Paddy Power will continue to "trade aggressively" despite profit drop
Head of online Peter O'Donovan says Paddys won't cut back on marketing and bonusing spend while H1 results are a "short-term blip"
Paddy Power’s head of online Peter O’Donovan (pictured) told eGaming Review this morning the operator will continue to “trade aggressively and strongly” despite posting a double-digit decline in online operating profit for the first half of 2014.
O’Donovan said the results were a “short-term blip” and that Paddy’s had to “take these results on the chin” and would not cut back on its marketing spend in order to bounce back in the second half of the year.
Group online profits dropped 18% for the first six months of 2014 to 43m, with operating profit for its online business excluding Australia down 44% to 22m, a fall Paddy’s attributed to adverse sports betting results.
“I wouldn’t call it a decline, we have just been hit by bad results,” O’Donovan told eGaming Review.
“Fundamentally we are growing turnover and customer numbers very strongly, so we just have to take these results on the chin and continue to trade aggressively and strongly, and to develop new products as we have been doing through the period,” he added.
During H1 Paddy Power significantly increased spend on free bets and customer bonuses, with costs in this area for online excluding Australia up 77% year on year to 15.7m.
But O’Donovan said the costs had led to a 35% increase in customer acquisition during the period, with 795,000 new players opening a Paddy’s account.
“You are going to have a higher free bet cost because of acquisition free bets, and then the remainder element around free bets was our money back specials during the World Cup. A significant number of the money back specials clicked, so that is great for customers but that impacts us,” O’Donovan said.
And he confirmed Paddys has no plans to scale back its free bet and bonus offers ahead of the Point of Consumption tax (PoC) being introduced in December.
The Irish operator increased its marketing spend during the period, particularly in TV where it grew its share of voice from 9% in H1 2013 to 14% in H1 2014. O’Donovan said Paddy’s approach to marketing was “art and science” and that the operator would “not cut back” in H2.
“We are not going to cut back. We are happy with our CPAs. Our marketing as a percentage of net revenue continues to be the lowest in the industry, so we are highly efficient in that. Our focus is on driving new customers, increasing retention rates, and we are happy to invest to do so,” he added.
It was not all doom and gloom for Paddy Power, with its Australian online sportsbook business growing net revenue 32% to 98.6m leading to a 57% increase in operating profit to 21.8m. O’Donovan said Paddy’s Oz operations were “positioned really well” for growth in the second half of the year.