Paddy Power commits to Italian market

Paddy Power has vowed to remain in the Italian market for the long-term after recently completing a root and branch review of the loss-making business.

In its interim management statement this morning, which showed a 36% increase in online revenues, the firm said it was committed to the Italian market and was in the process of implementing “substantial operational improvements” in an effort to turn the business around.

Paddys posted a €15m 2014 loss in Italy, but chief executive Andy McCue this morning told analysts the firm expected to reduce that by “a few million” this year and next before “substantially eliminating losses” before moving into profitability thereafter.

“While market growth [in Italy] has been slow in recent years, the medium to long-term dynamics are attractive, with mobile expected to be the key driver of growth,” McCue said.

“It is clear, however, that we have invested in a local presence which is excessive relative to the size of the market, and an inconsistent investment has limited awareness of our brand.

“And it is also clear that we can fix these issues, and that returns can be generated from further and more focused investment. As a result, we are staying in Italy,” he added.

Paddy Power and other sports betting operators in the Italian market are soon to be boosted by a change to the tax regime with levies applied to revenues rather than the current turnover structure.

Strong performance down under

Paddys’ stated strategy of “substantial and targeted investment” in product and brand already appears to be paying dividends, with online revenues up 36% during the 19 weeks to 11 May 2015.

This was most evident in its Australian business, where the launch of cash-out, fingerprint login, and live Victoria racing streaming saw total stakes grow 39% and net revenues 43% during the period.

Paddy Power also noted that it had increased investment in marketing and brand awareness in Australia to target the “current state of flux” amongst competing brands, with the likes of William Hill undergoing a major rebranding exercise.

The operator pushed forward with a similar strategy in the UK and Ireland, and in recent weeks became only the second operator to launch partial cash-out.

Time to move on

Paddy Power also confirmed that chairman Nigel Northridge will set down from the role at the end of H1 having completed two three-year terms.

Northridge, who has been chairman since 2009 and joined the Paddy Power board in 2003, will be replaced by Gary McGann, the current CEO of Smurfit Kappa Group.

“It has been a pleasure to have had the opportunity to serve on the Board over the past 11 years,” Northridge said.

The group has made great strides in that time due in no small part to the endeavour and commitment on my Board colleagues and of management present and past, for which I am thankful,” he added.

Paddy Power’s share price was up 0.72% this morning to €78.55.