Financial Results
4 March 2004
David Harding
Chief Executive
2
Highlights, 52 weeks to 30 December 2003

Fourth consecutive year double digit earnings growth

Product diversification and increased betting opportunities

Fixed odds betting terminals

IT and estate development

Government and regulation
3
Earnings growth – gross wins
£m
%
1999
2000
2001
2002
2003
03/02
CAGR
Retail
368
384
417
419
505
21
8.3
Telephone
44
48
48
51
57
11
6.4
Interactive
1
17
35
55
85
55
244.9
417
452
503
528
654
24
11.9
Group *
* Includes other
4
Earnings growth – EBIT
£m
%
1999
2000
2001
2002
2003
03/02
5 yr CAGR
Retail
72
82
93
112
152
36
20.6
Telephone
10
16
16
17
22
28
21.8
Interactive
(3)
(8)
9
21
37
81
-
Group *
74
85
112
141
202
43
28.3
* Net of other and central costs
5
Product diversification
– indicative share of gross wins 2003
Other
sports
* Numbers
7%
Other
sports
4% Dogs
5%
Football
7%
Horses
73%
Horses
36%
Football
31%
Dogs
21%
Retail
Numbers
7%
Other
Sports
19%
Football
18%
Terminals/
AWPs
20%
Horses
45%
Dogs
6%
Telephone
Sportsbook & Arcade
6
Increased betting opportunities
& extended opening - Retail
128
Betting opportunities
November Thursday
92
48 Numbers
18 Numbers
47 UK racing Sundays
100 % increase
69
12 Numbers
40 Dogs
46 Dogs
30 Dogs
7 O/seas
horses
20 UK Horses
2000
14 O/seas
horses
14 O/seas
horses
20 UK Horses
20 UK Horses
2002
2003
105 UK racing evenings
50 % increase
2004
7
Fixed odds betting terminals

At end December we had 3239 FOBTs and 2454 AWPs in the estate

Average installed base throughout the year 2400 FOBTs, 2700 AWPs

Average weekly net profitability per terminal £380

Planning assumption for 2004, 3600 FOBTs and 1900 AWPs by mid year

Factors influencing average profitability:Negative
Positive
Code of Conduct
Competitor rollout
Roll out to smaller shops
Density optimisation
Extended opening
New product development
8
Estate development
New licences
Resites
Extensions
Facelifts/upgrades
Forecast
Completed
14
33
17
56
13
28
14
70
120
125
*
20 Target new licence openers ‘04
*
47 New license applications in process
9
IT development


Retail technology programme
-
Electronic bet capture and settlement (EPOS)
-
New text information systems
Central bookmaking/single account
10
Government and regulation
Pre-legislative scrutiny
Gambling Commission
Gaming issues
Bookmaking issues

Definitions

Terminals

Exchanges

Bureaucracy
11
Tom Singer
Group Finance Director
12
Presentation in four parts
1.
Financial results FY2003
2.
Return of capital
3.
Guidance FY2004
4.
Current trading
13
Summary of Financial Results
FY03 v FY02 (pre-exceptional items)
FY03
£m
FY02
£m
Mvmt
%
Turnover (1)
5945.8
3365.3
76.7
Gross win (2)
654.3
527.7
24.0
Gross win % betting business
9.9%
14.3%
-4.4%
(143.2)
(111.7)
-28.2
511.1
416.0
22.9
(312.3)
(277.0)
12.7
2.9
2.4
EBIT
201.7
141.4
42.6
EBITDA
221.7
158.8
39.6
GPT, duties, levies, royalties and other related costs
Gross profit (contribution)
Net operating expenses
Associate income
(1)
(2)
Includes casino drop and AWP cash-in-box net of VAT
Includes casino drop and AWP cash-in-box inclusive of VAT
14
Summary of Earnings and Dividends
FY03 v FY02 (pre-exceptional items)
FY03
£m
FY02
£m
Mvmt
%
Profit before interest and taxation (EBIT)
201.7
141.4
42.6
Net interest payable
(30.9)
(59.9)
48.4
Taxation
(45.2)
(22.9)
-97.4
Profit after taxation
125.6
58.6
114.3
- Interim
(14.6)
(12.1)
- Final
(37.6)
(24.2)
(52.2)
(36.3)
43.8
73.4
22.3
229.1
Basic
30.0
16.9
77.5
Diluted
29.6
16.8
76.2
Dividend
Retained earnings
Earnings per share (pence)
15
Analysis of Gross Win
FY03 v FY02
1H03
£m
1H02
£m
Mvmt
%
2H03
£m
2H02
£m
Mvmt
%
YoY mvmt
%
Retail (1)
253.7
215.7
+18
251.9
203.2
+24
+21
Telephone
28.3
27.5
+3
28.2
23.4
+21
+11
Interactive (2)
38.6
29.3
+32
46.3
25.6
+81
+55
Other (3)
3.4
1.2
+183
3.9
1.8
+117
+143
324.0
273.7
+18
330.3
254.0
30.0
+24
Group
(1)
(2)
(3)
Includes traditional OTC business, AWPs and FOBTs
Includes Sportsbook, Casino and Poker
Includes greyhound stadia, Course and Group Promotions
16
Taxes and Duties
FY03 v FY02
FY03
£m
FY02
£m
Mvmt
%
GPT
86.7
70.8
22
Levies
27.7
27.0
3
Royalties
22.2
6.8
226
VAT/machine duty/other
6.6
7.1
-7
143.2
111.7
28
17
Net Operating Expenses
FY03 v FY02
Staff costs
Property costs
Depreciation
Pictures and data
Advertising and Sponsorship
Routine
Retail/Telephone/Group
Interactive
World Cup
AWP/FOBT rental
Finance charges (incl chargebacks)
Communications
Other (1)
Operating expenses
Less: costs allocated to Trading Divisions
Central costs (2)
FY03
£m
FY02
£m
Mvmt
%
155.2
47.3
18.4
18.2
143.0
41.5
16.7
16.4
8.5
14.0
10.2
11.1
6.4
13.3
8.7
7.0
5.2
32.6
5.6
7.8
2.1
7.5
4.1
4.0
28.3
15.6
69.4
312.3
(298.5)
277.0
(265.5)
12.7%
12.4%
13.8
11.5
20.0%
16.6
68.6
30.0
15.2
(1)
Includes printing and stationery, legal, consultancy, cleaning and miscellaneous other costs
(2)
Primarily central support functions and property costs
18
Underlying Growth in Operating Expenses
FY03 v FY02
FY03
£m
FY02
£m
Mvmt
%
Total operating expenses
312.3
277.0
13
Less:
Extended trading
Increase in Casino/Poker advertising
World Cup advertising
H & K shops/stadia acquisitions
FOBT installation/infrastructure costs
FOBT/AWP rental
Retail Technology Programme
Assets write offs and other non recurring costs
PLC costs including management incentivisation
(4.8)
(5.5)
(7.5)
(2.2)
(2.4)
(1.1)
(1.1)
(10.1)
(2.1)
(1.4)
(1.2)
(6.1)
Adjusted operating expenses
277.6
266.2
4
19
Profit Conversion
(trading profit as a % of gross win)
FY03 v FY02
FY03
%
FY02
%
Retail
30.1
26.7
Telephone
39.3
34.0
Interactive
43.7
37.3
20
Retail: Results
FY03 v FY02
 Continuing benefit of GPT regime/recycling
Growth rate (Y on Y)
Gross win
+21 %
Operating profit
+36 %
505.6
 Continuing strong growth in Numbers (virtual
racing, FOBTs) betting
418.9
 Extended trading hours
 13 new licences for LBOs and
152.4
112 other development actions
111.9
2003
2002
21
Telephone: Results
FY03 v FY02
 171,000 active accounts
(31 December 2002: 164,000)
Growth rate (Y on Y)
Gross win
+11 %
Operating profit
+28 %
56.5
50.9
 Good growth despite poor Cheltenham
Festival, no major football championship and
betting exchanges
 Costs down by £0.6m due to closure of
Athlone call centre (April 2002) and improving
efficiency in Leeds/Sheffield call centres
22.2
17.3
2003
2002
22
Interactive (1): Results
FY03 v FY02
 247,000 active accounts (31 December 2002 :173,000)
Sportsbook
 Focus switching back to UK/selected European markets
 Growing contribution from Arcade games
 No major football championship in 2003
Growth rate (Y on Y)
Gross win
+55 %
Operating profit
+81 %
84.9
54.9
Casino and Poker
 Launch of hosted poker (January 2003)
 Launch of integrated sportsbook/casino
account and language/Euro casinos in
Autumn 2003
 Multi-supplier strategy
(1)
Sportsbook, Casino and Poker
37.1
20.5
2003
2002
23
Cash Generation:
FY03 v FY02 (pre-exceptional items)
FY03
£m
FY02
£m
EBIT
201.7
141.4
Associate income
(2.9)
(2.4)
Associate dividend
-
5.7
Depreciation/amortisation
20.0
16.7
Working capital/other (1)
7.8
(4.1)
- routine
(18.5)
(20.4)
- acquisitions
(4.9)
(20.8)
Cash taxes
(33.4)
(9.5)
Free cashflow
169.8
106.6
Net indebtedness
366.1
481.4
Capital expenditure
(1)
+59%
Working capital benefit in FY2003 due to increase in GPT and PAYE creditors and client balances
24
Presentation in four parts
1.
Financial results FY 2003
2.
Return of capital
3.
Guidance FY2004
4.
Current trading
25
Return of Capital

Returning value to shareholders v flexibility for acquisitions

Share buy back is but one possible solution

Shareholder authority for:
- Buy back of up to 10% of issued share capital
- Hold in treasury up to 2.5% of issued share capital

Board to keep method, timing and quantum under review
26
Presentation in four parts
1.
Financial results FY 2003
2.
Return of capital
3.
Guidance FY2004
4.
Current trading
27
Guidance FY2004

3600 FOBTs and 1900 AWPs by June 2004

LBO extended trading

Cheltenham/Euro 2004

Retail Technology Programme (RTP) – revenue costs £3m in FY2004

Capex – RTP: £10m; ‘Routine’: £23m

Effective interest rate: 6.5%

Effective tax rate: 29%
28
Presentation in four parts
1.
Financial results FY 2003
2.
Return of capital
3.
Guidance FY2004
4.
Current trading
29
Current Trading

Encouraging start to the current year

Group gross win up 17%; double-digit growth all three channels

Operating expenses up 13%

All three channels well positioned with clear strategies for growth
30
Q&A