Paddy Power Betfair's £1bn tale of the tape

£1bn Revenue

The combined online revenues of Paddy Power Betfair were given as over £1 billion for 2015 in the announcement this morning, making it arguably the second largest online gaming operator in the world. Amaya is forecast £0.7bn and only bet365, which posted £1.28bn for the year ending March 2014, can claim a bigger revenue number. The crude H1 operating profit for the combined firm (taking Betfair Q4 FY15 and Q1 FY16) was £115.2m compared to £74.7m for William Hill’s combined Online and Australia business. Using the same numbers the combined revenue was £516.1m compared to £333.1m at Hills. In short, the new firm would be operating on an unprecedented scale for a regulated market focused business.

£230m Profits?

The combined crude H1 online operating profit from Paddy Power Betfair is £115.2m. The number for its non-Australian business was £86.6m and to make comparisons with Hills more accurate you can likely remove close to £5m from that number for Betfair’s US business. Even at nearer £81m it’s still some way in front of Hill’s £64.9m H1 operating profit, which was down 20% on the previous year. It would be wrong to assume instant cost savings at the combined group, but Breon Corcoran’s ruthless efficiency at Betfair over the past two years suggests that number could be even higher once synergies have come into effect.

17% UK Market Share

The UK is the key market not just for Paddy Power and Betfair, but also for its major competitor William Hill and a sizeable market for bet365. Hills own estimates place a combined Paddy Power Betfair as the leading UK player with 17% market share with Hills behind on 15% and bet365 on 13%. Between the three of them they would control 45% of the entire UK egaming market on 2014’s numbers. Assuming they are outgrowing the wider market it’s safe to assume the trio would have close to 50% market share between them by the end of 2015. If you add in Ladbrokes Gala Coral it’s closer to 60%.

67% Mobile Revenue

Two thirds (67%) of online revenue at Paddy’s came through mobile in H1, which was some way ahead of any of its peer group. Betfair said three quarters of its customers and a majority of its gaming customers were using mobile, which despite the intentionally obtuse metric, this suggests a very strong mobile performance from its sportsbook and acquisition is heavily weighted towards mobile at the present time. A 142% increase in in-play betting at Betfair during the past three months was driven by increased mobile usage and combining the best of breed from both firms’ in-house mobile development teams could create a very powerful operator in the key growth platform.

£106.9m Gaming Revenues

Paddy Power Betfair may create an online sportsbook giant, but it still remains a way behind in gaming with combined crude H1 gaming revenues of £106.9m. This trails William Hill’s H1 gaming revenue figure of £145.6m by some distance, but this may not be bad news for the firm. Growth in gaming has been strong at both firms, growing 27% in the most recent quarter for Betfair and 14% for Paddy Power against 4% at William Hill. If it can create a superior gaming product and ramp up cross-selling on Paddy Power in the manner recently seen at Betfair it could see some significant growth in this area even with Amaya snapping at its heels.

Key Numbers

Paddy Power Betfair*

H1 Revenue: £516.1m (£405.7m excluding Oz)

H1 Operating Profit: £115.2m (£86.8m excluding Oz)

William Hill Online

H1 Revenue: £279.9m

H1 Operating Profit: £64.9m

William Hill Australia

H1 Operating Profit: £53.2m

H1 Operating Profit: £9.8m

*Paddy Power Betfair numbers are based on a combination of H1 Paddy Power and Q4 2015 and Q1 2016 numbers from Betfair with conversions from Euro at current XE rate