Strategy

Our business objective is to build an ‘e’ enabled international betting and gaming business.

Below are the five critical success factors which the business has prioritised in order to realise its strategic ambition and grow shareholder value:

Retail excellence
UK land based betting and gaming has developed to become a genuine leisure activity. Our objective is to continually evolve the experience for our customers, whilst optimising both our margin and operational efficiency.

Digital capability
Betting and gaming online or increasingly on mobile continues to grow. We are making good progress in acquiring and developing improved technology, expanding our range of Digital products and delivering a more compelling and competitive offer to customers.

Customer and brand
Ladbrokes is the most recognised betting brand in the UK. We have begun the process of evolving the brand to make it more exciting, placing customer experience and insight right at the heart of our offer.

Regulatory leadership
The ongoing evolution of tax and regulation plays a key part in the performance of our business. We continue to play a lead role in ensuring the industry’s contribution to the economy, jobs and taxes is understood by key stakeholders.

Pricing, trading and liability management
All are critical to optimising margin, broadening product range and establishing a market leading customer offer.
Our increasing use of data and trading algorithms has enabled us to make great progress in expanding the number of Bet in Play markets available to our customers round the clock.

In a fast-changing market place the strength of retail provides not only a stable source of regulated revenue with growth potential but also delivers brand benefits across all channels.

Achievements

• Strong performance from UK Retail business
• OTC proved resilient despite a weak economy, with stakes marginally up on 2010
• Profit per shop grew for a second consecutive year
• Excellent contribution from momentum in machines
  • Efficient rollout of Global Draw machines, delivering a more focussed operation
  • Accelerated growth throughout the year, with Q4 delivering growth rates of 24%, and a Q4 rate of £930 gross win per terminal per week
  • Additional £58m gross win in 2011
  • Improved return from better games mix

Roadmap

• Further growth in machines from;
  • Yield management, tailoring games and product to the local demand
  • OddsOn to be extended onto machines in H2 to personalise the experience
  • New and exclusive content from multiple suppliers
• Robust cost control and a renewed focus on local market competitiveness
• Innovating customer experience at a lower cost per shop

New shop design to improve customer experience

We plan to continue to grow UK Retail in 2012 with a strong pipeline of new shop openings and initiatives to control costs and improve service already underway. We are targeting 60 openings in 2012 to include circa 40 new shop formats specifically designed to cater for changing trends in retail betting and gaming.

New format

• Less emphasis on counter
• Increased focus on experience, sports & machines
• More ‘managed’ service – staff engagement
• Lower cost model

We have also introduced a simplified staff grading structure to help support a more proactive approach to customer service. This reorganisation allows us to increase the average wage paid, whilst at the same time reducing overall people costs, through a decrease in the average number of shop staff per hour. Furthermore we will drive shop performance through increased use of market data and customer insight to drive market share at a local level.

UK Retail operating costs for 2012 are projected to increase by approximately 3% on a like for like basis and 5% including the impact of new openings.

In digital, we are continuing to invest in technology to improve our trading capabilities, expand our range of products and improve our delivery to the customer. We have begun investing consistently in brand and digital marketing and we will continue this investment process in 2012 having begun to see tangible benefits in 2011.

Achievements

• Improvement in sportsbook to incorporate advanced ecommerce technology, working with companies such as hybris. The site improvements brought the following improvements:
  • Single click bet placement
  • Emphasis on higher margin products
  • Greater personalisation
  • Better cross selling of related products

Strong growth in mobile

• Net revenue is strong and growing
• 33% digital sportsbook using mobile up from 12%
• Mobile ngr 17% of total sportsbook up from 6%
• Focussing on growing casino usage; 35% of ngr h2 ’11 (24% h2 ‘10)

Roadmap

• New improved Sportsbook launch scheduled for Q2
• Further improvements in Sportsbook and wider gaming business in place for 2012
• Growing Mobile further in 2012
  • Additional games in 2012 on mobile and tablet
  • More apps including bingo and Euro 2012
  • Agreements with Realistic and Probability to expand range of mobile gaming products
  • Agreement with SkyIQ to improve customer relationship management
  • New mobile platform on track for Q2 to optimise customer experience

We have begun the process of evolving the brand to make it more exciting, placing customer experience and insight right at the heart of our offer. The reinvigoration of our brand began in August 2011 with the launch of a new marketing campaign which has shown positive results since then with accelerating growth in sign ups, actives and amounts staked. This growth in customer acquisition is encouraging and we will continue to invest in Digital marketing throughout 2012.

Achievements

• Improved customer engagement and excitement around the Ladbrokes brand
• Momentum in key Digital KPIs; strong growth in Digital signups and actives
• Improved pay per click terms and enhanced search engine capabilities
• Development of a more sophisticated affiliate marketing program
• Increased campaign effectiveness

Roadmap

• Future campaigns will focus on mobile, bet in play and casino, all targeted to drive sign-ups and actives, and deliver materially improved digital revenue
• Work to enhance campaign analytics, predictive modelling and customer lifetime management
• Develop ‘end to end’ customer experience management

Ladbrokes continues to engage with Government and stakeholders to ensure the full impacts of potential changes in tax and regulation are fully understood. We support a fair and stable fiscal and regulatory framework for the betting industry in the UK that will enable it to continue to contribute to economic growth and tax revenues as well as protect jobs.

During 2011 we started to develop our pricing, trading and liability management capabilities through the reorganisation of the trading function, investment in a new platform and the increased use of automated algorithms. This allowed us to increase materially the number of Bet in Play opportunities we offer customers.

Achievements

• Upgraded platform supports data feeds and adopts greater automation
• Focus on producing increasingly effective algorithms to deliver more markets
• Material increase in BIP football matches; BIP turnover 20% H2 v 8% H1
• GamblingData quarterly In-Play Tracker ranks Ladbrokes leading provider of football BIP events

Roadmap

• More Bet in Play in all sports in 2012
• 50,000 BIP events in 2012, up from 29,000 in 2011
• Increased use of ‘intelligent’ trading tools
• Launch of new cross-channel fieldbook in Q1, a material improvement on legacy systems
  • More automation of pricing (pre match & BIP)
  • Improved management of liabilities
  • Real-time analysis of price movements

Across 2012, we'll be introducing further automation to augment our pre-match capabilities, and thereby manage margin better.

Ladbrokes has been making continued progress with its reinvigoration plan improving its competitive position and working towards achieving our technology milestones.