Wednesday 20 March 2019

Paddy Power chief tips Budget tax hike to force out smaller rivals

Paddy Power Betfair’s CFO has ruled out the closure of any of its 264 outlets in Ireland
Paddy Power Betfair’s CFO has ruled out the closure of any of its 264 outlets in Ireland
John Mulligan

John Mulligan

The CEO of Paddy Power Betfair expects some smaller high street rivals in Ireland to close outlets after the betting tax was doubled to 2pc in January.

There had been intense opposition to the Government's plan to hike the tax from 1pc to 2pc, but the increase went ahead in the last Budget.

"It is inevitable that when you push taxes up, some of the smaller players can move out," said Peter Jackson.

"There's a point where people struggle to operate," he added. Mr Jackson said that the shake-out in the UK market a few years ago as a result of tax changes there probably hadn't been substantial enough. In Australia, he pointed out that extra taxes had prompted consolidation.

"There are changes afoot I suspect in Ireland and we will see some impact on some of the smaller independents," said Mr Jackson.

"That is inevitable, I'm afraid, when governments introduce some of these high-level taxes. It's only the scale players that can afford to accommodate these extra hits because of the benefits you get from operating in many jurisdictions and being able to share your fixed costs around."

Paddy Power Betfair has 264 outlets in Ireland, and chief financial officer Jonathan Hill said that the group has "no intention at all" of closing any of them.

The group said the increased betting tax, had it been in force last year, would have knocked about £20m (€23.2m) from its £451m (€524.5m) underlying group earnings before interest, tax, depreciation and amortisation (ebitda), of which £11m would have been a hit to its Irish retail arm. The other £9m would have reflected a hit to its online business in Ireland.

Mr Jackson also said that he welcomed the long-awaited introduction of the Government's gambling control bill, which has been floating around for years without being enacted.

"We'd welcome the introduction of the gambling control bill," he said. "It's taken a long time to come through."

He was speaking as Paddy Power Betfair unveiled full-year results and plans to change its holding company name to Flutter Entertainment to reflect a more diverse number of entities now operating within the group. The name change won't affect the trading names of businesses including Paddy Power and Betfair, and will have to be approved by shareholders at the company's annual general meeting.

Paddy Power Betfair saw its underlying ebitda fall 5pc to £451m as it shouldered costs associated with its expansion into the United States.

Last year, the group merged its US business with American firm FanDuel, taking a 61pc stake in the combined entity. That gave it access to about eight million customers.

Paddy Power Betfair said it spent £95m (€110.5m) on sales and marketing activities in the US last year as it rushed to attract gamblers to its sports-betting business.

The US arm generated sports-betting revenue of £11m in 2018. FanDuel lost $5m on the US Super Bowl last month in what was seen as the first major event for New Jersey's fledgling sports-betting industry. But FanDuel offered attractive odds to punters, in a move designed to raise awareness and lure new customers.

Paddy Power Betfair's group revenue rose 7pc to £1.87bn (€2.1bn) last year, and said that Paddy Power had continued to retake online market share in the UK.

The group said that 2019 had started in line with expectations.

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