Despite reporting strong growth in sales in the first four months of the year, profitability at Irish bookmaker Paddy Power was impacted by "adverse sports results", resulting in the company's two worst weekends ever for football profitability.
As with other bookmakers across the UK and Ireland, the company was hit by two weekends - January 11-13th and March 22nd-23rd of this year- when nine of the ten favourites in the Premiership won, resulting in Paddy Power having to pay out on all accumulator bets which tracked the favourites. In addition, on the weekend in January, 16 of the 21 best backed teams across European football leagues, also won, while in March, 17 of these teams won. Typically, on any given weekend, 54 per cent of favourites will win.
Overall, ahead of the company’s agm in Dublin today, the bookmaker reported strong growth in the period from January 1st to May 11th, with sportsbook stakes up 20 per cent (2013: 18%) in online and 5 per cent like-for-like (2013: 3%) in retail.
“Accelerated new customer acquisition has been a key driver of online growth, with first-time bettors up 16 per cent in the period, compared to an 8 per cent increase last year,” the company said.
Looking to the full year, the company said that it expects the impact of the adverse sports results “to be largely offset by the impact of positive top-line momentum, the recycling of winnings by customers, favourable exchange rate movements and the later than expected introduction of the Irish online and phone betting tax.”
Total online net revenue grew by 1 per cent, with 12 per cent growth in eGaming/B2B net revenue offsetting the adverse impact of year-on-year sports results. Mobile accounted for 54 per cent of the company’s total online revenue in April.
Online stakes grew by 20 per cent, while in the UK and Ireland, the company reported sportsbook growth of 16 per cent in stakes and 12 per cent in active customers.
The company opened 14 new shops in the UK, and 11 in Ireland during the period, while in Irish retail, Paddy Power benefited from improved sports results at Cheltenham and less football within its business mix. As a result, like-for-like sportsbook net revenue increased by 4 per cent in Irish retail, as compared to a reduction of 10 per cent in UK retail.
As of May 11th, the group had no debt and net cash of € 264 million, or € 197 million excluding customer balances.
Paddy Power also announced this morning that Patrick Kennedy, chief executive since 2006, will step down from the role in April 2015. It is understood that Mr Kennedy has no future plans as of yet, but has announced his departure early to facilitate a smooth selection process for his successor.
Mr Kennedy said: “I have loved every day of being Paddy Power’s chief executive. It is as fun and as interesting a job as anyone could hope to have, and I have had the privilege of working with some enormously talented and supportive people over the years that I’ve been here. I have always had a personal view that after ten years at the helm, change is good, both for the business and the individual. With this in mind, I have today given notice to the board of my intention to step down next April, the tenth anniversary of my appointment.”
Chairman Nigel Northridge is set to select and appoint a new chief executive, and the succession process will consider both internal and external candidates.
Responding to the news Davy Stockbrokers said that the announcement “may weigh on the stock for a period”.
“ It is now key that the group demonstrates superior execution in each of its markets as it enters what is likely to be a period of higher scrutiny.”
