Paddy Power Betfair trading update

The Paddy Power Betfair online gambling grouip posted Q1-2017 results Wednesday, highlighting:

* Revenue up 23 percent to GBP 416 million (up 15 percent in constant currency);
* Growth driven by sports, with sportsbook stakes up 18 percent at GBP 2,999 million and margins up 1.3 ppts;
* Underlying EBITDA up 87 percent to GBP 111 million and underlying operating profit up 114 percent to GBP 91 million;
* Sports revenue up 28 percent at GBP 326 million;
* At 31 March 2017, the Group had £133m of net cash, excluding customer balances;
* Gaming revenue up 6 percent at GBP 90 million.

CEO Breon Corcoran reported to shareholders:

“Reversing the trend of the past two years, results at Cheltenham 2017 favoured bookmakers and this contributed to good revenue growth. Combined with the annualisation of merger-related cost savings and continued focus on operating efficiency, this resulted in a doubling of operating profits in the first quarter.

“Since then, however, at high profile events such as the Grand National, Premier League football and the US Masters, results favoured customers, and overall gross win margins were weak in April.

“A key strategic focus for 2017 is the integration of our technology platforms. This project is on track and we expect both our European brands to be operating on a common platform by the end of the year, at which point customers will start to benefit from increased pace of new product delivery.”

Corcoran noted that revenue benefitted by GBP 23 million in the quarter due to the weakness of Sterling and on a constant currency basis revenue was up 15 percent.

Online revenue increased by 15 percent to GBP 224 million (cc +12 percent), primarily driven by a 33 percent increase in sportsbook revenue. Sportsbook growth was driven by both improved sports results and 13 percent growth in online stakes. Net revenue margin improved by 1.3ppts to 6.7 percent.

Gaming revenues were up 2 percent, and Corcoran noted that although the group was continuing to focus on improving the performance of its gaming products, revenue remains below expectations.

Turning to Australia, Corcoran revealed that said that Australia revenue increased by 21 percent in local currency, driven by a 17 percent increase in total stakes. This growth was notwithstanding a reduced contribution from in-play betting, which represented 8 percent of stakes in the quarter versus 14 percent in the prior year.

In the United States, revenue was up 12% in local currency, with TVG revenue up 5 percent and the online casino operation in New Jersey up 68 percent.

Corcoran said that in retail operations revenue increased by 23 percent to GBP 82 million (cc +18percent).

Excluding the impact of new shops and currency movements, like-for-like revenue increased by 16 percent, comprising a 20 percent increase in sportsbook revenues, driven by 3 percent stakes growth and improved sports results, and machine gaming growth of 7 percent. We opened four shops in the UK and one in Ireland during the quarter, taking the group’s total estate to 618 shops.

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