paddypower

Paddy Power takes long view as online profits stall

Paddy Power’s online division was the driving force behind the Irish betting and gaming group this morning unveiling 29% year-on-year growth in revenue to €311.2m in the half-year to the end of June.

Online, which generated close to three quarters of group operating profits in the six months to the end of June, increased net revenue by 35% year-on-year to €191m, with sportsbook contributing €139.4m of the total. Mobile turnover was up 123% to €365m, with 55% of sportsbook customers transacting via mobile in June, generating 41% of sportsbook turnover.

However, operating profit from Paddy’s flagship arm was only marginally up by 1% to €48.5m as the company reinvested heavily in the business with a view to ensuring continued growth.

Operating costs in the half rocketed 54% to €110.7m from €69.2m, which included heavy investments in launching in Italy, as well as the development of new VIP mobile casino brand Roller, social betting game BetDash and its Cayetano product development arm. The company also invested “aggressively” in marketing around Euro 2012, in upgrading its technology, new media “for ongoing growth as consumers’ media consumption shifts to social, online and mobile”, and increased headcount, which stood at 336 in online and technology as of June 2012, 69% up year-on-year.

Analyst David Jennings of Davy Stockbrokers commented in a note: “If there was any remaining doubt about where the strategic focus of Paddy Power lies, this results announcement leaves little uncertainty: long-run market leadership rather than short-term profit is clearly management’s goal.”

The company also commanded a 4% share of sportsbook turnover in Italy in June, its first full month of operation in the dot.it market, it revealed this morning. CFO Jack Massey said the company’s “medium term goal in terms of market share is to get to the same market share as we have in the UK… 10-15%”, which he said would probably take over two years, “depending on our success and how much we invest.”

CEO Patrick Kennedy added: “Our early experience suggests that our initial hypothesis that there is a strong appetite among Italian consumer for a disruptive, engaging betting brand is correct.” The company has already managed to get one of its tongue-in-cheek ads, featuring Jesus Christ curing the ills of Italian football, banned by three Italian TV stations – RAI, Sky Italia and Mediaset.

The Euro 2012 football championship generated a 164% rise in turnover to €78m over Euro 2008 for Paddy Power, with gross win of €7.6m, although Kennedy admitted the bottom line was “reasonably modest given customer marketing and acquisition costs.” Active customer numbers were up 41% in H1 to 1.2m.

The Paddy Power boss also cited independent research showing the Paddy Power brand “dominated consumer conversations” during Euro 2012. Engagement rates during the Euros on Facebook, defined as the proportion of followers who liked, commented or shared each of the company’s posts, “were higher not just than our competitors but significantly higher than all of the global brands that sponsored the tournament”. The company’s share of voice, or how many times the brand was mentioned online was also “higher relative to all those other brands, to Nike, to McDonalds, to Umbro and Orange”, said Kennedy this morning.

Paddy Power’s headline Euro 2012 marketing stunt – Denmark striker Nicklas Bendtner revealing a pair of the bookie’s lucky pants after equalising against Portugal – was the eighth biggest news story in the world that day on Twitter.

“Since January, we have increased our Facebook fans by 445% to 251,000, our Twitter followers by 308% to 133,000 and our YouTube views by 186% to 13 million,” it announced this morning.

Kennedy told analysts that this was important to the brand because: “Every man over the age of 18 on Facebook, of which there are over 13m in the UK, is connected to at least one Paddy Power fan. So we now have the capacity to target every one of those 13m in the UK via a friend of theirs directly.”


Casino Choice journalist

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