Paddy Power leads Q2 uptick for PPB

Paddy Power Betfair (PPB) this morning reported a 5% rise in H1 online revenues to £462m, with the operator hailing the return to growth of the gaming vertical and its Paddy Power brand in Q2.

Q2 online revenues climbed 13% after a 1% downturn in Q1, which the firm attributed to “improved underlying trading in Q2 and the benefit of the World Cup”.

PPB did not break out brand specifics but said it had seen “strong improvement” in the Paddy Power brand thanks to a “significantly improved product post platform integration” and subsequent higher cross sell rates.

Online sports revenues were up 5% in H1 to £335m, with a 12% increase in sportsbook revenues offset by a 4% decline in exchange and B2B revenues.

“Both sportsbooks brands have shown good revenue momentum across the half with 3% total sportsbook growth in Q1, increasing to 15% growth in Q2 in the period prior to the World Cup (Q2 total growth 23%),” the firm said.

However, exchange revenues were down 1% for H1, with the firm admitting that increased competition was having an impact.

“While football commissions are also showing good momentum on the Betfair Exchange, overall exchange revenues were down 1% in Q2 due to continued weakness in horseracing commissions,” the operator said.

“The weak horseracing performance in Q1 could largely be attributed to the high number of fixture cancellations, but the fact this weakness continued in Q2 highlights the competitive challenge facing racing commissions from low margin sportsbooks and price discounting by smaller exchange competitors.”

Online gaming revenues were also up 5% in H1 to £127m and up 14% in Q2.

Group CEO Peter Jackson said: “In Europe, product enhancements and improved cross sell rates have led to stronger gaming revenue growth over the past few months for both brands, whilst customer satisfaction with the Paddy Power sports app has stepped up.”

He added: “The World Cup was a showcase event for Paddy Power, with a series of successfully executed marketing campaigns leading to it being one of the UK’s most talked about brands in social media conversations around the tournament.

Elsehwhere in H1, Australia revenue climbed 19%, retails revenue ticked up 6% and US revenues climbed 20%.

H1 underlying EBITDA was up 1% to £217m.

However, the market was unmoved by the results, with shares trading 2.5% lower.

Regulus Partners said the firm’s overall performance was “still some way off growing the market to grow share (outside the US and possibly Australia).”

“This is what a business with the size and latent capabilities of PPB should be aiming for, in our view.”

The growth figures are also best viewed in context of a World Cup year and increased marketing spend during the period, which hurt profitability.