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Hodgson's horror is Paddy Power Betfair's boon

Published: 17:40 24 Aug 2016 AEST

Betting on football
The bookie took £38mln in bets on the Euro 2016 tournament

The Euro 2016 football tournament was an unmitigated disaster for the England team but it was a happy event for Paddy Power Betfair plc (LON:PPB).

The company, in its first set of results since the merger of Irish bookie Paddy Power and online betting exchange Betfair, said the footie tournament generated £38mln in revenues across the group.

The tournament concluded in July, so some of that revenue was outside the reporting period, which covered the first half of 2016, but £22mln of Euro 201 revenues were booked in June, contributing a large chunk of the £90mln increase in net revenue – to £582mln - from sports bets.

Total net revenue, which includes revenue from casino-style games and bingo, rose 18% to £759mln from £642mln in the first half of last year. The second quarter saw revenue rise 20% year-on-year.

Online revenue rose 20%to £440mln; revenue from its Australian operations jumped 17% to £129mln; revenue from over-the-counter bets in betting shops advanced 12% to £147mln while in the US revenue increased 16% to £43mln.

Underlying earnings, or EBITDA, jumped 31% to £180.9mln from £138.0mln the year before, while the underlying EBITDA margin improved by 2.3 percentage points to 23.8%.

Depreciation and amortisation took a £114.3mln bite out of earnings, resulting in a loss before tax of £45.9mln versus a profit the year before of £60.3mln.

The company said the integration Paddy Power and Betfair is progressing faster than expected, and the group is now expecting to realise £65mln of cost synergies, most of which will occur next year, one year sooner than envisaged.

“The restructuring is now largely complete and the merger synergies are being delivered ahead of schedule,” said Breon Corcoran, chief executive of the group.

“We are creating a world-class operation by exploiting the unique assets and capabilities of each legacy business, particularly in the key functions of technology, marketing and trading.

“While our industry remains highly competitive and is exposed to the prevailing economic and regulatory environments, our strong market positions, increased scale and enhanced capabilities position us well for sustainable, profitable growth," Corcoran said.

Full-year pro-forma underling EBITDA is expected to be between £365mln and £385mln, which implies a mid-point £2.5mln above the current consensus forecast of £370mln. Broker Shore Capital said that in response it would most likely increase its current forecast of £369mln towards the top end of the guidance range.

The company declared an interim dividend of 52p.

Broker Liberum said the interims were slightly ahead of consensus, apparently driven by a better cost performance. Like Shore Capital, it feels the shares are fairly valued after a good run recently.

The shares, which closed last night at 9,950p, initially advanced to 10,020p on the results but fell back 0.2%, in line with the market, to 9,930p.

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