Paddy Power CEO to step down

ator Paddy Power will begin the search for a new chief executive following Patrick Kennedy's announcement that he will step down in April 2015, ten years after joining the firm.

In a statement today Kennedy said: "I have always had the personal view that after 10 years at the helm, change is good for both the business and the individual.

"I have loved every day of being Paddy Power's chief executive. It is as fun and as interesting a job as anyone could hope to have, and I have had the privilege of working with some enormously talented and supportive people over the years."

Kennedy began working at Paddy Power in 2005 and became CEO a year later, since which time the company's shares have almost quadrupled. Kennedy says he has no plans for what he'll do after leaving Paddy Power, but that he won't work for one of their competitors.

The Nominations Committee of the firm's board, led by chairman Nigel Northridge, will now begin the hunt for Kennedy's replacement, considering both internal and external candidates.

Northridge says the firm will be sorry to see Kennedy go and are extremely grateful for his work over the past decade, during which he oversaw "a period of exceptional development and growth in Paddy Power".

Kennedy is known for heading the brand's cheeky and fun image, cultivated in humorous publicity gimmicks and novelty bets. Their marketing is often controversial too, such as the decision to take bets on the outcome of the ongoing trial of Oscar Pistorius, which landed the firm in trouble with the Advertising Standards Authority for Ireland.

While Northridge thanked Kennedy for giving notice "well in excess of his contractual obligation", leaving the firm with more than enough time to "ensure a smooth transition", his resignation will still come as a blow.

On Twitter Kennedy is described as being a force that helped Paddy Power become a "powerhouse" in the sector and as one of the "smartest CEOs on the block".

David Jennings, an analyst at securities firm Davy in Dublin, says Kennedy's departure is "likely to lead to a period of uncertainty for investors" and raise questions regarding the groups’ "willingness and ability to pursue significant strategic opportunities in the interim period".

The news had already driven down the firm's share price by around 4% on Tuesday, the day the announcement was made.

An interim statement for 2014 through to May 11 demonstrates that the company's growth has continued since 2013, with net revenues, first-time bettor numbers and sportsbook stakes rising.

However like many bookmakers Paddy Power recently suffered its "two worst weekends ever for football profitability", as punter-friendly results in the Premier League throughout January and March left a significant dent in the firm's profits.

The company says it hopes to offset these results through the course of the financial year through the "impact of positive top-line momentum, the recycling of winnings by customers, favourable exchange rate movements and the later than expected introduction of the Irish online and phone betting tax".

However Lorien Pilling, director at Global Betting and Gaming Consultants (GBGC), says the firm's new CEO will have to face a number of key issues in the role.

These include the introduction of the point-of-consumption tax, which will limit Paddy Power's ability to run generous cash back/bonus offers; the rising machine games duty which will pare profits; the powers given to UK councils to restrict the opening of new betting shops, which will hamper the company's efforts to expand their land-based operations and keep up with competitors William Hill and Ladbrokes; and finding new, profitable markets for the firm to break into.

Pilling noted that having spent nearly a decade in the role, Kennedy is one of the longer serving CEOs in the sector, taking over the firm before the UK Gambling Act came into force, nine months before the upheaval of the Unlawful Internet Gambling Enforcement Act (2006) and when "online poker was 'the future'".

Pilling continued: "So he has seen a lot of changes across the sector over the last eight years. He probably looks ahead to the next two years and thinks now is a good time to get out while the going is still relatively good and his reputation is intact.

"But whoever takes over will have a big task to try and maintain growing revenues and profits to keep shareholders happy.

"The Paddy Power CEO job is obviously still an attractive one but there is the whiff of a 'hospital pass' for Kennedy's replacement, not unlike David Moyes' appointment as manager of Manchester United after the long-serving Sir Alex Ferguson. And we have all seen how well that went."