Paddy Power Betfair revenue rises despite online sluggishness


paddy-power-betfair-sluggish-online-gamblingUK-listed online gambling operator Paddy Power Betfair enjoyed modest revenue and profit growth in Q3 despite a lackluster performance by its online division.

Wednesday saw PPB release a trading update covering the three months ending September 30, during which group revenue improved 9% year-on-year to £440m, underlying earnings rose 7% to £121m and underlying operating profit gained 5% to £101m.

Outgoing PPB CEO Breon Corcoran called the results “encouraging” given the comparison with Q3 2016, which got a boost from the tail end of the Euro 2016 football tournament. Corcoran said trading to date in Q4 has been “good” and the company expects FY17 underlying earnings to come in between £450m and £465m.

Overall online revenue was down 3% to £216m. Despite the lack of a major football tournament, online sports betting stakes improved 10% but hold fell 0.8 points, pushing online sports revenue down 2% to £156m, while online gaming was essentially flat at £60m.

Exchange betting revenue at the Betfair platform was down 5% year-on-year, thanks to Q3 2016 having enjoyed “exceptional revenue from high-value customers.”

Paddy Power’s retail operations reported revenue rising 12% to £85m, as sports revenue gained 7% and machine gaming rose 8%. Paddy’s retail empire across the UK and Ireland grew to 623 shops in Q3 and the company expects to add a further five UK shops by year’s end.

In Australia, the Sportsbet online sports betting operation saw stakes shoot up one-third, pushing revenue up 29% in local currency. The company credited “continued product investment and promotional generosity” for the gains. Sportsbet recently rolled out The Fold, a form of betting insurance that allows customers to cancel a bet mid-race for a full refund.

In the US, where PPB operates the TVG race-betting operation and a New Jersey-licensed online casino, revenue improved 18% thanks to TVG’s handle rising 12%. The daily fantasy sports operation DRAFT has incurred £8m worth of red ink since PPB acquired the business in May and the company expects a full-year earnings loss of £15m.

PPB also confirmed that Corcoran’s replacement as CEO, Peter Jackson, will assume the corner office as of January 8, 2018. Corcoran will remain on the board after he relinquishes his CEO duties and will make himself “available thereafter” to ensure an orderly transition of power.

The company also said it’s nearing the end of its marathon platform integration efforts. A small number of customers are already testing PPB’s new desktop and mobile front ends and the full migration of customers is expected to be complete by early next year, although the company plans to migrate customers in stages to minimize the fallout from any potential cockup.