Flutter Entertainment, the rebranded Paddy Power Betfair, has reiterated its charge for the acquisition and retention of customers as it reported a drop in pre-tax profits of 24% for the first half of 2019, with the company citing changes in regulations and taxation as a major factor in the performance.
Flutter, which operates Paddy Power, Betfair, FanDuel, Sportsbet and the recently acquired Adjarabet, saw profit before tax drop to £81m despite an 18% increase in revenues for the half to £1.02bn. During the first half, expenditure on sales & marketing across the group increased by 15% to £214m.
Chief Executive Peter Jackson commented: “In Europe, Paddy Power’s recreational focus and great marketing execution has helped deliver continued growth in customers. The build out of functionality for Betfair continues to make good progress, with sportsbook country specific pricing launched, along with additional languages and currencies.”
The firm said that the Paddy Power brand has maintained the momentum it generated in 2018 following the completion of the company’s European platform integration. The rollout of new product and enhanced generosity has been complemented by improved marketing execution, with the brand’s voice continuing to resonate strongly in the UK, in what remains a very competitive market.
It said: “The brand’s focus continues to be on the acquisition and retention of recreational customers in the UK and Ireland and to this end, progress has continued in the first half of 2019, with daily active customer growth of 22% in Q1 and 16% in the pre-World Cup period of Q2.”
The firm also revealed that new sign-ups for Paddy’s Rewards Club have more than doubled year-on-year following the success of the Rhodri Giggs loyalty campaign and expansion into gaming.
Flutter reported that the significant back-end development work has taken place on Betfair to reduce the time required to offer international customers localised content. It estimates that this work will ultimately reduce the length of time it takes to launch in a new jurisdiction by up to 50%. As more of this functionality gets rolled out, Betfair will ‘look to increase our marketing investment in select international markets with the goal of accelerating growth’.
The company is also about to make a big push in the US with its FanDuel brand. It revealed: “Our US business is entering the key seasonal period for customer acquisition with the start of the NFL season in September. In H2, we will therefore be investing heavily in sportsbook acquisition together with continuing to grow our fantasy player base nationally.”
Flutter’s US interests also include horseracing TV and wagering network TVG and New Jersey online casino Betfair casino. Proforma revenue in the US division was 46% higher, reflecting 5% revenue growth in the established sports businesses (daily fantasy and TVG), strong growth in Casino gaming revenue and £35m of sports betting net revenue.
Jackson commented: “In the US, our FanDuel brand and product proposition enabled us to take 50% of the sports-betting market in New Jersey in H1. We are delighted with this performance and have been encouraged by the regulatory momentum that has seen 10 states regulate online sports betting since the repeal of PASPA.
“Cross-sell is an important contributor to our success, with around half our customers in New Jersey coming from our existing daily fantasy business, while strong cross-sales have delivered 15% market share in online casino. We have recently gone live in Pennsylvania, where we are one of the first operators to launch online, and we hope to replicate our success there too.”
Flutter’s Australian brand Sportsbet ‘delivered a strong first half with great momentum in the business’. The first half saw a significant increase in gaming taxes for Australian online corporate bookmakers, with the growth to avoid equating to an incremental charge equivalent to circa 11% of total net revenue for Sportsbet.
The company said that the changes were also having an impact on the marketing environment. “We continue to observe closely how competitors approach investment in a post-POC environment. While it is still early days, we have been encouraged by signs that operators are behaving rationally in the face of lower customer economic returns.
“We are seeing signs of reduced costs across search marketing with Google pay per click rates down year-to-date. We have also seen competitors give up the rights to certain media assets, reflecting our belief that there may be less discretionary spend in the market overall.”