Paddy Power Betfair Drops on News of CEO Departure, Earnings Struggle
Posted on: August 9, 2017, 05:00h.
Last updated on: August 9, 2017, 05:08h.
Rising revenue hasn’t offset investor unsteadiness over the future of Irish and UK betting juggernaut Paddy Power Betfair.
The company’s share price dropped 4.7 percent on Monday, after news that CEO Breon Corcoran would be stepping down. That dip was followed by an additional 3.9 percent slide on Tuesday upon release of Paddy Power Betfair’s latest half-year earnings report.
Traded publicly on the London Stock Exchange, the Paddy Power Betfair price is off 12 percent from the beginning of the year. This is despite revenue that rose nine percent for the first half of 2017. That rate of growth is half of what it was for H1 2016, and overall, the company’s stock price has lost 25 percent since the merger between Paddy Power and Betfair 18 months ago.
EBITDA rose by 22 percent, and the company reported a pre-tax profit of $133.1 million, which is up from a $59.7 million loss the previous year. The company reported that its growth was partially offset by increased investment in pricing and promotions.
“We continue to make substantial investments to position Paddy Power Betfair as a structural winner in a dynamic and highly competitive market,” Corcoran explained in a statement. “The integration of our technology platforms is on track for completion by the end of the year, and will bring significant benefits, including increased quantity and pace of new product development in 2018 and beyond.”
Crushed by Trump
The online betting behemoth has faced something of an unlucky run over the past year. Their misfortunes started when they bet against Donald Trump, taking a $6.5 million loss in the US presidential election.
Corcoran pointed to that as well as the lack of any major soccer tournaments in recent months as another reason for revenue hardships.
But as stagnant as the first half was, the third quarter could be even worse if another popular betting option comes in for gamblers but doesn’t turn out well for the bookmaker. The Floyd Mayweather-Conor McGregor fight on August 26 has many in Britain and Ireland plunking money down on the Irish fighter.
The UFC title holder opened as an 11-1 longshot, but has been bet down to 4-1. If he pulls off an upset, Paddy Power could suffer another multimillion-dollar loss.
To explain the tepid stock temperature, however, investors have shown caution since October, when the Competition and Markets Authority announced a joint investigation with the UK Gambling Commission into betting firm practices and potential mistreatment of customers. The investigation’s next report expected in December.
The regulatory review has put pressures on share prices of many online gaming companies, and as the world’s largest bookmaker, Paddy Power Betfair hardly expects to be exempt from the scrutiny.
Analysts question why Corcoran, 46, was leaving the company he’d been with for 16 years, especially after he was instrumental in overseeing the merger between Paddy Power and Betfair. Corcoran has indicated he will stay on until his replacement, Peter Jackson, the outgoing CEO of financial technology firm Worldpay, has made a smooth transition.
In Corcoran’s public statement about his departure, he noted the choice to leave was difficult.
“There is never a good time to leave, but this is the right decision for me and my family,” he said, “and following the successful completion of the merger integration it is an opportune time for the business, too.”
Leaving the company with Corcoran is Ken Robertson, Paddy Power’s maverick ad chief responsible for irreverent ad campaigns that tweaked British Prime Minister Theresa May over Brexit, and highly promotable futures betting Donald Trump’s presidency, and by proxy, the fate of the world.
After 19 years with Paddy Power, the man once dubbed “Head of Mischief” is supposedly setting out to form his own agency.
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