Paddy Power Betfair reports on third quarter

Online and land gambling group Paddy Power Betfair posted its Q3-2017 results Wednesday, highlighting:

* Revenue up 9 percent year-on-year to GBP 440 million, driven by 11 percent growth in sports revenue;

* Underlying EBITDA up 7 percent to GBP 121 million on a margin of 28 percent, notwithstanding marketing investment in the Draft acquisition and a strong contribution from Euro 2016 in the prior year;

* Anticipates FY 2017 underlying EBITDA will be between GBP 450 million and GBP 465 million;

* Underlying operating profit up 5 percent at GBP 101 million.

* Online revenue was down 3 percent to GBP 216 million against a tough comparative period that included a strong contribution from the concluding stages of the Euro 2016 tournament;

* Sportsbook stakes were up 10 percent, but sportsbook revenue was down 2 percent due to a 0.8 percentage point decrease in the sportsbook margin to 6.6 percent;

* Moves by the Western Australian state government to introduce a point of consumption wagering tax from 1 January 2019 at a rate of 15 percent of wagering revenue will cost company subsidiary Sportsbet around A$12 million a year;

* Group retail revenue rose 12 percent to GBP 85 million, with a 7 percent increase in sportsbook revenues, driven by 2 percent stakes growth and improved sports results, and machine gaming growth of 8 percent. The group currently operates 623 betting shops, with more planned;

* Newly acquired US daily fantasy sports subsidiary Draft incurred GBP 8 million of start-up losses in the quarter and is expected to record FY EBITDA losses of approximately GBP 15 million.

* Group net cash at 30 September 2017 was GBP 125 million, excluding customer balances, after the payment of the interim 2017 dividend of GBP 50 million.

Outgoing CEO Breon Corcoran, reported to shareholders:

“Q3 was an encouraging quarter, with good stakes growth despite the absence of a major football tournament.

“Our international businesses performed particularly well,” he said, singling out Australia, where revenues rose 29 percent driven by a 33 percent increase in stakes, and the United States where an 18 percent rise was recorded with sports revenue up 18 percent and gaming revenue up 16 percent. TVG, Betfair New Jersey and Draft were all contributors to US revenues.

Corcoran said that the group’s retail division outperformed the market through its sports-led proposition and is well positioned to respond to regulatory changes.

He said that the integration of group technology platforms is nearing completion, and that in 2018 customers will start to benefit from an increased pace of new product delivery across Betfair and Paddy Power brands.

The new Paddy Power desktop and mobile front ends are currently being tested with a small number of customers, and the company anticipates that  all Paddy Power customers will be migrated to the integrated platform by early 2018.

“Trading has been good in the period since our interim results and we now expect underlying EBITDA for the full year to be between GBP 450 million and GBP 465 million,” Corcoran concluded, noting that he will hand over to new CEO Peter Jackson on January 8 next year.

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