2012 Interim Results Announcement

Companies

Flutter Entertainment (CDI) (FLTR)

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-	Profit before tax up 21% to €68.7m and diluted EPS up 25% to 121.5 cent, despite some adverse sports results since our May trading update;
-	Interim dividend increased by 30% to 39.0 cent per share;
-	Net revenue growth of 29% in constant currency with double-digit growth in every division;
-	Four new online ventures with start-up losses of €6.3m in the period;
-	Strong balance sheet with net cash of €186m.

-	Accelerated growth in online scale, new customers and new business investment: customer acquisition up 50%, active customers up 41% to 1.2m, net revenue up 41% to €191m and operating profit up 7% to €48.5m:
		-	Strong paddypower.com growth: customer acquisition up 48%, active customers up 42% to 1.0m and net revenue up 32% in constant currency to €128m. Operating profit up 15% before start-up losses on four new ventures;
		-	Significant growth in Australia following investment last year: customer acquisition up 73%, online active customers up 37%, stakes up 24% and net revenue up 42% in constant currency. Operating profit up 35% to €13.2m;
-	Leading mobile market share: mobile net revenue up 239% in constant currency to €53m with 54% of active sportsbook customers transacting via mobile in June;
-	Successful entry into the Italian online market in May achieving a 4% share of the online sports betting market in the first full month of operation;
-	New mobile and tablet led casino product and brand (Roller), a sports betting based social game (BetDash) and Cayetano developed gaming product all to start contributing revenue in the second half of the year.

Patrick Kennedy	Jack Massey
Chief Executive	Finance Director
Paddy Power plc	Paddy Power plc
Tel: + 353 1 905 1011	Tel: + 353 1 905 1011

	Six months ended 30 June 2012 (unaudited)	Six months ended 30 June 2011 (unaudited)	% Change		% Change in Constant Currency ('CC')
		Restated¹
	€m	€m
Amounts staked by customers²
Online (ex Australia)	1,050	771	+36%	+31%
Online Australia³	763	642	+19%	+10%
Irish Retail	474	483	(2%)	(2%)
UK Retail	257	177	+45%	+37%
Telephone	196	152	+29%	+25%
Total amounts staked	2,741	2,225	+23%	+18%

Net revenue
Online (ex Australia)	127.9	93.8	+36%	+32%
Online Australia	67.2	47.0	+43%	+32%
Irish Retail	57.0	50.6	+13%	+13%
UK Retail	47.8	32.5	+47%	+39%
Telephone	11.4	8.5	+34%	+30%
Total net revenue	311.2	232.5	+34%	+29%

Operating profit
Online (ex Australia)⁴	35.9	36.5	(2%)	(6%)
Online Australia	13.2	9.8	+35%	+24%
Irish Retail	9.0	5.1	+79%	+85%
UK Retail	7.6	4.7	+61%	+48%
Telephone	1.3	0.2	+550%	+341%
Total operating profit	67.1	56.2	+19%	+13%

Diluted earnings per share	121.5c	97.1c	+25%	n/a

Note 1	For consistency with online industry practice, the Group started deducting free bets, promotions and bonuses from gross win and reporting the resulting net revenue amount from 2011. Profit is not affected, just the classification of costs. The first half of 2011 has been restated on this basis.
Note 2	Amounts staked by customers represents amounts received in respect of bets placed on sporting and other events that occurred during the period and net winnings, commission income and fee income earned on gaming and other activities. Net revenue (or ‘Income’) represents the net gain on betting transactions (stake less payout) plus the gain or loss on the revaluation of open positions at period end, net winnings on fixed odds and online casino gaming activities, and commission income and tournament fees earned from peer to peer games, financial spread betting and business-to-business services. The costs of customer promotions and bonuses are deducted when arriving at net revenue.
Note 3	Online Australia also includes legacy telephone operations accounting for less than 5% of its gross and operating profit in H1’12.
Note 4	Online (ex Australia) includes start up losses of €6.3m on four new online ventures in H1’12 (H1’11: €0.3m).

-	UK Retail like-for-like sportsbook stakes up 12% and machine gaming net revenue up 5% in constant currency. Operating profit up 61% to €7.6m, with 23 shops opened in the year to date;
-	Irish Retail operating profit up 79% to €9.0m, driven by the normalisation of sports results. Like-for-like stakes down 3%.

€m	H1 2012	H1 2011	% Change	% Change in Constant Currency ('CC')
Sportsbook net revenue	139.4	95.5	+46%	+39%
Gaming & other net revenue	51.7	39.5	+31%	+26%
Total net revenue	191.0	135.1	+41%	+35%
Gross profit	159.1	114.5	+39%	+33%
Operating costs	(110.7)	(69.2)	+60%	+54%
Operating profit	48.5	45.3	+7%	+1%
% of Group operating profit	72%	81%
Active customers	1,173,185	833,347	+41%
(Active customers are defined as those who have deposited real money and have bet in the reporting period, excluding indirect B2B customers)

-	An upgraded technology infrastructure to significantly increase availability, resilience and capacity for growth;
-	Investing in new media for ongoing growth as consumers' media consumption shifts to social, online and mobile channels;
-	Expansion in betting markets, betting events and gaming content, for both online and mobile;
-	An increase of 336 or 69% in online and technology headcount at June 2012 as compared to June 2011.

Online Channel Active Customers	H1 2012	H1 2011	% Change
UK	798,139	542,416	+47%
Ireland and Rest Of World	198,469	161,625	+23%
Total	996,608	704,041	+42%

Online Customers Product Usage	H1 2012	H1 2011	% Change
Sportsbook only	631,958	421,169	+50%
Gaming only	90,233	85,702	+5%
Multi product customers	274,417	197,170	+39%
Total	996,608	704,041	+42%
(Active customers are defined as those who have deposited real money and have bet in the reporting period, excluding indirect B2B customers)

-	The migration of Sportsbet and IAS to the same technology platform as paddypower.com paving the way for the rollout of more betting markets, mobile product and streaming;
-	The implementation of improved customer analytics, acquisition and retention, social media and online technologies;
-	Increased headcount, including opening an office in Sydney to access an expanded pool of talent and support a focus on the New South Wales market;
-	Structural improvements to the expected normal gross win percentage by optimising risk management, and the business and customer mix.

Telephone Channel Active Customers	H1 2012	H1 2011	% Change
UK	38,626	39,251	(2%)
Ireland and Rest Of World	18,659	19,530	(4%)
Total	57,285	58,781	(3%)
(Active customers are defined as those who have deposited real money and have bet in the reporting period)

-	Sporting results over the short term and/or the performance of the Group in managing bookmaking risk affecting the achievement of expected gross win margins;
-	Disruption to the sporting calendar or broadcasting of major sporting events;
-	The ability of the Group to enter new markets, launch new products or introduce new systems in a successful, cost effective and/or timely manner;
-	The intensity of competition in the Group's markets and the Group's ability to successfully compete;
-	Economic, technological, consumer behaviour and other macro factors affecting demand for the Group's products;
-	The regulatory or legislative environment, interpretation and practices applicable to the Group's activities and related litigation and reputational risks;
-	The ability of the Group to avoid disruption to its systems and protect customer and other key data;
-	Changes in tax law, interpretation or practice, or payment obligations to racing and sporting bodies;
-	Relationships with, and performance by key suppliers and performance for key B2B customers;
-	The ability of the Group to attract and retain key employees;
-	Societal, media or political sentiment towards the Group, its brands and its businesses;
-	Changes in the exchange rates between the euro and the pound sterling and Australian dollar.

i)	Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii)	Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

		Six months ended 30 June 2012 (unaudited)	Six months ended 30 June 2011 (unaudited) Restated (Note 2)
	Note	€'000	€'000

Amounts staked by customers		2,740,705	2,225,477

Continuing operations
Income		311,239	232,462
Direct betting costs	5	(46,348)	(32,477)
Gross profit		264,891	199,985
Employee expenses		(94,415)	(67,103)
Property expenses		(21,146)	(16,684)
Marketing expenses		(35,198)	(20,203)
Technology and communications expenses		(18,169)	(15,047)
Depreciation and amortisation		(14,794)	(11,823)
Other expenses, net		(14,078)	(12,894)
Total operating expenses		(197,800)	(143,754)
Operating profit		67,091	56,231
Financial income	6	1,683	1,004
Financial expense	6	(106)	(472)
Profit before tax		68,668	56,763
Income tax expense	7	(8,937)	(8,139)
Profit for the period		59,731	48,624

Attributable to:
Equity holders of the Company		59,731	47,375
Non-controlling interest		-	1,249
		59,731	48,624

Earnings per share
Basic	8	€1.240	€0.999
Diluted	8	€1.215	€0.971

		30 June 2012 (unaudited)	30 June 2011 (unaudited)	31 December 2011 (audited)
	Note	€'000	€'000	€'000
Assets
Property, plant and equipment		101,011	80,301	95,599
Intangible assets		57,876	54,204	51,000
Goodwill	9	98,390	75,251	93,607
Financial assets - restricted cash	11	6,170	2,262	6,409
Deferred tax assets		4,617	2,505	2,594
Trade and other receivables		5,513	-	6,735
Total non current assets		273,577	214,523	255,944
Trade and other receivables		33,418	19,658	31,165
Financial assets - restricted cash	11	29,024	16,422	18,149
Financial assets - deposits	11	6,942	-	-
Cash and cash equivalents	11	143,413	72,311	111,139
Total current assets		212,797	108,391	160,453

Total assets		486,374	322,914	416,397

Equity
Issued share capital		5,076	5,042	5,072
Share premium		38,604	34,449	37,826
Treasury shares		(34,177)	(34,177)	(34,177)
Shares held by long term incentive plan trust		(22,884)	(23,774)	(33,397)
Other reserves including foreign currency translation, cash flow hedge and share-based payment reserves		33,914	28,548	36,976
Retained earnings		241,818	158,257	218,086
Total equity - attributable to equity holders of the Company		262,351	168,345	230,386

Liabilities
Trade and other payables		161,345	121,254	136,925
Derivative financial liabilities		17,122	8,821	9,715
Provisions		483	502	593
Borrowings		-	7	-
Current tax payable		12,906	5,506	11,408
Total current liabilities		191,856	136,090	158,641

Trade and other payables		24,835	9,668	20,347
Derivative financial liabilities		509	1	194
Provisions		1,717	1,632	1,649
Deferred tax liabilities		5,106	7,178	5,180
Total non current liabilities		32,167	18,479	27,370

		Six months ended 30 June 2012 (unaudited)	Six months ended 30 June 2011 (unaudited)
	Note	€'000	€'000
Cash flows from operating activities
Profit before tax		68,668	56,763
Financial income		(1,683)	(1,004)
Financial expense		106	472
Depreciation and amortisation		14,794	11,823
Employee equity settled share-based payments		5,366	6,805
Foreign currency exchange gain		(1,148)	(89)
Loss on disposal of property, plant and equipment and intangible assets		121	99
Other adjustments		-	568
Cash from operations before changes in working capital		86,224	75,437
Increase in trade and other receivables		(249)	(4,490)
Increase in trade and other payables and provisions		30,533	3,885
Cash generated from operations		116,508	74,832
Income taxes paid		(8,987)	(6,940)
Net cash from operating activities		107,521	67,892

Cash flows from investing activities
Purchase of property, plant and equipment		(13,978)	(13,024)
Purchase of intangible assets		(8,842)	(2,502)
Purchase of businesses, net of cash acquired	10	(3,554)	(211)
Payment of contingent deferred consideration	10	(510)	(50)
Proceeds from disposal of property, plant and equipment and intangible assets		77	45
Purchase of financial assets - deposits	11	(6,997)	-
Interest received		1,660	1,026
Net cash used in investing activities		(32,144)	(14,716)

Cash flows from financing activities
Proceeds from the issue of new shares under option agreements		782	325
Purchase of shares by long term incentive plan trust		(2,790)	-
Purchase of non-controlling interest		-	(85,311)
Dividends paid	12	(34,355)	(24,340)
Movements in current and non current restricted cash balances		(10,318)	4,695
Repayment of non-controlling shareholder loans		-	(1,038)
Payment of dividends to non-controlling shareholders		-	(9,244)
Secured bank loan repayments		-	(2,197)
Finance lease repayments		-	(1,264)
Interest paid		(71)	(319)
Net cash used in financing activities		(46,752)	(118,693)

	Online (ex Australia)	Online Australia	Irish Retail	UK Retail	Telephone	Total Group
	€'000	€'000	€'000	€'000	€'000	€'000
Income As reported under previous accounting policies	101,063	47,738	50,976	32,747	9,460	241,984
Restatement - customer promotions and bonuses	(7,227)	(744)	(361)	(213)	(977)	(9,522)
As reported under new accounting policies	93,836	46,994	50,615	32,534	8,483	232,462
Direct betting costs (other direct betting costs)
As reported under previous accounting policies	(12,379)	(11,166)	(4,935)	(4,701)	(59)	(33,240)
Restatement - customer promotions and bonuses	763	-	-	-	-	763
As reported under new accounting policies	(11,616)	(11,166)	(4,935)	(4,701)	(59)	(32,477)
Operating expenses (marketing expenses)
As reported under previous accounting policies	(52,207)	(26,787)	(40,987)	(23,337)	(9,195)	(152,513)
Restatement - customer promotions and bonuses	6,464	744	361	213	977	8,759
As reported under new accounting policies	(45,743)	(26,043)	(40,626)	(23,124)	(8,218)	(143,754)
Impact on operating profit	-	-	-	-	-	-

	Online (ex Australia)	Online Australia	Irish Retail	UK Retail	Telephone	Total reportable segments
	€'000	€'000	€'000	€'000	€'000	€'000
Income from external customers	127,933	67,176	56,982	47,863	11,285	311,239
Inter-segment trading	-	-	(2)	(83)	85	-
Total income	127,933	67,176	56,980	47,780	11,370	311,239
Direct betting costs	(18,005)	(15,376)	(5,121)	(7,712)	(134)	(46,348)
Gross profit	109,928	51,800	51,859	40,068	11,236	264,891
Depreciation and amortisation	(4,037)	(3,433)	(3,768)	(3,070)	(486)	(14,794)
Other operating expenses	(69,975)	(35,146)	(39,048)	(29,424)	(9,413)	(183,006)
Reportable segment profit	35,916	13,221	9,043	7,574	1,337	67,091

	Online (ex Australia) Restated	Online Australia Restated	Irish Retail Restated	UK Retail Restated	Telephone Restated	Total reportable segments Restated
	€'000	€'000	€'000	€'000	€'000	€'000
Income from external customers, being total income	93,836	46,994	50,615	32,534	8,483	232,462
Direct betting costs	(11,616)	(11,166)	(4,935)	(4,701)	(59)	(32,477)
Gross profit	82,220	35,828	45,680	27,833	8,424	199,985
Depreciation and amortisation	(2,140)	(2,358)	(4,185)	(2,690)	(450)	(11,823)
Other operating expenses	(43,603)	(23,685)	(36,441)	(20,434)	(7,768)	(131,931)
Reportable segment profit	36,477	9,785	5,054	4,709	206	56,231

	Six months ended 30 June 2012	Six months ended 30 June 2011 Restated
	€'000	€'000
Income
Total income from reportable segments, being total Group income	311,239	232,462

Profit or loss
Total profit from reportable segments	67,091	56,231
Unallocated amounts:
Financial income - non-Online Australia (1)	293	282
Financial income - Online Australia	1,390	722
Financial expense - non-Online Australia (1)	(106)	(128)
Financial expense - Online Australia	-	(344)
Profit before tax	68,668	56,763

Non current assets
	30 June 2012	30 June 2011	31 December 2011
	€'000	€'000	€'000
UK	96,522	67,829	89,531
Australia	94,724	88,697	93,302
Ireland and rest of world	71,544	53,230	64,108
Total	262,790	209,756	246,941

	Six months ended 30 June 2012 €'000	Six months ended 30 June 2011 €'000
Recognised in profit or loss:
Financial income
On financial assets at amortised cost:
Interest income on short term bank deposits	1,683	1,004
	1,683	1,004
Financial expense
On financial liabilities at amortised cost:
Bank loans	-	270
Bank guarantees	49	64
Finance leases	-	66
Unwinding of the discount on provisions and other non current liabilities	57	72
	106	472

Recognised in other comprehensive income:
Foreign exchange gain / (loss) on translation of the net assets of foreign currency denominated subsidiaries	3,921	(3,152)
Fair value movement on cash flow hedges	(1,675)	-
	2,246	(3,152)

		Six months ended 30 June 2012	Six months ended 30 June 2011

Numerator in respect of basic and diluted earnings per share (€'000): Profit attributable to equity holders of the Company		59,731	47,375

Denominator in respect of basic earnings per share (in '000s):
Ordinary shares in issue at the beginning of the period		50,725	49,954
Adjustments for weighted average number of:
-	ordinary shares issued during the period	16	312
-	ordinary shares held in treasury	(1,734)	(1,734)
-	ordinary shares held by long term incentive plan trust	(847)	(1,121)
Weighted average number of ordinary shares in issue during the period		48,160	47,411
Adjustments to derive denominator in respect of diluted earnings per share (in '000s):
Dilutive effect of share option schemes, sharesave scheme, shares held by long term incentive plan trust and share award schemes		991	1,354
Adjusted weighted average number of ordinary shares in issue during the period		49,151	48,765

Basic earnings per share		€1.240	€0.999
Diluted earnings per share		€1.215	€0.971

	Irish Retail €'000	UK Retail €'000	Online (ex Australia) €'000	Online Australia €'000	Total €'000
Balance at 1 January 2011	8,207	9,996	-	58,764	76,967
Arising on acquisitions during the year	-	1,201	13,303	-	14,504
Foreign currency translation adjustment	-	229	-	1,907	2,136
Balance at 31 December 2011	8,207	11,426	13,303	60,671	93,607
Arising on acquisitions during the period (Note 10)	-	2,604	-	-	2,604
Foreign currency translation adjustment	-	291	-	1,888	2,179
Balance at 30 June 2012	8,207	14,321	13,303	62,559	98,390

	Book values on acquisition	Provisional fair values 30 June 2012
	€'000	€'000
Identifiable net assets acquired:
Property, plant and equipment	1,044	1,044
	1,044	1,044
Goodwill arising on acquisition - total		2,604
Consideration		3,648
The consideration is analysed as:
Cash consideration		3,554
Contingent deferred consideration		94
		3,648

	Six months ended 30 June 2012
	€'000
Cash consideration - acquisitions in the period	3,554
Cash consideration - acquisitions in previous periods	510
	4,064
Analysed for the purposes of the statement of cash flows as:
Purchase of businesses, net of cash acquired	3,554
Payment of contingent deferred consideration	510
	4,064

	30 June 2012 €'000	31 December 2011 €'000
Non current
Financial assets - restricted cash	6,170	6,409
	6,170	6,409
Current
Financial assets - restricted cash	29,024	18,149
Financial assets - deposits	6,942	-
Cash and cash equivalents	143,413	111,139
	179,379	129,288
Total	185,549	135,697

	30 June 2012 €'000	31 December 2011 €'000
Cash	35,421	21,855
Short term bank deposits - with an original maturity of less than three months	107,992	89,284
Cash and cash equivalents in the statement of cash flows	143,413	111,139