Delivering Ladbrokes' strategy
Strategic objectives
To create long-term value across the Group by:- Steadily growing the profitability of the foundation business in the UK
- Capturing the growth available in the online space
- Developing the international retail businesses.
Key Performance Indicators (KPIs)
While strategic initiatives can change, our KPIs capture the desired results of our actions.Operational efficiency is key so the pursuit of these strategic goals is also examined from a cost(1)(2) growth and profit before interest and tax (2) growth perspective.
Long-term shareholder value
UK Retail
Maximising the UK's performance
As the largest part of the business it is important that the Board monitors the UK's performance to gauge whether operational initiatives (such as extended winter evening opening, the OddsOn! loyalty card, and the introduction of B3 content) are having the desired effects. This is achieved by examining the gross win growth and movements in some of the underlying levers to get a clear picture of what is driving the performance.
| 2008 | 2007 | |
|---|---|---|
| OTC margin | 16.9% | 17.1% |
| Like for like total costs | 0.7% | 3.0% |
| Average number of machines | 8,044 | 8,147 |
| Average weekly gross win per machine | £682 | £585 |
| Shop numbers (at 31 December) | 2,091 | 2,133 |
Detail behind 2008's performance can be found on the UK Retail page.
eGaming
Investments into new customer acquisition
In February 2008 we announced the intention to drive the top line of the eGaming business through investment into new customer acquisition.
The Board examines the gross win growth for this part of the business and specific online KPIs such as unique active players, real money sign-ups and cost per acquisition to monitor its progress.
| 2008 | 2007 | |
|---|---|---|
| Unique active players (000s) | 726 | 601 |
| Real money sign ups (000s) | 373 | 307 |
| Cost per acquisition | £152 | £120 |
| Adjusted cost per acquisition | £101 | £86 |
| Net revenue conversion | 32.0% | 38.3% |
In February 2008 when the strategy was announced, the Company highlighted that the investment into new customer acquisition was expected to leave profits flat in 2008 and drive profit growth thereafter.
More detailed text describing 2008's performance, and the impact of the initiatives on each of the divisions within eGaming, can be found on the eGaming page.
Telephone
Additional KPIs
To complete the picture of the Group, the Board examines the Telephone business which, with the High Rollers element, can have a sizeable impact on the Group as a whole.
| 2008 | 2007 | |
|---|---|---|
| Net revenue growth | (55.1)% | 510.9% |
| Cost (1) (2) growth | (61.0)% | 178.3% |
| Profit before interest and tax (2) growth | (54.7)% | 961.3% |
| No. of calls (000s) | 6,382 | 7,165 |
| Agent costs per call | 57p | 61p |
| Unique active players (000s) | 108.4 | 115.0 |
| Average monthly active player days | 176 | 193 |
| 2008 | 2007 | |
|---|---|---|
| Net revenue growth | (9.6)% | (10.1)% |
| Cost (1) (2) growth | (4.3)% | (0.9)% |
| Profit before interest and tax (2) growth | (32.6)% | (35.2)% |
| Gross win margin | 7.6% | 7.1% |
Detail behind this performance can be found on Telephone page.
Other European Retail
Geographical diversification
Where there is compelling commercial potential, and having regard for local regulation, Ladbrokes is seeking to diversify. The Group currently has developed operations in Ireland, Belgium and Italy.
The Board examine gross win growth, cost growth and profit growth to gauge the progress in these countries.
In 2008, the costs exceeded the gross win growth - this was owing to the development of our new Italian business and the rollout of its new premises.
Further detail on the performance of our constituent businesses within Other European Retail can be found on Other European Retail page.
The Group
The Group performance
The Board also examines the performance of the Group as a whole. To do this they examine the gross win growth, cost growth and profit performance over the year.
| 2008 | 2007 | |
|---|---|---|
| Gross win growth | (2.9)% | 29.2% |
| Operating cost (1) (2) growth | 7.3% | 16.2% |
| Profit before interest and tax (2) | (23.0)% | 60.5% |
Because of the volatile frequency of High Rollers activity the Board also examines the Group excluding this business.
The Board also look at the financial metrics below operating profit to gauge financial stability and cash efficiency.
| 2008 | 2007 | |
|---|---|---|
| Net interest expense (2) | £65.2m | £67.7m |
| Net debt to EBITDA (2) ratio | 2.6 | 1.9 |
| Net debt to EBITDA (2) ratio adjusted for High Rollers | 3.3 | 3.1 |
| Effective tax rate | 15.4% | 15.6% |
Detail on the Group performance can be found on Financial review page.
(1) Operating cost is a total of cost of sales after depreciation and amounts written off non-current assets and before gross profits tax plus administrative expenses.
(2) Before non-trading items and from continuing operations.
Ladbrokes PLC 2009