Chief Executive's statement

Profit from continuing operations by business ⁽¹⁾

	Year ended 31 December 2008 £m	Year ended 31 December 2007 (2) £m	Year on year change %
UK Retail	187.9	187.8	0.1
Other European Retail	20.6	21.7	(5.1)
eGaming	55.1	55.0	0.2
Telephone Betting (excluding High Rollers)	3.1	4.6	(32.6)
Other (3)	(8.0)	(6.3)	(27.0)
Corporate costs	(14.9)	(21.1)	29.4
Total excluding High Rollers	243.8	241.7	0.9
High Rollers	80.1	179.0	(55.3)
Total	323.9	420.7	(23.0)

⁽¹⁾ Before finance costs, tax, non-trading items and discontinued operations.
⁽²⁾ Restated - details of restatement explained in notes 2 and 39 to the consolidated financial statements.
⁽³⁾ Other includes international development costs and the start up of our Spanish joint venture.

2008 has been a busy year for the Group. eGaming has launched a range of initiatives which have led to an increase of 20.0% in net gaming revenues whilst, in UK Retail, the OddsOn! customer loyalty card was launched and strong control was exercised over costs. Outside the UK we are building businesses in Spain and Italy, and continue to explore opportunities in China.

Retail betting

In spite of the challenging economic environment our UK Retail business has seen gross win growth of 4.7% over the period, an improvement from last year's 3.3% increase. This rise was driven by our 8,044 machines which delivered gross win growth of 15.2%. The implementation of the 2005 Gambling Act has allowed us to operate extended winter evening opening and introduce B3 (£1 stake: £500 jackpot) content onto our terminals. During the year we have introduced five new B3 slot games.

OTC gross win benefited from extended winter evening opening in the first three months plus the incremental activity of the European Football Championships. However, a lower margin contributed to OTC gross win declining by 0.6%.

Cost control has remained a key area of focus for the UK business. After allowing for the 4.3% increase associated with extended winter evening openings and the introduction of Turf TV, other costs grew by just 0.5%. This mainly reflects the introduction of voluntary single opening, improved staff scheduling, the closure of unprofitable shops and the further reduction of Sky coverage in the shop estate.

In Ireland, we added a net 71 shops to the estate, the majority of which were in Northern Ireland. While the like for like Northern Ireland performance showed good gross win growth of 21.3%, the shops in the Republic of Ireland suffered an 8.8% like for like constant currency gross win decline. This reflected the more challenging economic environment and, with no machines, a greater reliance on Irish horseracing which experienced an unusually high number of abandonments. The underlying gross win performance for Ireland was down 6.6% during the year.

Our Belgian business reported £3.1 million of profit and is expected to benefit in 2009 from the recent closure of our two largest competitors. In Italy, the roll-out of our licences has been completed and the clear priority in 2009 is to grow revenues across the estate.

Remote betting and gaming

In February 2008 we announced our eGaming strategy of enhanced investment into new customer acquisition to drive profit growth in future years. The main initiatives announced included: television advertising for Ladbrokesbingo.com and Ladbrokescasino.com in the UK; tailoring regional content to more effectively satisfy the customer base (for example in the Nordics) and content innovation (for example increased opportunities for betting-in-play). On the back of these initiatives we have seen net gaming revenue increase by 20.0% over the year, with new customer sign ups growing by 21.5% to 373,000 and the number of unique active players using Ladbrokes.com also increasing by 20.8% to 726,000. The competitive environment for Poker remains extremely challenging, and in the second week of February we joined the Microgaming network to improve the liquidity on higher staking tables.

We have always been clear that the frequency of High Rollers activity is unpredictable and although not as active as 2007, High Rollers contributed £80.1 million of profit during 2008, a very material source of cash flow.

International development

In Spain, following the grant of our Madrid licence in April, our Sportium joint venture has now opened 45 outlets. The full potential of Spain remains dependent on the pace of regulation in other regions.

Our international team continues to pursue a number of opportunities and bids around the world, with a particular focus currently on China.

Regulatory environment

2008 saw the first full year of implementation of the 2005 UK Gambling Act. In response to the changes, we have had 82% of our estate open until 9.30pm throughout the year and have improved our machine content. eGaming meanwhile has seen the benefits of television advertising with campaigns for both Ladbrokesbingo.com and Ladbrokescasino.com.

On 31 October 2008, The Horserace Betting Levy was agreed with a roll-over at the previous levy rate of 10% of UK horseracing gross win. In addition The British Horseracing Association and The Race Course Association agreed to stage an additional 102 races in 2009.

In July 2008 the Gambling Commission outlined its plans for additional research into high-stake, high-prize gaming machines. The research is aimed at increasing understanding of what impact these machines may have on problem gambling. The Gambling Commission agreed to report back to the Minister for Sport by the end of June 2009.

In Spain the regulation of retail betting by the Comunidad de Madrid and the issuance of licences enabled us to launch our Sportium joint venture. In Italy we have rolled out the new licences we were awarded following further market regulation in 2006.

Consistent with EU single market law, we continue to strive for the removal of restrictions on the freedom of establishment and the free movement of services across borders. The European Commission has brought ongoing infringement procedures against a number of Member States, primarily in relation to national measures that effectively prohibit the activities of private remote gambling operators. A number of Member States are currently considering changes in legislation varying from those seeking to legalise, regulate and tax to those seeking restrictions which further protect state controlled monopoly operators and their revenues. We actively lobby individual Member States and challenge restrictions through complaints to the Commission and legal challenges in the national courts. In 2008 our long-running case in the Dutch national courts was referred to the European Court of Justice, from which a ruling is expected in late 2009/early 2010.