Industry reaction to Breon Corcoran’s departure

Today’s announcement that Paddy Power Betfair CEO Breon Corcoran is stepping down and being replaced by Peter Jackson was not viewed as good news for the company by the market nor analysts.

Shares in the FTSE 100 company dipped by almost 7% to 7,379p in early trading, although some of the financial numbers slipped into the announcement may have also had an impact, with Q2 reported revenue growth of 9% and underlying EBITDA growth of 21%.

As one rival executive, who requested anonymity, said: “If you take the H1 figures, it means revenue was -2% in Q2 in reported currency. Once you layer in FX movements, it could easily be -10% in constant FX.

“As we know from LCL and WMH results, comps were tough in Q2 (Euros and favourable results), but this still looks a surprising figure. I wouldn’t have thought that would have contributed to Breon’s departure but I have genuinely no idea.”

Here’s what other industry stakeholders had to say about Corcoran’s departure:

Executive at a rival firm, speaking off the record

“I think a lot of industry watchers will be quite surprised both at the announcement of Breon Corcoran’s departure from the business and the appointment of Peter Jackson to the top job. The share price has come off quite heavily since the merger but the underlying business seems to be performing well. It’s hard not to think that there’s more to this story than Breon simply deciding he’d had enough after 16 years.

Following Breon will be a hard task but they’ve gone for a proven CEO and someone who already has four years of experience in the company – having sat on the Board as a non-exec since 2013. It’s a huge job and some will be surprised that they’ve gone for someone who doesn’t come from a pure betting background, especially in an industry where product development is so fundamental. It could be the case that Mr Jackson is keeping the seat warm for someone else in due course, and that today’s quick announcement is more to calm the jangled nerves of shareholders and the City.”

Simon French, analyst at Cenkos Securities

“The market will be surprised by the timing of this decision… and highlights a lack of long-term planning as more obvious candidates such as Andy McCue and Mark Brooker left the business as part of the integration process. The group is also left in somewhat of a strategic vacuum with growth slowing as pre-announced H1 results highlight with revenue up just 9% and EBITDA 21%. Decisions need to be taken around how to reinvigorate top-line growth which could include acquisitions and a more tolerant approach to unregulated markets where growth remains strong but PPB under Breon has purposefully moved away from.”

Paul Leyland, partner at Regulus Partners

“Breon has gained a well-deserved reputation as a highly cerebral and capable executive, who turbocharged the brains behind Paddy Power’s brand, turned around Betfair, and then created a FTSE 100 regulated gambling growth company. It isn’t too much to say that he has transformed the sector, bringing an intellect and discipline rarely matched. The key question now is whether these attributes are hard-wired into PPB, but we suspect this leadership transition will go rather more smoothly than some others.”

Ralph Topping, former William Hill CEO

“His aspirations and expectations were always deep rooted. The industry will definitely be poorer for his going and those perhaps cheering his departure and its impact on PPB should think on. They need premier league opponents like Breon Corcoran to test themselves against. Without him the game is somewhat devalued. Good luck to him. He can walk off the field with pride.”

Goodbody

“Overall, the news that Breon Corcoran is to leave will come as a surprise; particularly given the merger integration is not yet complete. However, for such an influential CEO departure timing will never be perfect.

We believe investors should get reassurance from a number of factors including: (i) merger integration remains on track; (ii) the group’s FY17 performance is in line with expectations; (iii) there will not be a long search period and subsequent uncertainty as a CEO designate is in place; (iv) Peter Jackson has a CV that ticks all the right boxes to head up the group; (v) he will have deep knowledge of PPB and the sector having been a non-executive for over four years; and (vi) Breon Corcoran and PPB has over the years assembled a very strong senior management team to take the group forward.

Additionally, we would also note that the reasons we like this group long term remain in place including its scale and industry leading efficiency. This positions the group to compete aggressively across the key areas of marketing; price/promotion; product and customer service, which position it to be a long term winner.”

David Jennings, analyst at Davy

“Mr Corcoran’s decision to step down has come earlier than expected. The timing is certainly less than ideal given the particularly noisy regulatory backdrop at present and the fact that the group is yet to complete its major platform migration project.”

Steve Donoughue, gambling consultant and secretariat of the Parliamentary All Party Betting & Gaming Group

“It is never a good day when one of the brightest minds in the industry leaves their post. Breon Corcoran was a key part of the Paddy Power Betfair merger’s critical success factors and I suspect many investors would have hoped his tenure would have extended beyond its completion. Peter Jackson has some enormous shoes to fill.”