Despite reporting a 4% increase in profits for the first half of 2018, it seems that Paddy Power Betfair’s glass is half empty.
The Dublin-based company has just reported a healthy increase in profits for the first half of the year but is pessimistic about profits for the full year because of additional taxes as it expands in the US.
Profits for the first half of the year were up to £106m ($137m), representing a 4% increase in profits as total revenue grew by 5% to £867m ($1.14bn).
Revenue remained flat in the first quarter but, like many online betting companies, PPB benefited from the buildup and start of the World Cup, leading to a 13% increase in revenues in the second quarter. Breaking the figures down, revenue from the company’s Australian operations was up by 19%, and there was a 20% increase in the US. Retail operations – essentially, the bricks-and-mortar betting shops – saw revenues rise by 6%.
The boss speaks
CEO Peter Jackson, signed from Worldpay UK in August 2017, said: “It has been a busy and successful few months. We have made substantial progress and trading in Q2 was good, with all brands and operating divisions contributing to the group’s revenue growth.”
Despite this optimism from the boss, PPB downplayed expectations for the full year, forecasting EBITDA (earnings before interest, tax, and depreciation) between £460m and £480m ($602m and $628m).
The note of caution was because of losses likely to be incurred in the US as PPB builds up and integrates the recently acquired FanDuel and because of what Jackson described as “significant upcoming tax headwinds” in Australia. For those of you that don’t speak corporate English, he meant that taxes were going up.
Despite this, there is plenty of optimism about Sportsbet, the company’s Australian operation. Jackson said he expects Sportsbet to “target further market share gains by using its scale to increase investment in marketing, product, and its value proposition.”
There he goes again. Sportsbet is going to do more advertising and will hopefully increase its market share.
There were, inevitably, the predictable complaints about the UK government’s move to cut the maximum stake on Fixed Odds Betting Terminals, which could reduce the company’s revenues (although the move has now been delayed until 2020).
Overall though, Jackson was optimistic. He said: “We have much better visibility of the regulatory and fiscal changes in the UK, Australia, and the US and believe that our leading customer propositions mean we are well positioned to build a business that can generate sustainable shareholder returns over the long term.”
Could he have said it in simpler language? Of course he could, but you don’t get paid seven figures and share options to say, “We’ve got some well-known names. Stick with us and we’ll do all right.”