DUBLIN Paddy Power Betfair (PPB.I) (PPB.L) said it was cautious on revenue growth in its main European market due to a "pretty extreme" level of competition, even as it almost doubled earnings across the group in the first quarter.
Competition has intensified among gambling firms seeking to offset higher taxes and tighter regulation with increased revenues, leading to a flurry of mergers including last year's 6 billion pound tie-up between online betting exchange Betfair and Paddy Power, which operates shops as well as an online business.
The ensuing aggressive pricing and promotional activity has made it tougher to win new business, Paddy Power Betfair Chief Executive Breon Corcoran said on Wednesday, meaning the Dublin-headquartered firm was "a little bit behind where we hoped" on increasing its customer numbers in Europe.
"The competitive nature of this industry right now is pretty extreme. What we have to remind our shareholders and indeed our competitors is that we have plenty of appetite to compete," Corcoran told an analyst call.
"What's not entirely clear is whether we're being rational or whether we're not competing hard enough... If this industry continues to be as competitive as it is, we have to give ourselves the flexibility to increase investment."
Shares in the group were 1.8 percent lower at 1000 GMT.
Its main competitors include Ladbrokes Coral Group (LCL.L), itself the product of a merger, and William Hill (WMH.L) which has so far been left off the M&A merry-go-round.
Corcoran used the US Masters golf tournament to illustrate the changes in the market where Paddy Power Betfair had expected to be alone in offering customers the chance to win if their pick finished in the top 8 but were among four bookmakers to offer the more generous market.
The group's online revenue in Europe, which accounts for more than half of total revenue, increased by 12 percent on a constant currency basis in the first quarter, driven by improved sports results and growth in the amount of money staked.
Overall revenue growth of 15 percent, combined with merger-related cost savings and operational efficiencies helped push underlying core earnings or EBITDA up 87 percent to 111 million pounds.
Corcoran said it was too early to give any guidance for the year but that sports results had favoured customers since the end of March and overall gross win margins were weak in April.
(Editing by Keith Weir)