Paddy Power COO pledges European growth
Breon Corcoran has pledged to "grow the group across Europe in the next few years", after Paddy Power posts record annual results.
Paddy Power’s increased online focus and investment has paid off after the Irish operator announced record annual results this morning, with its COO pledging to “grow the group across Europe in the next few years”.
The Dublin-based business, that today also announced its intention to withdraw from the spread betting sector altogether and shutdown its PaddyPowerTrader brand following a review of its white label deal with London Capital Group, saw increased profits across all its divisions and territories with a 2010 online gross win of 250m, an 88% increase on the previous year. Its total online operating profit rose to 75m, up 52% from 49.4m in 2009 “ a contribution of 72% of the group’s overall profits, down from 74% in 2009.
In a statement this morning LCG said it was in negotiations with Paddy Power to agree a “mutually beneficial termination agreement”. It added PaddyPowerTrader customers would be invited to transfer to LCG’s Capital Spreads brand at a date to be agreed and that as a result of this transfer, LCG would “continue to receive revenue” from these customers.
Paddy Power said its online operating costs rose by 66%, however no financial figure was disclosed. In its results announcement it said this was due mainly to investment in “key areas” such as mobile to ensure the group remained part of the “big-get-bigger” segment of online operators.
Breon Corcoran, COO of Paddy Power, told eGaming Review that its total group marketing spend, including Australia, was around 50m. This includes free bets but not affiliate spend. Despite this, he said the company remained in “investment mode” in technology, brand and staff.
On entering soon-to-be-regulated markets such as Greece, Spain and Denmark, Corcoran pledged to “grow the group into Europe in the next few years” but added the company’s strategy and philosophy remained the same: “It’s hard to know what happens next and who’s going to go first, but we’re looking at as many as we can and as best we can. It’s our intention to participate if we can and do so properly.
“We think that if you enter a market and then it regulates in a way that isn’t helpful then your revenues are at risk. It’s our preference to wait until what a market looks like before we enter it,” he said.
“We have a very small Spanish language business so we already have some exposure, but it’s a case of waiting for clarity and not putting huge amounts of capital at risk through marketing and through brand building investment,” the COO added.
Corcoran concluded by saying that the long-term future of the company would always be within regulated markets rather than the “hairier stuff” that some of its competitors chose to invest in. “Our investors are interested in this business being in licensed jurisdictions. The strategy continues to operate in legal markets because there’s a certainty that the market will remain open.”
On the new Irish government’s proposed 1% turnover tax that is being extended from retail to online bookmakers Corcoran said he expected to have “more clarity in the coming weeks”.
“Eight out of the top 10 online operators in Ireland don’t have any physical assets here so it’s our hope, and the government’s intention, to levy the tax against them but that remains to be seen. The government’s intention is not to create an unlevel playing field and a tax on Irish jobs. It’s our intention to tax all the operators servicing customers from Ireland but that has yet to play out.”
Excluding its Australian operation Paddy Power’s online division grew its profits by 26% in the period to 58m. Sportsbook stakes and gaming gross win also grew by 28% and 34% respectively. Active customers increased by 44%, driven by 56% growth in UK customers. Both sportsbook and gaming active customers grew strongly, up 45% and 48% respectively. Costs, however increased by 72% due, it said, to increased taxation with the extension of payroll taxes in Ireland and higher UK VAT adding almost 3m, or 6%, to its online costs.
Its active online customers rose 56% from 537,202 in 2009 to 838,083 last year. The group delivered record turnover of 3.8bn with its overall operating profit growing 56% to 103.8m from 66.7% in 2009.
Paddy Power’s Australian Sportsbet business, now under the full ownership of the Irish operator, performed strongly with online gross win up 44% and an operating profit of 19.5m. Its mobile turnover was up more than three-fold to 112m, or 11% of sportsbook stakes with nearly a third (31%) of its online sportsbook customers now transact via mobile, generating 19% of stakes.
“This gives us a position of scale amongst the top-tier of online betting and gaming operators to fund further online investment,” the company said in a statement this morning. “Our position is bolstered by strong momentum and less regulatory complexities than faced by many of our peers,” it added.