Faster merger benefits prompt upgrades at Paddy Power Betfair
The third quarter was a bit slow out of the stalls but put in a flying finish
Shares in Paddy Power Betfair plc (LON😋P😎 galloped higher as the bookmaker raised full-year profit guidance.
The shares rose 3.5% to 8,880p in the first hour of trading as the company, formed by the merger of traditional bookmakers Paddy Power and online betting exchange Betfair, said buoyant third quarter trading and synergies from the merger feeding through more quickly than expected had prompted it to raise profits guidance.
The company expects £35mln of merger synergy benefits in 2016, which is £5mln more than previously indicated.
Underlying earnings are now expected to be between £390mln and £405mln for the full year, the midpoint of which is some 6% higher than current market forecasts.
Previously, the company had indicated full year earnings would fall in the range of £365mln to £385mln.
In the third quarter underlying earnings raced 53% higher to £113mln from £74mln the year before, on the back of a 25% increase in total net revenue to £404mln.
Stakes on the sports-book climbed 24% to £2,414mln from £1,919mln the year before.
“This was another good quarter for Paddy Power Betfair,” declared Breon Corcoran, chief executive of Paddy Power.
“We are continuing to focus on building a stronger combined operation by exploiting the unique assets and capabilities of each legacy business, and on using our scale to better serve our customers.
“Work is under way to combine the best of Betfair and Paddy Power's technology into a multi-brand, multi- channel, multi-jurisdictional platform that will start to unlock the full potential of the group's scale and will lead to increased pace of development and faster roll out of new products,” he added.
“We continue to see better growth and value opportunities elsewhere in the sector from less UK-centric (c.80% of profits earned in GBP) and indeed 'regulated' (96% of PPB revenues) businesses,” said Liberum Capital Markets.
On the other hand, the broker said that for investors wanting “very high regulated market exposure, an online leader in the UK and major marketing and IT fire-power”, Paddy Power ticks all the boxes.
All punters would welcome a windfall within two weeks of the Cheltenham Festival in March and those who have backed bookmaker Paddy Power look set to get just that.
The listed bookmaker plans to pay €141 million in dividends to shareholders on March 2nd, made up of a special dividend due after its merger with Betfair, a final 2015 dividend, and a payment for the first month of this year, its last before joining forces with its rival.
Paddy Power’s list of retail shareholders includes a few people who, because they like a bet, know that the bookie always wins, and invested accordingly. You can take short odds about some of them using their dividends to boost their betting banks for the Cotswolds showdown. After all, their shares have practically doubled in value since this time last year, so they’re already ahead.
The merger with Betfair is a big part of that share price increase. That deal now looks set to go through next week, but it does not appear that punters will notice any practical impact at Cheltenham 2016. Both companies will be chasing a big slice of its estimated €650 million betting turnover and see it as a good opportunity to recruit customers, so each will have already mapped out a plan of campaign for the four days.
In some ways, it is hard to get a handle on just what Paddy Power Betfair will mean for customers. The enlarged group plans to maintain the two brands, so nothing outwardly will change. So far, the companies have talked a lot about the benefits to clients of bringing two of the industry’s stronger technology teams together.
They say it will mean more innovation, more betting products, more tailored and personalised wagers, not necessarily more value but not less of it either. The reality is that, until now, the focus has been on what the merger will mean for shareholders, so punters will have to wait a little longer before finding out what it means for them. Presumably, they will have a clearer picture by Cheltenham 2017.
Credit to www-irishtimes-com/business/reta --- -1-2512907