53
Year ending 31 December 2010

Year ending 31 December 2010 - Investors – Playtechplaytech-ir.production.investis.com/~/media/Files/P/Playtech-IR/... · 70. 90. 110. 130. 150 170 Gross income. Total revenue Adjusted

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Year ending 31 December 2010

• Introduction: Roger Withers, Chairman

• Financial Review: Shuki Barak, CFO

• Review of 2010: Mor Weizer, CEO

• Current Trading: Mor Weizer, CEO

• Strategic Initiative: Acquisition: Mor Weizer, CEO

• Questions and Answers

1

• Solid performance across key financial metrics

• Gross income up 26%

• Adj EBITDA up 10%

• Adj Net profit up 4%

• Final dividend set at 9.6 € cents

• Total of 19.0 € cents for the year, up 4%

• Positioning for growth in regulated markets

2

• Strategic Partnerships

• Scientific Games

• Sportech

• Acquisitions

• Virtue Fusion

• Intelligent Gaming (Jan 11)

• PTTS Turnkey (Mar 11)

• Corporate Governance

• 2 experienced non-execs & Head of Compliance

3

• UKLA has deemed Playtech to be currently ineligible for a Premium Listing

• A key test is that a company must have audited accounts covering at least 75% of its business for the past three years

• due in part to the rapid growth of WHO, the business contributed over 25% of Playtech’s profits in 2010

• no full year accounts for William Hill Online as only formed in late 2008

• by the end of 2011, Playtech will have audited accounts for WHO for the period 2009 to 2011

• Playtech is committed to attaining a Premium Listing in early 2012

4

€111.5 €111.5

€74.7

€137.3

€114.8

€93.7

€173.1

€142.3

€103.1

50

70

90

110

130

150

170

Gross income Total revenue Adjusted EBITDA

2008 2009 2010

+26.1%

+24.0%

+10.0%

5

€111.5 €111.5

€74.7

€137.3

€114.8

€93.7

€173.1

€142.3

€103.1

50

70

90

110

130

150

170

Gross income Total revenue Adjusted EBITDA

2008 2009 2010

€93.7

€103.1

Adjusted EBITDA

2009 2010

2009

Adjusted EBITDA

Gross income

2010

Adjusted EBITDA

Gross income

2009

Adjusted EBITDA

Total Revenue

2010

Adjusted EBITDA

Total Revenue

Out of Gross Income

Out of Total Revenue

68.2%

81.6% 72.4%

59.5%

Adjusted EBITDA Margin

The Decrease in the 2010 margins is mainly due to acquisitions and the

withdrawal from France

+10.0%

6

Total Results

40

60

80

100

120

140

Total Revenue 2009

Total Revenue 2010

Adjusted EBITDA 2009

Adjusted EBITDA 2010

VFGTSPT Organic

+24%

+10% €103.1

€93.7

€142.3

€114.8

83%

4%

13%

90%

3%7%

7

Excluding GTS, VF & France

40

60

80

100

120

140

Total Revenue 2009

Total Revenue 2010

Adjusted EBITDA 2009

Adjusted EBITDA 2010

VFGTSFrancePT Organic

€98.3

€110.0

€77.5

€84.9

+11.9%

+9.6%

8

40

60

80

100

120

140

160

180

WHO Share of profit

Other

Bingo

Poker

Casino

€173.1

€137.3

€111.5

2008 2009 2010 9

40

60

80

100

120

140

160

180

2008 2009 2010

€111.5

€173.1

€137.3

Total Growth +26.1%

WH SOP +6%

Existing Licensees

+5.1%

France-5.8%

New Business & acquisitions

+20.8%

10

• The increase in diversification was enhanced with the addition of GTS and VF licensees

• As local regulated markets grow, this diversity will continue, eliminating smaller, less economic licensees

Increased diversity = Decreased risk

% of total revenues

2009 2010

Top 2 licensees 39% 33%

Top 5 licensees 57% 49%

Top 10 licensees 74% 64%

Top 15 licensees 84% 74%

Licensees > €4m revenue 7 8

Licensees > €1m revenue 22 2911

70.0 , 72%

Adjustable Operating Expenses Including Dep & Amor

Adjusted Expenses Excluding Dep & Amor

Operating Expenses 2010

27.0 , 28%

12

39.6 , 57%

7.8 , 11%

4.6 , 6%5.4 , 8%

12.6 , 18%

Employee Related Costs

Admin & Office Costs

Travelling, Exhibitions & Marketing Costs

Other Operational Costs

Revenue Driven Costs

Operating Expenses 2010 €70.0m = 100% (excl’ Dep&Amor)

13

39.6 , 56%

7.8 , 11%

4.6 , 6%5.4 , 8%

12.6 , 18%

Employee Related Costs

Admin & Office Costs

Traveling, Exhibitions & Marketing Costs

Other Operational Costs

Revenue Driven Costs

Revenue Driven Costs

2009 2010

Total Revenue 114.8 142.3

Revenue Driven Costs 4.1 12.6

% out of Revenue 3.6% 8.9%

As expected the Revenue Driven Costs increased due to

Virtue Fusion and GTS

The projection for FY 2011 is 9%- 10% out of the Revenues

14

39.6 , 69%

7.8 , 14%

4.6 , 8%5.4 , 9%

Employee Related Costs

Admin & Office Costs

Travelling, Exhibitions & Marketing Costs

Other Operational Costs

Operating Expenses 2010 €57.4m = 100% (excl’ Dep&Amor & Revenue driven costs)

15

39.6 , 69%

7.8 , 14%

4.6 , 8%5.6 , 9%

12.6 , 18%

Employee Related Costs

Admin & Office Costs

Travelling, Exhibitions & Marketing Costs

Other Operational Costs

Employee Related Costs

2009 2010Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 57.4

Employee Related Costs 25.4 39.6% out of Adjusted Operating Expenses w/o Revenue Driven Costs 64.1% 68.9%

The increase in 2010 is due to VF and GTS acquisitions and employee expansion

The projection for FY 2011 is 69% to 71% out of Adjusted Operating Expenses w/o Revenue Driven Costs

16

39.6 , 69%

7.8 , 14%

4.6 , 8%5.4 , 9%

27.0 , 28%

Employee Related Costs

Admin & Office Costs

Travelling, Exhibitions & Marketing Costs

Other Operational Costs

Admin & Office Costs

2009 2010

Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 57.4

Admin & Office Costs 5.7 7.8

% out of Adjusted Operating Expenses w/o Revenue Driven Costs 14.5% 13.6%

The projection for FY 2011 is 12.5% - 13.5% out of Adjusted Operating Expenses w/o Revenue Driven Costs

17

39.6 , 69%

7.8 , 14%

4.6 , 8%5.4 , 9%

27.0 , 28%

Employee Related Costs

Admin & Office Costs

Travelling, Exhibitions & Marketing Costs

Other Operational Costs

Travelling, Exhibitions & Marketing Costs

2009 2010Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 57.4

Travelling, Exhibitions & Marketing Costs 4.4 4.6% out of Adjusted Operating Expenses w/o Revenue Driven Costs 11.2% 8.0%

The projection for FY 2011 is 7.5% - 8.5% out of Adjusted Operating Expenses w/o Revenue Driven Costs

18

39.6 , 69%

7.8 , 14%

4.6 , 8%5.4 , 9%

27.0 , 28%

Employee Related Costs

Admin & Office Costs

Traveling, Exhibitions & Marketing Costs

Other Operational Costs

2009 2010Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 57.4

Other Operational Costs 4.0 5.4% out of Adjusted Operating Expenses w/o Revenue Driven Costs 10.0% 9.4%

The projection for FY 2011 is 9.5% - 10.5% out of Adjusted Operating Expenses w/o Revenue Driven Costs

Other Operational Costs

19

Cash used in financing activities – dividend paid in period– €45.6m

PTEC continues to be highly cash generative with very high conversation rate from adjusted EBITDA

Net cash provided from operating activities including cash received from WHO – €103.3m

Cash Used in investing activities:

• Sportech – €11.3m

• Virtue Fusion - €26.1m

(*) Full summary the balance sheet statement detailed in the appendices 20

(*) Full summary the balance sheet statement detailed in the appendix

Robust balance sheet

Cash balance of €68.5m at 31 December 2010

Main Assets & InvestmentsVF - €36.6mGTS - €20.4mTribeca - €23.9mInvestment in WH Online - €162.2mOther investments - €11.3m

Total Balance Sheet assets - €384.1m

21

• Over 70 new casino games, move to monthly roll-out

• 5 new branded titles/ 10 games• Made up 3 of 6 top slots by revenue in H2

• Keeps the portfolio fresh & players interested

• Enhanced Flash capability broadens access/ exposure on sites

• Complementary third-party content

• Cross-platform becoming additional USP

22

• Casino: open platform & third-party

• Bingo: international, branded, PT side games

• Poker: mobile apps and lobby enhancements

• Emerging: Sports betting product; Lottery games pack

• Responsible gaming tools; payment systems

• Cross-platform developments

• Mobile app launches

• Videobet: UK roll-out & new features

• Intelligent Gaming acquisition, moving onto casino floor

23

• Over 15 new licensees, 19 new products

• Major names reflect Playtech’s appeal amongst Tier 1s

• RAY, Betfair, Codere, Unibet

• Product infill strategy: Tain, bet365• Licensees >€1 m: two thirds have 2 or more

Playtech products

• Cross-platform gaining real traction:

• e.g. Buongiorno

24

• Scientific Games: • Sciplay gaining traction and profile

• Global Draw: Videobet roll-out over halfway

• Sportech: • Positioning for the US with SGR

• William Hill Online: • Strong operational performance in its 2nd year

• Cash dividend growth

• Partnerships offer flexibility and deeper penetration

25

• Dominant software provider in UK market: great shop window

• Roll-out now over 11,000 machines: over 300+ daily

• Expect to be substantially complete end Q2: 20,000 machines• Cash box constant

• Operators already looking for new features

0

2000

4000

6000

8000

10000

12000

# of Sites

# of Terminals

26

• Future opportunities• UK pub market

• Central & South America

• Europe: Nordic, Italy, Germany

Games – core expertise

Systems– core expertise

UK distributors

International manufacturers

TARGET

Videobet

• Financial metrics• Both daily fee/ revenue share models

• 2011 is breakeven year

• Full roll-out/ new markets drive margins

Market Positioning

27

signslaunchedVB roll-out over

halfwaylaunched launched

signs gaming terminals gets US approvals

for SGR

launched acquisition

28

• Like-for-like growth – over 8%

• Daily average revenues first nine weeks vs. 2010

• Excluding impact of France closure

• Excluding GTS & VF acquisitions

• Daily average vs. Q4/10: over 1.0% ahead

29

• 4 new regulated markets/regulated products• New markets: Estonia, Finland, France

• New product: Italian bingo Q2 10, casino expected H1 2011

• Playtech launched in all new segments

• Regulated market income• 46% of gross income(1)

• 40% from total revenues

• Expected to expand on the back of additional

regulated markets activity, e.g. Betfair, RAY,

Videobet UK deployment

• Lessons learned

(1) inc. estimated % from WHO

• Targeting operators in newly-regulating markets

• Partnering with well-established operators

• Proactively leveraging unique cross-platform capabilities

• Scale and breadth across all products and networks

• Strategic partnerships: global reach and leverage

• Maintaining flexibility & opportunism

31

• Asset deal, not exercise of 2006 call options • Businesses have changed since 2006, additional assets/relationships included in

regulated markets

• Capabilities and expertise focused on newly regulating markets

• Removes concerns over inherited liabilities

• Non-interest bearing deferred consideration

• Pre-packed assets into new holding company for simplicity

• Completion due end-June, integration by end-December 2011

32

• Strong and increasing demand for full turnkey solutions in regulated markets

• Positions Playtech for major opportunities in newly-regulated markets: tenders are already underway

• Turnkey solutions: e.g. Spain, Germany

• Software & certain ancillary services: US, Greece, Germany

• Licensees increasingly looking for broad range of packaged services• Looking for experienced help in highly competitive markets, with first-mover advantages

• Expands Playtech’s offering from single product through to full turnkey• Turnkey solution attractive to new entrants seeking single supplier

• Consolidates position as leading provider of gaming software and services

• Businesses have 10 years experience in B2B services based on Playtech software• Quality management team easily integrated into Playtech group

33

• 4 divisions providing range of important ancillary B2B services• Marketing

• Operations

• Payment Advisory

• Network Management

• 850+ staff, principally based in Bulgaria & Philippines

• All licensees use Playtech’s software

• Revenues: H2 2010 annualised run rate €81.4m

• EBITDA: Current run-rate €19.4m • Historic EBITDA margin of 20-23%

34

Division

(fee structure)

Revenues

€ millionServices Clients

H2 run rate

%

Marketing Services

(Revenue share)57.2 70

Affiliate management, media buying, search engine optimisation and market-leading CRM capabilities: VIP mgmt

5 licensees including Imperial, Snai, Mansion, Serbian Lottery

Operational Service

(Revenue share,Hosting – fixed price)

13.3 17Technology hosting, 24/7 multi-lingual customer and technical support, finance and fraud prevention

Over 60 clients, including WHO, Mansion, Imperial, Netplay and Onisac

Payment Advisory

(%age deposit)8.3 10 Payment advisory services

Clients, include Imperial, Partygaming, Mansion and WHO

Network Management

(Fixed fee)2.4 3

Online, interactive multiplayer poker environment , tournament & VIP mgmt

35 - all iPoker licensees,

35

• €140m minimum consideration

• Payments of €20-25m in 6 month intervals • No interest charge payable on outstanding balance:

• Implies NPV of less than €130m for initial consideration

• No PTEC financing requirement expected, out of free cash flow

• Total consideration capped at €280m, based on 7x FY2014 EBITDA• Similar tranche payment structure for any subsequent consideration

• Full consideration triggered under certain EBITDA performance conditions

• Base case projection implies final valuation likely to exceed maximum consideration

36

• Expected to be earnings enhancing immediately• C.13% plus enhancing 2012 and beyond – before adjustment(1) and synergies

• Group EBITDA margins expected to be c.50%

• No disruption to current earnings and cash flow profile

• Operational synergies identified and yet to be factored in

• Net assets of €61.6m – debt free and cash free

(1) Earnings pre amortisation of goodwill

37

2009 2010

€’000 €’000

Operating profit 56,449 45,309

Amortisation 6,406 13,674

Depreciation 2,372 3,416

EBITDA 65,227 62,399

Share of Profit of associates before amortisation of intangibles 22,534 30,792

Change in FV of available for sale investment (CYF, ALOG & SPO) 399 2,223

Professional expenses on acquisitions 360 1,802

Employee stock option expenses 5,150 5,855

Adjusted EBITDA 93,670 103,071

Adjusted EBITDA margin 82% 72%

Adjusted EBITDA margin (out of gross income) 68% 60%

38

2009 2010

€’000 €’000

Net profit 69,511 64,670

Amortisation of investment in WH Online 10,513 8,266

Change in FV of available for sale investment (CYF, ALOG & SPO) 399 2,223

Discounting of deferred consideration 418 736

Amortization on acquisitions 3,282 7,516

Employee stock option expenses 5,150 5,855

Professional expenses on acquisition 360 1,802

Exchange differences – on deferred consideration (232) 1,200

Previous year one off tax - 939

Adjusted net profit 89,401 93,207

Adjusted net profit margin 65% 54%

Adjusted net profit margin (out of gross income) 78% 66%

39

2009 2010

€’000 €’000

Net profit 69,511 64,670

Depreciation, Amortisation 8,778 17,090

Employees Stock Options Expenses 5,150 5,855

Change in FV of available for sale investments 399 2,223

Income from associate (22,534) (30,792)

Amortisation of intangibles in associate 10,513 8,266

Net change in Assets and Liability & other adjustments (1,130) 3,691

Net Cash Provided by Operating Activities 70,687 71,003

Dividend received from equity-accounted associates 18,528 32,269

Capex, intangibles & capitalised development costs (13,698) (15,080)

Acquisition of subsidiary net of cash acquired (11,310) (26,136)

Investment in held for sale investments - (11,332)

Proceeds from sale of available for sale investments - 2,665

Investment in partnership - (2,430)

Investments in joint venture - (490)

Other (969) (1,184)

Net Cash Used in Investing Activities (7,449) (21,718)

Net Cash Provided by (Used in) Financing Activities (36,096) (39,466)

Increase in Cash and Cash Equivalents 27,142 9,819

Cash and Cash Equivalents at Beginning of year 31,558 58,700

Cash and Cash Equivalents at End of year 58,700 68,519

As of As of

31 Dec 2009 31 Dec 2010

€’000 €’000

Cash and Cash Equivalents 58,700 68,519

Receivables 16,443 22,749

Investments (CYF, ALOG & Sportech) 5,513 10,932

Investment in WH and other equity associates 170,366 162,583

Intangible assets 65,459 100,384

Fixed Assets & other non current Assets 10,704 18,946

Total Assets 327,185 384,113

Deferred Revenue 18,186 15,113

Deferred consideration 13,554 15,001

Contingent consideration (VF & GTS) 6,983 16,533

Trade and other accounts payable 17,478 24,669

Progressive and other operators’ jackpot 1,068 12,847

Shareholders' Equity:

Share Capital and Funds 183,563 189,690

Available for sale reserve 1,025 -

Retained earnings 85,328 110,260

Total Liabilities and Shareholders’ Equity 327,185 384,113 41

• Depreciation

• In line with business growth, still immaterial

• Capex additional growth only on dedicated investments for regulated markets

• Amortisation

• Development costs (internally generated) – €4.7m

• Amortisation on acquisitions/investments:

• Tribeca - €3.2m

• WHO - €8.3m

• GTS - €1.4m

• Virtue Fusion - €3m

42

2009€’000

2010 €’000

Revenues 114,775 142,294

Adjusted operating expenses (excl’ Dep&Amor)

(43,639) (70,015)

Depreciation & Amortisation (5,496) (9,574)

Amortisation on acquisitions (3,282) (7,516)

Other adjustable operating expenses (5,909) (9,880)

Operating profit 56,449 45,309

Share of WHO profit 22,534 30,792

Amortisation of intangibles in WHO (10,513) (8,266)

Finance income (expenses), net 2,055 1,266

Adjustable finance and other costs (186) (1,936)

Share of loss in joint venture - (152)

Adjustable Previous year one off tax - (939)

Tax (828) (1,404)

Profit for the Period 69,511 64,670

(*) Breakdown of adjusted net profit and adjusted EBITDA items detailed in the appendix

SUMMARY OF INCOME STATEMENT:

PROFIT FOR THE YEAR

ADJUSTED PROFIT

ADJUSTED EBITDA

43

2009€’000

2010 €’000

Revenues 114,775 142,294

Adjusted operating expenses (excl’ Dep&Amor)

(43,639) (70,015)

Depreciation & Amortisation (5,496) (9,574)

Operating profit 65,640 62,705

Share of WHO profit 22,534 30,792

Finance income (expenses), net 2,055 1,266

Share of loss in joint venture - (152)

Tax (828) (1,404)

Adjusted Profit 89,401 93,207

(*) Breakdown of adjusted net profit and adjusted EBITDA items detailed in the appendix

SUMMARY OF INCOME STATEMENT:

PROFIT FOR THE YEAR

ADJUSTED PROFIT

ADJUSTED EBITDA

44

2009€’000

2010 €’000

Revenues 114,775 142,294

Adjusted operating expenses (excl’ Dep&Amor)

(43,639) (70,015)

Operating profit 71,136 72,279

Share of WHO profit 22,534 30,792

Adjusted EBITDA 93,670 103,071

(*) Breakdown of adjusted net profit and adjusted EBITDA items detailed in the appendix

SUMMARY OF INCOME STATEMENT:

PROFIT FOR THE YEAR

ADJUSTED PROFIT

ADJUSTED EBITDA

45

29.0 26.7

8.3 11.8

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2009 2010

Adjustments to EPS

EPS

38.537.3

46