Paddy Power Betfair H1 online revenues decline as gaming continues to slide
Sportsbook revenues also down 1% after poor results and increased investment in customer retention
Paddy Power Betfair this morning reported a 2% decline (cc) in H1 online revenues to £439m, with lower sportsbook margins and gaming declines contributing to the dip.
Sports revenue increased 1% to £318m, driven by 3% growth from the exchange and set back by a 1% decrease in sportsbook revenues, as margins slipped from 6.7% in the same period last year to 6.2%.
PPB said the margin decline was driven by more customer friendly sports results this year, but also reflected “increased investment in pricing and promotions”.
“This investment included improved odds for Betfair customers including a reduction in football overrounds to market leading levels, and enhanced value to Paddy Power customer’s through our headline “2 up – You Win” offer and “VIPP Club” loyalty benefits,” the group said.
Online gaming also took a step back with revenues dropping 3% to £120m in H1, and continuing a recent trend of decline in the vertical.
The firm said it was continuing to focus on operational improvements to gaming but recognised it needed to “invest in gaming to address gaps in our product versus our competitors”.
It also said the work would be done after the technology migration to a single platform was completed towards the end of the year.
“While Paddy Power customers will see some immediate improvements with enhanced gaming apps on migration to the integrated platform, it will be 2018 before material new additional product updates will begin to be developed for release across both our brands,” the firm added.
Revenues across the entire group climbed 9% to £827m, with underlying EBITDA up 21% to £220m as merger efficiencies continued to be realised.
Breon Corcoran, who will be replaced as CEO by Peter Jackson in the coming months, said: “We continue to make substantial investments to position Paddy Power Betfair as a structural winner in a dynamic and highly competitive market.
“The focus of this investment is to use technology to improve efficiency and minimise the cost of servicing our customers and to further enhance our customer proposition.
“The integration of our technology platforms is on track for completion by the end of the year and will bring significant benefits including increased quantity and pace of new product development in 2018 and beyond.
“Ahead of that, our customers and shareholders are already seeing benefits from efficiencies and investments. In the first half alone, customers enjoyed approximately £30m of extra value through better odds, more generous offers and new loyalty benefits.
“Operating efficiency and the annualisation of merger-related cost savings resulted in strong operating leverage in the period, with operating profit up 22%.”
Elsewhere, Australia revenues grew 15% to £173m, while US revenue grew 11% cc to £55m.