Paddy Power shows gambling companies can win without FOBT crutch
The Irish bookie has delivered an impressive set of results
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Your support makes all the difference.The Government’s proposal to put the squeeze on the gambling industry’s golden FOBT goose isn’t going to worry Paddy Power overly.
The Irish bookie has just released its latest trading update and if this is how the industry looks like shorn of its favourite crutch, it looks pretty good from the perspective of investors.
Despite last year’s comparable figures benefiting from a major international football tournament (EURO 2016), with nothing like it this year to pick up the slack, everything’s heading in the right direction.
Adjusting for currency fluctuations; revenues, earnings, margins, were all in the black during the three months ending September 30.
Paddy Power does have UK betting shops, (350 in total and the number is steadily expanding). As such, it will take a hit when the Government finally decides whether to push the button on the toughest FOBT option - it would cap stakes at £2 per spin, with £20, £30 and £50 being the other options (I'd make £20 the favourite).
However, under the heading “retail”, which includes the betting shop estate”, the company has concluded that it is “well positioned” to cope with “regulatory changes”. It would just like to know what the final shape of the new rules will look like. With consultations dragging on and on and on, it isn’t too hard to sympathise with that.
In the meantime, the company has an impressive, and growing, business to oversee, one that can easily cope without a product that has been described as the “crack cocaine of gambling”, with some justification if studies on addicts brains are taken into account.
Rival bookies such as Ladbrokes and William Hill, which derive up to half their revenues from FOBTs, are going to find the reforms harder to swallow.
But they pay their CEOs absurdly, like other big businesses do. Instead of swimming against the tide, those CEOs could try earning their money by constructing businesses that don’t require such a damaging prop to keep the numbers up.
Power proves it is possible to do that.
What’s that? There’s still a fly in the ointment?
Paddy Power’s impressive growth was driven by its online operations, which is where all the action is in the gambling sector (and many others).
Once the FOBT issue has been addressed, there probably ought to be a discussion about how well that side of the industry is regulated, and whether sufficient steps are being taken to distinguish those who gamble for fun from those whose instincts are darker.
Still, that’s an issue for the future. One this company ought to be able to cope with.
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