BUSINESS

Paddy Power posts record profits thanks to boost from Australia

TAGs: Australia, Paddy Power, Sportsbet

paddy-power-sportsbet-revenueIrish betting operator Paddy Power posted record profits in 2014 thanks to a strong performance by its Australian online division. Paddy’s group revenue rose 18% to €882m in 2014, while profit before tax rose 21% to €167m.

The 2014 FIFA World Cup helped boost Paddy’s turnover to a record €7b although the company says hold was negatively affected by sports results that had “more ups and downs than Taylor Swift’s love life.” Paddy said there were three separate weeks last year in which nearly all the favorites won, causing bookies to pay out “gazillions” on accumulators.

Paddy’s online operations (including Italy but excluding Australia) saw sportsbook turnover rise 25% as the ranks of online customers grew 21%. But sportsbook revenue rose just 7% to €194.2m as hold dipped one point.

Mobile was again a star performer, responsible for 55% of online revenue. Mobile turnover grew 38% to €1.6b and Paddy says 77% of sportsbook customers made a mobile transaction in December. Paddy suggested mobile betting adoption is now “not far behind using it for setting up one night stands on Tinder!”

Online gaming and ‘other’ revenue rose 18% to €140m despite only 6% growth in active customers. Gains in casino, bingo and B2B offset a decline in poker. Mobile gaming revenue rose 58%, representing 40% of overall online gaming (rising to 45% in December).

Paddy lags its competitors in gaming revenue per active customer, but is taking steps to remedy this “historic under penetration.” Paddy credited its Bulgarian game development base for providing it with new proprietary content, including the Santa’s Spins product, which “beat every game ever launched on the site for month one revenue.”

Paddy’s Italian-facing site saw revenue rise 85% but the division posted a net loss of €14.7m as overall market growth remains “slower than expected.” Paddy says it will complete a review of its Italian operation over the coming months to “position our business better for this market reality.”

Things were far rosier in Australia, which saw its share of Paddy’s overall profit rise to 32% from 24% in 2013. Sportsbet’s online sportsbook stakes rose 15% after online active customers increased 38%. Online revenue rose 26% to €227m while operating profit surged 56% to €52.4m. Mobile turnover rose 66%, representing 53% of online sales. Telephone wagering – currently the only Aussie medium via which in-play wagering is permitted – reported revenue up 39% despite stakes falling 32%.

Paddy’s UK retail operations reported revenue up 36% to €174m and profit rose 53% to €21.2m. Retail sportsbook was up 26% to €80.5m and machine gaming rose 45% to €93.5m. Irish retail saw revenue and profit each up 9% to €126.6m and €15.6m respectively as stakes topped €1b for the first time. Paddy’s total retail presence rose by 75 in 2014 to 564 shops, with the UK business expecting to add 30 more shops in 2015.

Telephone wagering in the UK and Ireland – which includes the PP Messenger app – saw active customers up 7% and stakes up 9% to €380m. However, adverse sports results pushed revenue down 14% to €19.5m, resulting in a net loss of €700k for the year. Paddy says it has no intention of scrapping the telephone wagering operation, as phone-registered customers “spend a similar amount with us online.”

Looking forward, Paddy intends to focus on in-house product development, with future investment emphasis prioritizing “online over retail, mobile over desktop, sports over gaming and organic over acquisition.” Speaking of acquisition, Paddy seriously reduced its ability to engage in any post-POCT acquisitions of smaller rivals by announcing it would return €392m in cash to shareholders.

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