Irish betting operator Paddy Power saw profit dip 20% in the first half of the year as unfavorable sporting results and generous promotional offers combined to beat the bookie. Operating profit in the six months ending June 30 slipped to €60.1m from €75.4m in the same period last year, despite a 4% rise in revenue and a 14% rise in sports betting handle.
The company laid the blame for the poor showing on the pair of “dream weekends” for punters earlier this year that saw a host of football favorites live up to their billing. A raft of favorites winning in the first half of the 2014 FIFA World Cup brought “a dreadful sense of déjà-vu” with the result proving “costlier than John Cleese’s divorce payments.” Total wagering on the first half of the World Cup came to €130m, with the whole tournament attracting wagers of €198m (+130% over Paddy’s 2010 tally).
Paddy’s online revenue (excluding its Australian offshoot Sportsbet) fell 8% to €148m. Casino and other non-sports revenue was up 14% to €66.2m, although poker suffered a ‘reduction’. Sports revenue fell 21% to €81.7m despite a 25% gain in turnover, in part because of a 77% rise in punter incentives to €15.7m. The net result was a 48% decrease in online profit to €22m, despite a 21% gain in active customers. Mobile accounted for 34% of H1 casino revenue and 60% of sports betting stakes in June.
The Italian-facing site PaddyPower.it narrowed its losses slightly to €8.9m as revenue rose 126%. Despite slowing growth in the market’s number of online bettors, Paddy expects the business will turn a profit in 2016 thanks to the launch of poker, its PP Vegas mobile-led casino and the addition later this year of bingo and virtual betting verticals.
In Australia, the Sportsbet site enjoyed a 14% gain in revenue to €98.6m which pushed operating profit up 32% (+57% in constant currency terms) to €21.8m. Mobile accounted for 49% of stakes, while telephone wagering – currently the only channel in Australia that permits in-running bets – reported revenue up 8% despite stakes falling by a third. Paddy says new betting levies imposed in Victoria, Queensland and South Australia would have cut gross revenue by €6m had they been in place during H1.
At the retail level, UK operations saw operating profit up 22% to €9.5m as OTC wagering revenue rose 13% to €36.8m and fixed-odds betting terminal (FOBT) revenue rose 43% to €42.9m. Paddy’s complement of UK shops rose 31% year-on-year to 299. The number of Irish shops rose 9% to 239, resulting in an 8% revenue gain to €62.4m and profits up 13% to €8.6m.
Telephone wagering revenue fell 35% to €8m despite a 13% gain in handle, resulting in a net loss of €1.9m compared with a €1.5m profit in the same period last year. The number of telephone bettors rose 9% to 40k in the UK while phone operations outside the UK fell 1% to 19.5k.
Paddy said its ranks of Facebook fans and Twitter followers rose 17% during H1 thanks to its traditionally cheeky approach to social media during the World Cup. The company has expanded its social reach into newer apps like Instagram, Snapchat and Vine, the latter featuring Paddy’s beer-swilling toy squirrel Barry O’Rio (the non-Python pictured above).
Looking ahead, Paddy expects the Irish government will pass its Betting (Amendment) Bill this year. Had the 1% online turnover tax been in place this year, Paddy says it would have cost the firm an extra €4m in H1. Similarly, the Dec. 1 implementation of the UK’s 15% online point-of-consumption tax would have reduced Paddy’s net by €20m. But as it braces for impact, Paddy expects the POCT will create the “potential for market share gains from weaker operators being forced to exit the market or compromise their offer.”
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