Dublin-based bookmaker Paddy Power Betfair, fending off increased competition and greater regulation in the UK and Australia has announced that it will increase its marketing budget from £300 million to £320 million.
Recently appointed CEO Peter Jackson noted to the press last week that although earnings are up 18 percent on earnings that are up 13 percent for the company that it has lost some market share to rivals such as Ladbrokes. Profits are up but players are betting less. The company was formed from the 2105 merger of Paddy Power and Betfair.
Although demographics don’t favor bookmaking stores, they remain “important social hubs” and will continue to do so “for some time.” Jackson continued, “We’ve obviously seen a lot of that transition happen in our industry, but we know a lot of our customers like the opportunity to socialize and hang out with their mates in our stores. Whilst that continues we’re very happy to provide it,” Jackson said. “We’re thoughtful though, we don’t have particularly long lease obligations on our estate and so if things were to change we’re able to flex and manage that well.”
The future remains cloudy, “because of the advent of this huge switch to digital.”
“Our shops are more profitable and outperform on sports betting enabling them to better withstand reduced machine stakes limits,” said the bookmaker in its results announcement. “All our shops are in high footfall, highly-competed locations, positioning us to benefit from competitor shop closures. Our proven track record of acquiring shops and achieving significant uplifts in their revenues…means we will continue to target selective new shop openings and acquisitions.”
One threat comes from British government proposals to more closely regulate fixed odds betting terminals. However, the bigger threat comes from Australia, where profit margins have been robust, but whose South Australian state government has approved a new 15 percent Point-of-Consumption tax. Other Australian states are also mulling this tax, which would add to the GST winnings tax and race field fees that bookies currently pay.
Australia is a huge market for gambling, but governments are proposing more stringent rules on advertising and a prohibition against using borrowed money to wager. Jackson said these pressures will cause some of the smaller players to drop out, which would benefit his company.
These challenges have caused shares to decline 25 percent from a high of £107.70 in 2016, with 11 percent losses since January.
Jackson told reporters that his company is preparing for the World Cup in Russia this summer. “Following the successful completion of our European technology integration, Paddy Power customers are now enjoying the fastest sports book app in the market,” he said. “Our considerable development resources will now be focused on bringing more new products to customers, some of which will be delivered ahead of the World Cup.”
