Paddy Power Betfair revenues dip on racing cancellations and “bookmaker friendly” results
Operator’s online revenues down 2%, although gaming shows signs of a return to growth
Paddy Power Betfair (PPB) this morning reported a 2% dip in Q1 online revenues to £219m, with the firm blaming a spike in cancelled racing fixtures and an extended run of bookmaker friendly results for the downturn.
Online sports revenue was down 1%, with football growth offset by weakness in horseracing, thanks largely to 14% of UK/Irish races being cancelled, compared to 4% last year.
An extended run of bookmaker friendly results from November to February also dampened customer activity
Similar struck the exchange, where revenues fell 7% year-on-year. The firm also blamed a reduction in high-value customer charges as these customers made less profit than last year.
Horseracing makes up 45-50% of Betfair exchange revenues.
Gaming was down 4% in the quarter with growth in Betfair offset by a decline in revenues on the Paddy Power brand.
However, the company hailed “very positive” signs in the vertical – which has been struggling for more than two years – with revenues up 4% in February and March.
“The migration of Paddy Power customers to the integrated technology platform in January has improved the brand’s gaming product and improved cross-sell from sports,” the operator noted.
“We have made good progress against our strategic priorities,” added Group CEO Peter Jackson.
“In Europe, the successful completion of our platform integration has resulted in a meaningful improvement to the Paddy Power product. This has seen the brand’s gaming revenue returning to growth from February and a significant uplift in cash out usage and in-running betting during the Cheltenham Festival.”
Australia revenues grew by 6%cc to £83m, with 21%cc staking growth offset by adverse margins.
US revenues grew 23%cc to £28m.
“In Australia, Sportsbet continues to perform well and is targeting further market share growth, with additional investment planned to take advantage of any disruption arising from market consolidation and the introduction of increased taxes,” Jackson said.
“In the USA, TVG and Betfaircasino.com have good momentum and we are continuing to make preparations for any positive regulatory changes.”
Group Q1 underlying EBITDA fell 6%cc thanks to new betting taxes and start-up losses in the US businesses. Excluding these items, underlying EBITDA was flat at £102m.
Regulus Partners said in a note this mmorning: “PPB continues to disappoint in its online performance and while there is no doubt that a number of the excuses are valid (weather, recycling, platform disruption), a combination of trying to sound positive “good momentum against our strategic priorities” and handing the strategic keys back to shareholders (via a share buyback), suggests that PPB is in danger of becoming a-n-other large gambling company, in our view.
“Playing it safe may return to high single digit growth, but we believe a merger of this scale and latent power should be making a lot more mischief than this.”
Some pretty grim 1Q numbers from #PaddyPowerBetfair this morning. Big (weather-related) rise in UK/Ire racing cancellations and adverse Aussie sports results mainly to blame. Shares -6.3%.
— Paul Jarvis (@pajemiki) May 2, 2018