UK-listed gambling operator Paddy Power Betfair (PPB) is expressing regret for having taken bettors to the cleaners in Q4 2017, leaving them with nothing to wager during Q1 2018.
On Wednesday, PPB released a trading update covering the first three months of the year, during which revenue fell 2% year-on-year to £408m, underlying earnings (factoring out one-offs) fell 8% to £102m and underlying operating profit slipped 12% to £80m.
Retail sports betting stakes at Paddy Power betting shops were down 9% to £415m while online sports handle fell 10% to £1.28b.
PPB claimed that the sports segment suffered from “very strong gross win margins in Q4 2017,” and this affliction “was compounded by bookmaker friendly results in January and February,” apparently leaving punters with zero discretionary income at their disposal. A raft of weather-related racing cancellations didn’t help.
Overall sports revenue was down 2% to £319m, with non-Australian online revenue down 1% to £161m and retail off 8% to £52m. PPB claimed the online sports revenue decline was largely due to weakness in its Paddy Power brand, offsetting unquantified growth in its Betfair brand.
Overall online revenue was down 2% to £219m, partially sunk by a 7% decline in Betfair’s exchange betting revenue. PPB claimed that the racing cancellations hit the exchange particularly hard, as did some “high-value customer charges.” Overall retail revenue was down 4% to £79m.
Overall gaming revenue was flat at £90m, as online gaming’s 4% decline to £58m was offset by retail gaming’s 5% rise to £27m. Given the expected reductions in maximum stakes at retail fixed-odds betting terminals, PPB cannot rely on this segment to carry the load much longer.
The Australia-based Sportsbet online betting operation saw its revenue fall 2% to £83m (up 6% in local currency) based on adverse sports results. PPB’s US division (the TVG race betting business and Betfair’s New Jersey online casino) broke the mold, rising 10% to £23m.
PPB projected its full-year 2018 underlying earnings to come in between £470m and £495m, assuming no new point-of-consumption taxes in Australia. However, that number could shrink if PPB decides to take advantage of any favorable change in US sports betting laws.
Banking on the theory that a magician’s best friend is distraction, PPB used its trading update to announce plans for a £500m share buyback program, which the company hopes will transpire over the next 12 to 18 months. But investors were unimpressed, pushing the stock down over 6% on the day.
