Paddy Power expects no shop closures in face of £2 FOBT limit
Operator expects to make up shortfall by pushing customers online and benefiting from rivals’ closures
Paddy Power expects the triennial review to have a minimal impact on its retail business, with the firm not expecting to close any shops even with a worst-case scenario £2 stake limit.
At an analyst teach-in on Friday, the firm said it expects to mitigate impact on shop profitability with new products, such as new roulette variants, and substitution, i.e pushing those customers to virtual sports or online.
The company said it was also well poised to benefit from the market consolidation that would likely follow such a stake limit, benefitting from better EBITDA numbers per shop.
PP shops generated average EBITDA of £103,000 in 2016, according to the operator, compared to £81,000 for William Hill and £68,000 for Ladbrokes Coral.
A review carried out by KMPG for the betting industry claimed a £10 maximum stake would lead to half of the 9,000 betting shops in the UK becoming unprofitable and risking closure by 2020.
Gavin Kelleher of Goodbody said PP was “streets ahead of peers on all metrics”, adding it was “better placed to navigate and prosper longer term in an ever-changing regulatory environment”.
Roberta Ciaccia from Berenberg said the “company’s UK retail network has the best economics in the market,” adding: “It has the greatest potential to capture back revenues from competing bookmaking shops which will be eventually forced to close.”
From Paddy Power Betfair presentation pic.twitter.com/9r7jeT6IFB
— Simon French (@SimonFrench1979) September 29, 2017
The analyst show comes just days after Paddy Power Betfair CEO Breon Corcoran wrote to Tracey Crouch, the minister at the Department for Culture, Media & Sport, calling for at least a £10 limit on FOBT stakes.
Corcoran said the limit was needed because the FOBT issues was so “toxic” it was undermining the reputation of the sector and hindering PPB’s ability to attract top tier talent.
However the economics also appear to add up in PPB’s favour.
The impact of a £10 maximum stake would cost PPB around £32m in machine revenues in 2018 according to Barclays, compared to £276m at Ladbrokes Coral and £182m at William Hill.
An update is expected form the government in late October.