Final Results

Power Leisure PLC 21 February 2001 POWER LEISURE PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2000 Power Leisure plc, trading as Paddy Power Bookmakers, the leading bookmaker in Ireland with on-line interactive betting services in both Ireland and the UK, announces the Preliminary Results for the year ended 31 December 2000. HIGHLIGHTS - Profits after tax increase by 61.6% - Turnover E362.8m up 35% STG£231.1m (1999:E269.6m) - Operating profit E10.6m up 51% STG£6.75m (1999:E7.0m) - Pre-tax profits E11.0m up 55% STG£7.01m (1999:E7.1m) - EPS 18.20c up 63% 11.59p (1999:11.18c) - EPS fully diluted 16.87c up 52% 10.75p (1999:11.07c) - Final dividend proposed 1.17c per share 0.75p - Total dividends 3.92c per share up 43% 2.50p(1999: 2.75c) - Successful listing on London Stock Exchange and Irish Stock Exchange - Launch of paddypower.com and imminent launch of paddypower.co.uk - Interactive TV distribution through ntl and Telewest digital cable TV systems in UK planned for 2001 - Launch of UK and Irish Lucky Numbers (Lucky Choice) on paddypower.com Stewart Kenny, Chief Executive, Power Leisure plc said, 'We are very pleased with the Group's operational performance and development in the past year and, in particular with the margin of 8.1% achieved in our internet business launched in June 2000. The successful flotation ensures that we have the financial flexibility to pursue our on-line growth strategy, utilising our proven skills in bookmaking, product development and marketing. Our focus remains on developing online interactive channels in the UK and continued expansion of our telephone betting and licensed betting office business in Ireland ensuring that we remain the leading provider of entertainment - based sports betting services'. 21 February 2001 For enquiries contact : Stewart Kenny Chief Executive, Power Leisure plc Tel: +353 1 459 8811 Peter O'Grady Walshe Finance Director, Power Leisure plc Tel: +353 1 459 8811 Mobile: +353 86 255 5460 Issued on behalf of Power Leisure plc By: Drury Communications Ltd Contact: Mark Cahalane, Marie Therese Duffy, Billy Murphy Tel: +353 1 260 5000 Issued on behalf of Power Leisure plc By: College Hill Associates Contact: Michael Padley, Anontia Van der Bijl, Giles Cooper Tel: 0207 457 2020 POWER LEISURE PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001 RESULTS: FINANCIAL REVIEW Turnover The Group's turnover increased by 34.6% to E362.8million over 1999. Like for like turnover in our Licensed Betting Offices increased by 21.4%, while aggregate Licensed Betting Office ('LBO') turnover grew by 28.6%, which includes the impact of five additional LBOs opened during the year. Like for like turnover growth includes the positive impact of Sunday opening (which increased LBO aggregate turnover by approximately 5.8% over 1999). The growth is also positively impacted by the betting tax reduction from 10% to 5%, which occurred on 1 July 1999. Telephone betting turnover growth remained strong recording 56% increase in turnover over 1999 with measurable increases in our customer call handling response times in December 2000 following the relocation of the operation to larger premises. In its initial period of trading to 31 December 2000, paddypower.com, our internet-based betting service generated turnover of E8.5 million. Segmental Analysis Margin Gross margin, measured as bets placed (excluding betting duty and levies) less winnings returned to customers increased by 45.5% over 1999 to E46.3 million. Expressed as a percentage of turnover by delivery channel the following margins were achieved: 2000 1999 Licensed Betting Offices 13.38% 12.22% Telephone betting 8.89% 8.50% Internet-based 8.12% - Average 12.76% 11.88% Operating Profit Operating profit grew by 51% over 1999 to E10.6 million. This profit is stated after charging significant launch costs for our internet-based operations, which resulted in a loss of E3.0 million in this segment of our business. These costs include E0.5 million in respect of betting duty and levies incurred on behalf of customers and an allocated share of marketing and advertising expenditure amounting to E1.3 million. We have continued to experience significant increases in property rents as rent reviews were settled during the year. Dividends The provision for dividends paid and proposed in respect of the year ended 31 December 2000 increased by 46% over 1999 to E1.8 million. The Board is recommending a final dividend of E0.01167 per share payable on 6 April 2001 to shareholders on the register at the close of business on 2 March 2001. It is the Board's intention to adopt a progressive dividend payment policy mindful of the short-term requirements of our anticipated UK launch of online services and possible acquisition opportunities in that sector. Cashflow Net cash flow from operating activities grew by 117% over 1999 to E20.1 million. This cash was partially utilised in payments amounting to E9.6 million (1999: E3.3 million) to acquire fixed assets. Principally these assets comprised computer equipment amounting to E4.9 million purchased in connection with the establishment of our Irish-based internet operations and the majority of equipment required for the UK launch of our online services in 2001. Cash balances, which amounted to E16.0 million at 31 December 2000 (1999: E5.8 million), were increased by E3.6 million from the net proceeds of the share placing in December 2000. Cash balances include E1.3 million held on behalf of customers. The Group's cash balances are substantially invested in short-term bank deposits in accordance with our treasury management policies. Tax Rate Corporation tax charge for the year amounted to E2.9 million (1999: E2.1 million) which represents an effective tax rate of 26.8% (1999: 29.8%) against the standard rate of 24% (1999: 28%). The difference between the standard rate and our effective rate of tax is primarily due to significant investment in computer equipment which we depreciate over a three year period and depreciation of premises which is not tax deductible. OPERATING REVIEW: Power Leisure remains focused as a small-stake, fixed-odds sports bookmaker. The Company has added to its existing licensed betting offices (Licensed Betting Office) and telephone betting operations with the formal launch in June 2000 of our internet-based service, paddypower.com. Licensed Betting Offices The average slip value increased by 20% from E10.12 to E12.15. (note: a slip may contain more than one bet). The reduction in betting duty from 10% to 5% of bets wagered from 1 July 1999 continued to have a positive impact on our turnover growth during the year. In June 1999 we introduced Sunday trading in a selected number of our LBOs. The number of LBOs opened on Sunday varied as we experimented with customer reaction. These changes to trading, while increasing our operating costs, generated increased turnover. During 2000 the Company opened a further five (1999: six) Paddy Power LOBs bringing the total number of outlets in operation in Ireland at the year end to 118. In addition, a single LBO was opened in central London in December 2000. We opened one racecourse LBO (1999: one) at Leopardstown to bring to four the number of racecourse-based Licensed Betting Offices. Our relocation program continued during the year with two LBOs (1999: two) relocated to larger and better-positioned premises. A further eight (1999: seven) LBOs were refurbished. Telephone Betting Our telephone betting service (Dial-a-bet) continued its expansion during the year and ended the year with 19,967 registered customers and 7,390 active customers. (Note: active customers are defined as those that have bet with us in the previous three months). In December 2000 the telephone betting services were successfully relocated to the Company's new offices in Tallaght. The new facilities comprise 60 operator terminals servicing 120 incoming digital telephone lines. Our call management system allows monitoring of call handling standards and response times. Average transaction size per call increased by 1.9% from E80.73 in 1999 to E82.24. Market research indicated that our telephone-betting customers are particularly loyal to the services we offer and tend to use our service to the exclusion of others notwithstanding the availability of competing services. Our market share in the Republic of Ireland in the combined telephone, LBO and internet-based markets measured as a proportion of total off-course turnover reported by Customs and Excise stood at 30% for the year ended 31 December 2000. On-line betting Our turnover through our internet-based betting service, paddypower.com in 2000 of E8.5 million was generated on an average bet size of E31. The achievement of a gross margin of 8.1% on this turnover must be measured against the burden of Irish government betting duty and levies borne by the Group, which represented 5.3% of turnover. The willingness and the ability of the Group to bear this taxation burden, which it must do to maintain competitiveness with operators located in jurisdictions which levy a nominal tax on bets, is limited. In the absence of any material change in betting duty in either the UK or Ireland in the next few months the Group plans to locate operations in a more competitive jurisdiction for the benefit of international customers. paddypower.com was formally launched in June 2000. Based on an initial marketing campaign in Ireland we achieved a total of 12,433 account registrations by 31 December 2000. This number has grown to 14,441 by 13 February 2001. Of these 5,064 accounts at 31December and 5,974 at 13 February 2001 are active (note: active accounts are those that have placed a bet within the previous three months). Irish and UK horse and dog racing which accounted for a significant majority of our turnover in our telephone betting and LBOs accounted for less than 50% of our turnover through paddypower.com. Bets placed on soccer and golf generated a significant portion of paddypower.com turnover. We have executed contacts with ntl Group and Telewest, the two largest cable TV operators in the UK, which will allow our online service to be offered together with other bookmakers to the interactive (digital) TV customers of those companies. As of 31 December 2000 ntl Group announced that it had 530,700 interactive TV customers in the UK. At 14 November 2000 Telewest had 315,000 interactive TV customers. Both companies are committed to significant rollouts of their service throughout their respective franchised areas in 2001 and 2002. We expect to launch our service on the ntl Group system within the next few weeks together with the launch of our internet-based service to UK customers, paddypower.co.uk. We expect to launch our Telewest- based service by mid-2001. The Group currently plans to substantially increase the level of its expenditure on advertising and marketing in support of the UK launch of our interactive on-line services in 2001. We plan to review the results from this expenditure as the UK launch progresses. We anticipate that the impact of this expenditure together with related tax subsidisation costs will have a negative impact on Group earnings for 2001. OUTLOOK: The outlook for all our operations remains positive. In the first six full weeks of 2001 like-for-like turnover in our LBOs increased by 18.8% over the same period in 2000 while telephone-betting was 25.4% ahead of 2000. Our telephone betting active customer accounts fell by 3.3% in the first seven weeks of 2001. Turnover through paddypower.com continued to increase in the first seven weeks of 2001 with the number of active accounts increasing by 18.0% from 31 December 2000. Gross margins have remained satisfactory. We have also launched in January 2001 the on-line version of our successful Lucky Numbers product which is UK and Irish lottery result based. We are optimistic of a substantial response from our customers to this product, which in our LBOs account for approxiametely 4% of turnover. Our biggest challenge for 2001 will be to ensure the successful launch of our interactive service on the ntl and Telewest digital cable TV systems in the UK together with the internet based paddypower.co.uk. All of these services will involve subsidisation of the UK betting duty and levies by the Group in the short term. Considerable press speculation has occurred in relation to the possible shift in the UK from a turnover-based tax to a gross profits based tax. Assuming the rate of tax was reasonable such a move would be welcomed. We remain encouraged by progress in all areas of our business since the year end and look forward to being in a position to report further progress to our shareholders later this year. 21 February 2001 Note: Number of shares outstanding at 31 December 2000 was 47,144,120 and the weighted average number of shares in issues during the year 44,018,957 and the dilutive effect of options outstanding was 3,490,580. CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 December 2000 Year ended Year ended 1 December 31 December 2000 1999 E'000 E'000 Turnover 362,825 269,640 Costof winning bets paid 316,511 237,595 _________ __________ Gross profit 46,314 32,045 Operating expenses 35,685 25,008 _________ __________ Operating profit 10,629 7,037 Interest payable and (15) (53) similar charges Interest receivable and 336 81 similar income _________ __________ Profit on ordinary 10,950 7,065 activities before taxation Tax on profit on 2,937 2,107 ordinary activities _________ __________ Profit on ordinary 8,013 4,958 activities after taxation Dividends 1,756 1,206 _________ __________ Retained profit for the year 6,257 3,752 Premium on acquisition - (1,502) of own shares Transfer to capital - (165) redemption reserve fund Prior year adjustment - (2,603) Retained profit brought 10,610 11,128 forward _________ __________ Retained profit carried 16,867 10,610 forward _________ __________ Earnings per share Basic E0.1820 E0.1118 _________ __________ Diluted E0.1687 E0.1107 _________ __________ CONSOLIDATED BALANCE SHEET 31 December 2000 31 December 31 December 2000 1999 E'000 E'000 Fixed assets Tangible assets 21,336 15,473 Intangible asset 1,267 1,388 __________ 22,603 16,861 __________ _________ Current assets Debtors 671 908 Cash at bank and in hand 16,054 5,840 __________ _________ 16,725 6,748 Creditors (amounts falling 13,240 7,402 due within one year) __________ Net current assets/(liabilities) 3,485 (654) __________ _________ Total assets less current 26,088 16,207 liabilities __________ _________ Capital and reserves Called up share capital 4,714 4,630 Share premium 3,585 305 Capital redemption reserve fund 662 662 Capital conversion reserve fund 260 - Profit and loss account 16,867 10,610 __________ _________ Shareholders' funds 26,088 16,207 __________ _________ CONSOLIDATED CASH FLOW STATEMENT 31 December 2000 Year ended Year ended 31 December 31 December 2000 1999 E'000 E'000 E'000 E'000 Net cash inflow from 20,104 9,279 operating activities Returns on investments and servicing of finance Interest received 336 81 Interest element of finance (15) (53) lease payments ________ ________ 321 28 Taxation Corporation tax paid (2,216) (2,007) Capital expenditure and financial investments Payments to acquire (9,612) (3,316) tangible fixed assets Sale proceeds on disposal of 61 104 fixed assets (9,551) (3,212) Equity dividends paid (1,650) (1,333) ________ ________ Net cash inflow before 7,008 2,755 financing Financing Capital element of finance (418) (488) lease payments Repurchase of ordinary share - (1,667) capital Issue of new shares including share premium 3,624 - less costs of issue ________ ________ Net cash inflow 10,214 600 ________ ________ STATEMENT OF RECOGNISED GAINS AND LOSSES 31 December 2000 Year ended Year ended 31 December 31 December 2000 1999 E'000 E'000 Profit for the financial year 8,013 4,958 Dividends (1,756) (1,206) Premium on acquisition of own - (1,502) shares Transfer to capital redemption - (165) reserve fund __________ _________ Total gains and losses in the 6,257 2,085 year __________ _________ Year ended Year ended 31 December 31 December Reconciliation of movements 2000 1999 in shareholders funds E'000 E'000 Total recognised gains and losses 6,257 2,085 Prior year adjustment - (2,603) Opening shareholders' funds 16,207 16,725 Issue of new shares 339 - Share premium (net of costs) 3,280 - Increase in capital conversion reserve funds on 5 - shares issued during the year __________ _________ Closing shareholders' funds 26,088 16,207 __________ _________

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