US and Australia drive PPB revenue growth in Q1

Paddy Power Betfair has reported a 17% year-on-year increase in revenue for the first quarter of 2019, with strong growth in its US and Australian operations offsetting a decline in online sports betting revenue.

Revenue for the three months ended March 31, 2019, rose to £478m (€557.0m/$624.6m). This comprised £366m in sports revenue, up 15% year-on-year, and revenue of £113m from gaming, a 26% increase.

Growth was driven by the operator’s Australian and US businesses, which saw revenue rise 20% and 47% respectively.

The Australian division, comprising the Sportsbet brand, saw revenue rise to £96m, driven by a 17% increase in customer stakes for the quarter. The business was hit by adverse racing results, though Paddy Power Betfair noted that while this meant net revenue margin fell below expectations, it was still 0.2 percentage points above Q1, 2018 at 9.2%.

US revenue, meanwhile, came in at £78m, with a 12% growth in the operator’s non-sportsbook businesses supplemented by $24m in sports betting revenue. This has had a positive effect on the New Jersey-licensed Betfair Casino, which saw revenue jump 83% due to sportsbook cross-sell, helping the brand increase its market share in the state to 14%.

Sports betting stakes for Q1 amounted to $598m, aided by FanDuel leading the New Jersey sports betting market over the period, generating 50% of market revenue. Further US growth is expected with FanDuel’s retail sportsbook going live in Boyd Gaming’s Valley Forge Casino Resort in Pennsylvania during March, and online wagering set to launch in the coming weeks.

The online division accounted for the majority (£228m) of group revenue in Q1, with a strong performance from gaming offset by a decline in sports revenue. The division benefitted significantly from the acquisition of Georgian igaming operator Adjarabet in February this year, which contributed 5 percentage points to online growth in Q1. Excluding the impact of Adjarabet, revenue for the division would have been down 1% year-on-year.

This, Paddy Power Betfair said, was due to a £6% decline in sports revenue to £152m, with 1% growth in exchange and B2B revenue offset by a 10% decline in sportsbook’s contribution. This was blamed on unfavourable horse racing results in February and football results in March, as well as the temporary suspension of UK horse racing fixtures in February as a result of an equine flu outbreak.

Online gaming revenue, on the other hand, was up 31% to £76m. Excluding Adjarabet, revenue would have been up 14%, driven by strong growth in the Paddy Power brand.

The operator said it remained focused on growing its recreational customer base and enhancing anti-money laundering procedures, as well as developing responsible gambling interventions. This, it said, was impacting revenue from higher value customers, particularly for the Betfair brnad.

Retail was the only division to post an overall decline in revenue for the period, with 2% gaming machine growth offset by a 5% decrease in sports revenue. This saw retail revenue decline 2% year-on-year to £77m. While sportsbook stakes were up 4%, revenue was impacted by margin declining to 11.4%, as a result of adverse racing results in February.

“Q1 was a good quarter for the Group with revenues up 17%, notwithstanding customer friendly sports results in the UK,” Paddy Power Betfair chief executive Peter Jackson said. “Underlying momentum remains good for Paddy Power with 22% growth in average daily actives.

“For Betfair, we continue to make good progress on the technology development work to enhance our global customer propositions which will enable us to accelerate international growth,” Jackson continued. “Meanwhile, the geographical diversification of our online business has been further enhanced by the addition of Adjarabet in February, with integration progressing well.”

Jackson added that trading in April was in line with company expectations, with FanDuel expected to generate good returns on its US sports betting investment.

“[For] rest of the Group we remain on track to meet our full year profit expectations despite the adverse sports results in Q1,” he added. “We remain excited about the growth opportunities that lie ahead for the Group.”