Subdued performance from Paddy Power Betfair in Q1 trading update

Paddy Power Betfair issued its Q1-2018 trading update Wednesday, reporting an unusually subdued performance due to “bookmaker friendly sports results” and poor weather conditions.

Highlights of the update included:

* Q1 overall group revenue 2 percent down at GBP 408 million (flat on a constant currency basis);

* Underlying EBITDA down 8 percent to GBP 102 million (down 6 percent in constant currency), due to the annualisation of new betting taxes & levies and start-up losses in US businesses;

* Full year underlying EBITDA currently expected to be between GBP 470 million and GBP 495 million;

* Operating profits fell from GBP 91 million in the first quarter of 2017 to GBP 80 million in Q1 2018;

* Net cash of GBP 330 million at 31 March 2018;

* Sales and marketing spend up 4 percent while other operating costs were flat year-on-year;

* Plans to return GBP 500 million of cash to shareholders over the next 12 to 18 months; share buyback programme to be initiated shortly. This is in addition to the existing dividend pay-out policy, which is unchanged at 50 percent of profit after tax;

* Share buyback programmes will commence shortly with an initial GBP 200 million tranche;

* Good underlying growth in Australia partially offset by adverse sports results;

* Online revenue down 2 percent at GBP 219 million. Online sports revenue was down 1 percent, with football growth offset by weakness in horseracing (14 percent of total UK/Irish races were cancelled versus 4 percent last year);

* Sportsbook revenue was up 3 percent, with growth in the Betfair brand;

* Exchange revenue was down 7 percent year on year;

* Retail revenue was down 4 percent to GBP 79 million;

* Gaming revenue was down 4 percent in the quarter with growth in Betfair offset by a decline in revenues on the Paddy Power brand;

* In Australia, revenue increased by 6 percent in local currency, with continued good growth in underlying customer activity partially offset by adverse sports results. Ahead of the expected introduction of new taxes, competition remains intense and market consolidation has commenced;

* US operations delivered revenue up by 23 percent in local currency, with sports revenue up 24 percent and gaming revenue up 19 percent. Sports revenue growth was driven by TVG where handle increased by 17 percent, supplemented by revenues from the daly fantyasy sports enterprise DRAFT;

Group chief executive Peter Jackson commented:

“We have made good progress against our strategic priorities. 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.

“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.

“In the USA, TVG and Betfaircasino.com have good momentum and we are continuing to make preparations for any positive regulatory changes.

“Notwithstanding lower profits in the first quarter, we expect full year underlying EBITDA of between GBP 470 million and GBP 495 million. This expectation reflects the increased investment in Australia and assumes no new taxes become payable in Australia in 2018. It is also before any potential additional investment which may arise in the event of positive regulatory changes in the USA.”

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