Peter Jackson has big boots to fill at Paddy Power Betfair
A new era arrives for Paddy Power Betfair on Monday when Peter Jackson takes over as chief executive of the gambling industry giant from Breon Corcoran.
He has big boots to fill but despite the company's solid health there are still a number of issues to deal with in his in-tray.
There is also the fierce competition in the sector, with Sky Bet having soared up the rankings and with new kid on the block GVC Holdings set to take over Ladbrokes Coral.
That Corcoran will be a hard act to follow was illustrated in August when the shock news of his departure was released. The company's share price fell by more than eight per cent at one point on the day the announcement was made.
Jackson, 42, arrives in the job having been appointed chief executive of payment processing company Worldpay UK only last March. He had previously been chief executive of foreign exchange company Travelex and held a number of senior positions in banking but his new position is still a big step up.
He does have experience of the gambling industry having served as a non-executive director of Betfair from 2013 and then Paddy Power Betfair following their merger, although his appointment may be seen as reflecting the difficulties of attracting leadership from outside the industry.
"He clearly has a large degree of knowledge of both the industry and business but it is always very different when you are driving the bus rather than just making sure it stays on the right road," Cenkos Securities analyst Simon French said.
Paul Leyland, the founder of gambling industry consultants Regulus Partners, believes Jackson has three or four "burning issues" to deal with, beginning with a reset of the culture at the company established by Corcoran, although Jackson is seen as being cut from the same cerebral cloth as his predecessor.
Leyland said: "The culture of the business has been very much set by Breon and it's cerebral, it's had to go through a lot of cuts, it's probably a little bit bruised due to underperformance and it is arguably a reason for change.
"Resetting that culture after such a strong leader is going to be a huge challenge and to my mind that's the biggest one."
There has also been talk that morale is low among the Paddy Power contingent at the company following the merger, which was seen as more of a takeover by Betfair.
It remains to be seen whether Jackson will relocate to Dublin, which would send a positive message to the Paddy Power team.
Growth a big issue
There was a mixed reaction when Paddy Power Betfair released their latest trading update in November.
The bookmaker reported revenue rising by nine per cent year and underlying Ebitda (earnings before interest, taxation, depreciation and amortisation) up seven per cent, driven by strong performances by their Australian arm Sportsbet – seen as the company's jewel in the crown – the US and growth in retail. However in online – the biggest part of the business – revenue fell by three per cent.
French said: "Clearly the biggest issue is how and how quickly does he look to accelerate top-line growth in the business because that is what has started to stagnate in recent quarters.
"Obviously there are a number of ways they could look to achieve that whether it is by increasing their exposure to unregulated markets, dialling up marketing in markets where they have already got strong positions to try and increase share, or whether it is going back on the acquisition trail – or any combination thereof.
"Historically the company has been relatively averse to unregulated markets even though they've been enjoying some strong growth in the few that they do operate in."
Both French and Leyland believe the company's performance in gaming – described as flat at the time of their latest trading update – needs improvement.
French said there had been discussions about the company introducing a third brand to deal with gaming.
"Paddy Power is a very strong sports betting brand as we all know but does that translate so well into the gaming arena?" he asked.
"Similarly Betfair has always had a very strong presence in the exchange market and has made a successful crossover into sportsbook but again does the casino offer any value? So I think that is something for him to consider."
More deals in prospect?
With the integration of Paddy Power and Betfair's technology platforms due to be completed soon following their 2016 merger, both French and Leyland wonder if consideration of mergers and acquisitions should be on Jackson's to-do list.
"Has enough water gone under the bridge on the merger to allow Paddy Power Betfair to participate in M&A and do they want to?" Leyland asked. "That possibly connects right back into gaming."
Technology integration would also give the company's development team freedom to get improved product to customers quicker, French said.
"One of the criticisms that was levelled at the Paddy Power brand in particular over the last 12 to 18 months was a lack of new product and innovation and that should now be starting to be rectified," he added. "That will undoubtedly help."
Of less concern according to French and Leyland is the government's review of FOBT maximum stakes, an area where Paddy Power Betfair is much less exposed than Ladbrokes Coral and William Hill.
Indeed Corcoran last year wrote to minister Tracey Crouch calling for stakes to be reduced to £10 or less.
Leyland described the FOBT review as a "non-event" for the company while French said: "I think relatively it is less of a concern and management is adamant they won't need to close a single shop even if the maximum stake is cut to £2."
However, responsible gambling is an area Jackson will have to concentrate on, Leyland said.
"The level of focus on responsible operation is at an all-time high, likely to grow further and is global in scope, increasingly so," he added.
"Politicians and regulators want to hear from chief executives. Therefore it is probably the single biggest piece of the brief he has got to get to grips with.
"Another key point in all of that is that, like it or not, Paddy Power Betfair is now a leader. Now that they are a FTSE 100 company commanding such large market share, they have to perform a leadership role. They've got no choice. Failing to do that puts the sector at risk and that adds another layer of complexity for Peter."
The City will be expecting to hear more from Jackson on his vision for the company when their full-year results are released this spring.
"He is not coming at this completely new and he should be able to articulate his vision and how he is going to achieve that vision pretty quickly," French said.
What's in Peter Jackson's in-tray
>> Setting out his vision for the company and resetting the culture following Breon Corcoran's departure
>> Consider reversing the company's policy of retreating from unregulated markets
>> Look for opportunities to re-enter the fray in mergers and acquisitions
>> Deal with underperformance in gaming
>> Provide leadership in the increasingly important aspect of responsible gambling
>> Deal with the fallout of the government's review of gambling
>> Keep an eye on the possibility of sports betting becoming more widely legalised in the United States
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