Paddys ramps-up Aus investment as UK market toughens
Irish operator says a third of profit will derive from its Australian business as the fight for UK market share intensifies
Paddy Power is to sharpen its focus on the Australian market after the operator admitted to feeling the heat of an intensified battle for UK market share ahead of next year’s Point of Consumption (PoC) tax implementation.
The Irish operator today slashed its operating profit growth forecast after its sportsbook performance remained flat, with the operator highlighting poor sporting results as a significant contributing factor.
But the operator cited its presence in Australia as a bright spot with online net revenue in the country up 30% year-on-year, growth that is expected to continue over the next 12 months.
Paddys’ CEO Patrick Kennedy forecasted that up to 33% of group profitability will be derived from Australia in 2014 (up from 23% in 2012) and outlined plans to increase investment in both headcount and product range Down Under.
Kennedy considered competition in the country to have plateaued despite Ladbrokes recently entering the market and BetFred expected to ramp-up operations next year.
“The music has stopped,” Kennedy said, adding that the likes of bet365, Tabcorp and Unibet are marketing considerably less aggressively in the country than they have done previously.
The opposite is true in the UK and speaking at the company’s analyst call Cormac McCarthy, CFO at Paddy Power, said that with the PoC tax looming, operators across the board have ramped up advertising efforts in an attempt to wrestle market share.
Stating marketing to be “the easiest leaver to pull”, McCarthy said the increase in competition was coming from across the board. “There are some new competitors, but it’s broadly from the same operators as usual,” he said.
McCarthy highlighted that advertising from the bottom ten percent of UK-facing operators now represents approximately one third of all advertising in the UK, doubling from last year’s figure of 15%.
The comments came despite Paddy Power keeping its marketing spend as a percentage of net revenue flat, however the company noted its intent to “invest efficiently to maintain and enhance our competitive position”.
Kennedy shrugged off the competition however, praising Paddy Power’s ability to “target free spend to customers in a way that other operators don’t”.