Paddy Power confident of growth in British online market
“I’d back us to grow at 15% to 20% a year, and continue to take share of a growing market” in sales terms during the next three years, Mr Kennedy said.
The overall online British market will probably grow at 10% to 15% a year, he said, adding that Paddy Power isn’t looking at buying online rivals in Britain.
Paddy Power’s bet on online gambling and its expansion into markets outside of Ireland are allowing it to boost profit.
The Dublin-based company’s investment in mobile technology is putting it “ahead of the pack” in taking smartphone and tablet gamblers, Mr Kennedy said.
Paddy Power shares climbed 4.7% to €38.79 last week. The stock has gained 26% this year, giving the company a market value of €1.9 billion.
The company was the first bookmaker in Apple’s online app store for the iPhone and iPad, and is producing a new “feature-rich” product for tablets, Mr Kennedy said.
The company controls about 30% of mobile betting in Britain, according to its own figures. In July about 37% of Paddy Power’s online customers transacted by mobile device, and that figure will exceed 50% “quite soon”, Mr Kennedy said.
“Our brand is becoming truly mass market in the UK,” he said. Buying other online betting businesses in Britain to expand “doesn’t make a lot of sense” for the company as it would end up acquiring existing customers, he added.
Paddy Power’s image in Britain is “cheeky and fun”, according to Mr Kennedy. The bookmaker’s advertising campaign with Imogen Thomas, a former Big Brother contestant linked with Premier League footballer Ryan Giggs, received a lot of publicity, he said.
Paddy Power has about 12% to 15% of the British online betting market, according to an August presentation by the company.
Paddy Power grew its overall online customers at an average rate of 40% a year during the last six years, while the average for William Hill, Ladbrokes and Rank Group is 14%, Mr Kennedy said.
“As new competitors come into the online market, Paddy Power will have to fight a little harder,” said Geetanjali Sharma, an analyst with Espirito Santo, who has a “hold’ recommendation on the stock.
“William Hill is definitely putting on a more aggressive fight in the online space.”
Paddy Power earned 81% of operating profit from online operations in the first half of the year, increasing its active online customers in Britain by 58% in the same period.
That helped boost first-half profit 9.6% to €47.4 million, even after the company said it received a “right bashing” at the Cheltenham horse-racing festival, where Irish jockeys had a record number of wins.
The Irish market, where Paddy Power generates about 25% of its profit, continues to look “pretty challenging”, Mr Kennedy said, with the average size of bets staked in the first half falling to €17 from €22 three or four years ago.
“That is just people cutting their cloth to different economic circumstances,” he said.
Paddy Power, which took full control of Australia’s Sportsbet in March, also expects to grow its market share in the country, according to the chief executive.
The Australian online market should grow by more than 10% a year for the next three years, with Paddy Power surpassing that, he said.
“There is still truckloads of opportunity for Paddy Power in the UK and Australia,” said Gavin Kelleher, a Dublin-based gaming analyst with Goodbody Stockbrokers.
“Paddy Power is always improving its customer acquisition and retention, remaining ahead of its competitors, so I think they will continue to take market share.”
Paddy Power is continuing to “review” developments in the US, where online gambling transactions are illegal, Mr Kennedy said.
William Hill, Britain’s largest bookmaker by market value, this year agreed to buy three Nevada sports-betting companies as it positions itself for possible legalisation elsewhere in the US.
“I think poker will be the first market that opens up, and poker will open up in the states either in certain large states or overall,” Mr Kennedy said.
“I think that is an opportunity for us but I think the big opportunity would be if sports betting opened up.”
Legalisation of online gambling in the US, particularly sports betting, is a “contentious” issue, according to Goodbody’s Kelleher. With legislation at a federal and state level still under consideration, not following rivals there isn’t “a bad thing” for Paddy Power, he said.
