Paddy Power Betfair revenue up 10% in third quarter

Group revenue at Paddy Power Betfair was up 10 percent to USD624 million 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 translation. Group revenue was up 8 percent on a constant currency basis.

While revenue in July benefitted from a good conclusion to the World Cup, which contributed USD 28 million revenue to the quarter, growth was “adversely affected” by “customer friendly sports results”, primarily in Australia.

Online revenue was up 15 percent to USD 320 million during the period. Revenue after the World Cup was up 13 percent, a clear acceleration on the 7 percent 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 percent, with sportsbook up 17 percent and exchange up 1 percent.

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.

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 amortization (EBITDA) decreased by 16 percent to USD 130 million, due to the inclusion of FanDuel fantasy sports losses. It was flat on a constant currency basis.

Within this, total operating costs increased by 8 percent on a constant currency basis, driven by a 13 percent 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 USD 5 million. Excluding these start-up losses and the USD 2,6 million impact from increased betting taxes and product fees, EBITDA was up 6 percent 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 percent,” he said.

“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.

“FanDuel recorded a 30 percent share of the sportsbetting 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.