Paddy Power Betfair report revenue rise as regulatory headwinds loom

Paddy Power Betfair believe they are well positioned to face the forthcoming "significant regulatory and fiscal headwinds" after reporting robust figures for the third quarter of 2018.

Underlying earnings by the bookmaking giant edged up three per cent at £104 million for the three months ended September 30, with revenue up ten per cent to £483m.

A strong online performance with revenue up 15 per cent was a key contributing factor, and the company remain steadfast on exploiting opportunities offered by the newly liberalised sports betting market in the US.

Full Paddy Power Betfair statement

Chief executive Peter Jackson said: "The third quarter was 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 the US, the exciting potential of the sports betting opportunity and the strength of our strategic positioning has been evidenced by our experience to date in New Jersey. 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."

Paddy Power Betfair chief executive Peter Jackson: 'The third quarter was a good quarter for the group'

Revenue from the company's betting shops was down four per cent to £82m, with two per cent growth in FOBTs offset by a six per cent fall in sports revenues, with punter-friendly horseracing results in July having a "disproportionate impact" on their Irish estate.

The firm also endured a difficult time in Australia, with a two per cent revenue decline caused by adverse sports results in August.

Paddy Power Betfair were fined £2.2m by the Gambling Commission last month for failing to protect customers and stop stolen money being gambled, and are also coming to terms with the Irish government's decision to double betting tax from the start of next year.

The company also estimates increases in the rate of remote gaming duty, which will be implemented in Britain next October, and the hit suffered by the new £2 stakes limit on FOBTs would have impacted on 2018 ebitda by approximately £115m.

Firm 'better positioned' to tackle industry changes

Jackson added: "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."

Looking to the rest of the year, the forecast for underlying earnings has been upgraded slightly to between £465m and £480m, although US sports betting losses are expected to be around £25m, reflecting marketing and promotional investment in New Jersey.

Analyst Gavin Kelleher of Goodbody said there was "a lot to like" about the update, adding: "Importantly for us online showed strong growth, the exchange returned to growth and the early signs in the US are very positive."

The firm's share price closed up 0.05 per cent at 7,035p.

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