One day ahead of the release of Paddy Power Betfair’s interim results on 8 August, the group announced a surprise change in leadership, with CEO Breon Corcoran stepping down from the role after 16 years with the company.
The group was quick to inform shareholders that it had appointed Peter Jackson, CEO of Worldpay UK, as Corcoran’s successor, with his start date yet to be confirmed. Jackson has been a non-executive director of Paddy Power Betfair since 2016, and previously served as a non-executive director of Betfair from 2013.
Yet, as a result of the announcement, shares in the FTSE 100 bookmaker dropped, with the company down 5% at the close of Monday and, following the release of the half-year results on Tuesday, the company recorded the biggest move on the FTSE 100, down 4.1% at the close.
So, what is Jackson’s focus likely to be over the course of the coming months to ensure Paddy Power Betfair remains competitive in the gambling market?
In August 2015, Paddy Power and Betfair announced a merger to create a combined group that would be better placed to compete in the gambling market. At the time, the companies said that the merger would create a “diversified group” with “attractive” international growth opportunities in Europe, the US and Canada. Under the agreement, Paddy Power shareholders would own 52% of the group, with Betfair shareholders owning 48%.
The merger was agreed in September 2015 and completed five months later in February 2016, with Corcoran becoming CEO of the group, having served as CEO of Betfair from 2012.
Corcoran wasn’t a stranger to Paddy Power. He joined the company in 2001, responsible for the non-retail business, and subsequently became a board member in 2004, before taking up the role of chief operating officer at the company in 2010. He left the company in 2012 for Betfair, and was instrumental in the merger process.
The group’s key focus since the merger has been investing in technology to drive down customer service costs and improve overall company efficiency. Jackson takes over at a time when technology platforms are scheduled to be integrated by the end of the year, which the group said was expected to result in “increased quantity and pace of new product development in 2018 and beyond”. Recently, new customer loyalty benefits have been introduced, along with competitive odds and offers to pull in punters.
Experience in technology and the digital consumer sector was crucial to Jackson’s appointment as CEO. In its interim results, the group highlighted four key areas where it demonstrates competitive advantage: global and local online scale; capabilities in scalable proprietary technology, digital marketing, and in-house product development; its portfolio of sports-led brands; and differentiated products. The group’s strategy is to use these core areas to become a “long-term structural winner”, investing in these fields to generate profit to fund new growth opportunities.
But, how tough will the job be for Jackson?
In the half-year results, the group reported revenue growth of 9%, down from 18% during the same period last year. Q1 was strengthened by favourable results at Cheltenham, while the company attributed a rocky Q2 to sports results going against the bookmaker. The company said it was also affected by the lack of a major football tournament, with Euro 2016 having brought in £22m of revenue in 2016. Earnings before interest, tax, depreciation and amortisation were up 21%.
To remain competitive, the new CEO will oversee investment in pricing, products and promotion. Technology resources have so far been directed towards the platform integration work, limiting the company’s ability to address weaknesses in gaming products and introduce new products on the European sportsbooks. However, new gaming apps and a faster sports app are set to be implemented in 2018, and the company is confident that customers will see “immediate product benefits”.
Elsewhere, digital marketing tools will aim to drive increases in activity, while customised content will spread targeted messaging to customers, including personalised content and competitor comparisons on live odds.
Jackson will also seek to leverage the $19m acquisition of DRAFT, a US daily fantasy sports market. The group said that the acquisition “complements our other business in the United States” and offers “exposure to a fast-growing market”. The product, available on mobile, will be bolstered by Paddy Power Betfair’s technology support. Depending on business performance, the group could see the price paid for the business increase by $29m over the next four years.
Corcoran will stay as CEO of the company over the coming months to ease the transition and to oversee the full integration of the Paddy Power and Betfair businesses. Jackson is likely to be at the helm by January 2018, and facing some tough challenges in a competitive market, will be looking to capitalise on the technology investments made by the group in recent months.
Leaving Worldpay after only having joined as CEO in March this year, his new company will be counting on him staying the distance in his new role and being ready to deliver on the group’s growth ambitions. The stakes are high, but you can guarantee that the group, and its new CEO, won’t be leaving their success to chance.
Spending money on cyber security has become one of the most important investments that a company can make. Discover how you can best protect your company from cyber risks and invest in the right security to fit your business needs.