Group revenue at gambling giant Paddy Power Betfair was up 10 per cent to £483 million (€549m) during the third quarter of the year, a trading update from the company shows.
The company said it had benefitted from the FanDuel acquisition in July, but that it was “adversely affected” by foreign exchange translations. Group revenue was up 8 per cent on a constant currency basis.
While revenue in July benefitted from a good conclusion to the World Cup, which contributed £22 million revenue to the quarter, growth was “adversely affected” by “customer-friendly sports results”, primarily in Australia.
Online revenue was up 15 per cent to £248 million during the period. Revenue after the World Cup was up 13 per cent, a clear acceleration on the 7 per cent growth the company reported in the second quarter period prior to the World Cup.
“While both our brands have experienced this improved trading momentum, the acceleration has been most evident in Paddy Power, where an enhanced customer proposition combined with better marketing execution has seen the brand begin to once again win market share in the UK,” said the trading update.
Sports revenue was up 11 per cent, with sportsbook up 17 per cent and exchange up 1 per cent.
In sportsbook, sports results were “in line” with the company’s expectations for the quarter, and growth was driven by increased customer activity on both of its brands.
Expectations
Third-quarter exchange revenue also grew “in line” with the company’s expectations, reflecting “good ongoing growth in football commissions and an improved performance in racing”.
Reported earnings before interest, taxes, depreciation, and amortisation (ebitda) decreased by 16 per cent to £101 million due to the inclusion of FanDuel fantasy sports losses. It was flat on a constant currency basis.
Within this, total operating costs increased 8 per cent on a constant currency basis, driven by a 13 per cent increase in sales and marketing spend.
“This sales and marketing growth in part reflected US sports betting spend but also the increased marketing investment that we are making in online and Australia which was deliberately weighted to the second and third quarters,” the company said.
Ebitda losses from US sports betting in the period amounted to £4 million. Excluding these start-up losses and the £2 million impact from increased betting taxes and product fees, ebitda was up 6 per cent on a constant currency basis.
Paddy Power Betfair chief executive Peter Jackson said it had been "a good quarter" for the group.
“In Europe the encouraging momentum that we saw in the second quarter accelerated further, with online revenue up 15 per cent. This momentum, which was evident in both Paddy Power and Betfair, is driven by enhancements in product and good execution in promotions and marketing.
“In Australia we continue to see very good scope to enhance Sportsbet’s leading customer proposition and target additional market share gains.
“Strategically, the third quarter was a key period for increased investment in promotional generosity given both the sporting calendar and the changing brand landscape, and this investment is driving increased customer activity.”
Mr Jackson said the “exciting potential” of the sports betting opportunity in the US was evidenced by the company’s experience to date in New Jersey.
Cross-sell
“FanDuel recorded a 30 per cent share of the sports betting market in September, driven by a market-leading customer proposition, our strong brand presence and the ability to cross-sell from our fantasy sports player base,” he said.
“Overall we are pleased with the substantial progress we continue to make against our strategic priorities.
“Our continued investment in brands and customer proposition means that all our businesses will exit the year with enhanced competitive positioning.
“Together with our scale and strong balance sheet this means we are better positioned to face the significant regulatory and fiscal headwinds that apply next year, and to capitalise on the long-term industry growth opportunity.”
In terms of outlook, the company is expecting full year underlying ebitda, pre-US sports betting, to be between £465 million and £480 million.
