing it online. So that took us a while to get that done but I think we're in a good place with that. And we'll see. It's early days but it's something the customer values and if it's a capability we have, I think it's something we should offer.

So you're right in terms of the decline. Of course, European championships is the reason for the decline. If you look at the first half of the year last year and exclude the European -- before the European championship, you'd see the growth in the exchange were about 2.5% compared to the first of this year, forget -- excluding the European championship now, right? So stopping the H1 before the European championship. I think that's what we kind of see long-term, 2.5%, 3%, great; 5% would be amazing, right? So I think that on the constant-currency basis, that's what you see. The decline is really euros-related before that 2.5% or so, which would be kind of in line with that guidance and our thinking long-term.

Just to follow up on that point about depositing in shops, it isn't reflective then of a change in customer base or...?

To be honest, we probably felt we'd get there anyway, even if the customer bases were very discrete. There would nothing wrong with -- even better -- even hard-core exchange customers are using the shops and Paddy Power has a history of taking poker deposits in the shops, for instance, right, which isn't really the same customer base either. But no, it was just more, I think we were probably quite cautious at the time of merger [by brand identification]. We may have some questions on the phones because [give us from the phone and we'll come back to some].

(Operator Instructions) Your first question comes from the line of Gavin Kelleher from Goodbody.

Just in terms of the amounts wagered and trends in the European online business, if we exclude the euro, the euro seemed to be a 9% headwind in Q2. Just given the increased promotional activity around net revenue margins, do you think that drove any increase in amounts wagered or do you think the amounts wagered underlying increase in Q2 was more results driven? Is there any way you can kind of extrapolate those things?

Not with any great science, Gavin. The mix, there is a results component, there's a pricing component and there's even a product component to this as well, specifically some of the loyalty stuff. So I think it would be counterproductive to try and disaggregate the measures. I think some of you focus on stakes a little bit more than we do. I think some of you focus on actives for an understandable reason, a little bit more than we do as well. So I don't think it'd be helpful to go into more detail.

(Operator Instructions) Currently, we have no questions.

Are there any other questions in the room?

Just a quick follow-up on the gaming side of it. You say that the platform should be also completed, [the platform iteration] completes by the end of the year. Given all the other things that you said you wanted to do in product and everything else, how do you think you can get back to sort of market growth rates?

I don't -- there are several hypotheticals in there. I think there'll be an immediate dividend on the gaming side with the new platform, immediate. And I think we need to see how some of the regulatory stuff plays out for some of our competitors. So we'll see what the market growth rate is. And trying to forecast next year's growth rates is just kind of beyond my capability at the moment. But the point I was trying to make is that we have a clear -- we've clearly now identified -- we feel we've clearly identified the relative gaps -- relative to competition and we're making progress to addressing most of them actually. But let's see what the numbers look like. I'd expect I'll be talking to you again about our gaming numbers. Let's see how we feel about it at the end of the year and let's see what we feel about it coming into next year.

Cool. So we've already taken a fair amount of your time. So unless there's any other -- then, just -- thank you for your time. It remains business as usual here over the next few months, but it is possible, this is the final time I get the result -- I get to present Paddy Power results, Paddy Power Betfair results. And I'd like to say genuinely, I appreciate the challenge over the years and the great support many of you have given. It's been a long journey, 16-plus years, it's been fun and eventful. And I truly believe the business has a good future. People ask me why I'm leaving, just as we get the tools to complete following the platform work, but quite honestly, I can -- I'm happy to cheer on this business from the sidelines. I'm confident of the bright future. A lot of my wealth is invested in this but the one thing that I can't get is time, and I do believe -- I'm excited about new challenges in different sectors. I'd also remind you, as I hope I have in the past, that this is a team sport. In addition to calling out my appreciation of the support from my team, we will introduce you to more of my colleagues in the next few months. We've already announced [Tietjens] for the sports bet business, while we haven't [surfaced] the quality of the team on the [Cormac] in recent years but I think they'll do that in September and retail in the coming months.

[Thank you for your] questions. Thank you.

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.