Proactiveinvestors Australia Paddy Power Betfair plc Proactiveinvestors Australia Paddy Power Betfair plc RSS feed en Fri, 19 Jul 2019 20:20:20 +1000 Genera CMS (Proactiveinvestors) (Proactiveinvestors) <![CDATA[News - Bookmakers see stock rise as investors bet they made a few quid as England crash out of World Cup ]]> Bookmakers saw their stock rise on Thursday as investors bet they made a few quid as England crashed out of the World Cup at the hands of Croatia last night.

If history has taught us anything, it is to not back the Three Lions, but after a few decent performances and ‘It’s coming home’ memes popping up all over social media, there will no doubt be a lot of people who dipped into their pockets to stick a tenner on England.

READ: England expects: ITV boosted by World Cup viewing surge hope, reported Societe Generale upgrade

On top of England’s semi-final heartbreak, the bookies will also have benefitted from some of the pre-tournament favourites – Germany, Brazil, Spain, Argentina, Belgium – all coming up short. A Croatia win on Sunday could be the icing on the cake for the bookies.

That was the hypothesis that the market seemed to be working as FTSE 100-listed Paddy Power Betfair plc (LON:PPB) shares pushed 2.3% higher to 8,495p, while Ladbrokes and Coral owner GVC Holdings PLC (LON:GVC) added 1.5% to 1,100p, and FTSE 250-listed William Hill gained 1.4% at 300p.

Among other stocks, some of those seen as beneficiaries of England’s better than expected World Cup showing continued to rise, with brewer and pubs operator, Greene King PLC (LON:GNK) up 0.6% to 565.8p, while sporting products retailer Sports Direct International PLC (LON:SPD) ahead 2.3% at 427.2p.

Jasper Lawler, head of research at London Capital Group noted: “During England’s match against Panama, Greene King sold an extra half a million pints, and the team’s progress past the group stage of the tournament is likely to provide a significant boost to the company’s bottom line.”

READ: World Cup and sunny weather boost Magners owner C&C Group

Meanwhile, on Sports Direct, he pointed out: “It’s worth noting that during the 2010 World Cup, when England faced the USA in the group stage of the tournament, Sports Direct posted its strongest trading day on record, as consumers rushed to buy football-related sportswear.

“This year’s World Cup, in which England has progressed further than in 2010, could therefore also provide a sizeable boost to sales.”

Investors could potentially find out next week how Sports Direct has fared, with hopes for an update on current trading when the FTSE 250-listed group reports its full-year results next Thursday, 20 July.

Broadcast boost curtailed

But ITV plc (LON:ITV) saw its shares drop as England’s semi-final exit dashed hopes for another advertising boost from its coverage of the tournament, with the stock – like the national team – having had a good run during the tournament.

ITV, which is due to publish its interim results on July 25, has previously guided for “broadly flat” advertising growth in the first half and +2% for total advertising.

However, analysts at Liberum said in a recent note: “We think there could be some upside risk to that, in particular, June’s +17% TV growth guidance given the success of the World Cup and the return of Love Island.”

READ: ITV jumps on England World Cup and Love Island viewing figures

Love Island – showing on sister channel ITV 2 - attracted an average of almost 4mln viewers in its opening week compared with 2.2mln in 2017.

A downgrade in rating by Goldman Sachs on Thursday also did some damage to ITV as the US bank cut the UK commercial broadcaster to ‘neutral’ from ‘buy’ citing valuation grounds after recent outperformance.

Thu, 12 Jul 2018 15:03:00 +1000
<![CDATA[News - Paddy Power Betfair no longer worth a punt following share price rally ]]> The share price of Paddy Power Betfair PLC (LON:PPB) has come up fast on the rails and is now up with events, Numis says.

The broker has moved to 'hold' from 'add' after the shares rallied around one-fifth from their recent low.

READ: US gambling shake-up stakes: the runners and riders​

The company remains well-placed from a US perspective, where the sports betting scene is being liberalised, but the broker's key pick in the sector remains GVC Holdings PLC (LON:GVC).

As for the UK, bookies were hit for six last month when the betting industry's worst-case scenario unfolded following the Department for Digital, Culture, Media & Sport's (DCMS) decision to cut the maximum stake on fixed odds betting terminals (FOBT) to £2 from the current £100 in a bid to curb problem gambling.

“Following the DCMS's verdict on FOBTs published in May 2018, we have assumed the £2 maximum stake is introduced in 2020 and have updated our sector forecasts accordingly,” Numis said.

Shares in Paddy Power were up 1% at 8,360p.

Wed, 20 Jun 2018 11:12:00 +1000
<![CDATA[News - Paddy Power Betfair agrees deal to merge its US operations with fantasy sports firm FanDuel ]]> Paddy Power Betfair PLC (LON:PPB) announced late on Wednesday that it has agreed a deal to merge its US operations with US fantasy sports firm FanDuel Inc.

The FTSE 100-listed bookmaker said it will contribute its existing US assets as well as US$158mln of cash, which will be used to pay down existing FanDuel net debt which stood at US$76mln at the end of March.

READ: Power Betfair up as it confirms talks to buy FanDuel

Paddy Power Betfair will have 61% ownership of the combined business and FanDuel investors will own 39%. The Irish group will also have an option to take its ownership of the business to 80% after three years and to 100% after five years.

The Irish group aid the deal strengthens its opportunity to target the prospective American sports-betting market, after a US Supreme Court ruling opened the door to legal sports betting across the country last week.

FanDuel, which is headquartered in New York, had revenue of US$124mln and 1.3mln active customers in 2017, with a 40% market share of the US daily fantasy-sports market.

In morning trading in London on Thursday, Paddy Power Betfair shares were up 3.3% at 8,915p.

Thu, 24 May 2018 10:53:00 +1000
<![CDATA[News - Big revenue drops predicted by big three bookmakers from imposition of worst case scenario stake limit ]]> The UK’s three biggest-listed bookmakers all saw their shares fell on Wednesday as they predicted big revenue drops from the proposal by the UK government to implement a new stake limit for gaming machines of £2, which was the worst case scenario expected by the industry.

In its reaction statement, FTSE 100-listed Paddy Power Betfair plc (LON:PBT) estimated that the direct, pre-mitigation, impact of this new stake limit would be a 33% to 43% decrease in its total machine gaming revenue.

READ: Bookies to suffer as UK government confirms cut in maximum stake on FOBTs to worst case scenario of £2

The Irish group said, in 2017, this would have equated to a £35mln to £46m revenue impact, representing 2.0% to 2.6% of Group revenue.

Meanwhile, FTSE 250-listed rival William Hill plc (LON:WMH) estimated that the annualised impact of a £2 staking limit could be a reduction in total gaming net revenue of 35-45%.

William Hill warned that, at this point, preliminary estimates suggest that the stake limit could result in around 900 of its shops – circa 38% of ts existing retail estate - becoming loss-making.

The bookmaker added: “A proportion of these would be at risk of being closed within a relatively short time of the proposed staking change being implemented and, for the remainder of the estate, we will monitor the actual impact on the estate and performance over the medium and long term.”

The group said it currently estimates that this could reduce William Hill Retail's annualised adjusted operating profit, following mitigation measures by around £70mln-100mln.

Notwithstanding this change, William Hill said its current intention is to retain its existing dividend policy to pay out approximately 50% of underlying earnings.

Certainty welcomed

And fellow FTSE 250-listed firm GVC Holdings PLC (LON:GVC) – which recently completed the takeover of merger betting shops chain Ladbrokes Coral – said it anticipates a fully mitigated impact of around £120mln on group underlying earnings (EBITDA) within two years of implementation.

It added that in the first full year the impact on group EBITDA is anticipated to be in the region of £160mln.

The firm said its offer for Ladbrokes Coral envisaged the possibility of a £2 maximum stake and added that today's announcement has no impact on the minimum targeted synergies of at least £100mln per annum.

GVC said: “Whilst we welcome the certainty provided by the announcement, we are disappointed with the outcome, particularly given the previous independent evidence on stake cuts published by both the Gambling Commission and the Responsible Gambling Strategy Board.”

The firm added: “It is now important that the industry is given an adequate implementation period to help prepare and plan for the shop closures that will arise, including attempting to mitigate the impact of resultant job losses. Significant re-engineering of the machines and gaming software will also be required to effect these changes.”

Tough challenge

William Hill’s chief executive officer, Philip Bowcock, commented: “The Government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing.”

And Peter Jackson, Paddy Power Betfair's CEO, said: "We have previously highlighted our concern that the wider gambling industry has suffered reputational damage as a result of the widespread unease over stake limits on gaming machines.

“We welcome, therefore, the significant intervention by the Government today, and believe this is a positive development for the long-term sustainability of the industry."

Shares all three firms fell back in early morning trading, with Paddy Power Betfair down 1.3% at 8,.140p, William Hill losing 1.4% at 313.1p, and GVC shedding 2.4% at 893.5p.

Bookmakers got a boost earlier this week after a US Supreme Court decision to sanction the lifting of the ban on sports betting in the country.

Thu, 17 May 2018 08:46:00 +1000
<![CDATA[News - Power Betfair up as it confirms talks to buy US daily fantasy sports company FanDuel ]]> Paddy Power Betfair plc (LON:PPB) gained on Wednesday as it confirmed it is in talks to acquire US daily fantasy sports company FanDuel.

In a statement noting media speculation, the FTSE 100-listed betting firm said "discussions, regarding a potential combination of the Group's US business and FanDuel to create a combined business to target the prospective US sports betting market" are ongoing.

READ: Paddy Power Betfair a faller as betting giant posts 6% drop in first-quarter earnings

It added, however, that "there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction" and said a further announcement will be made as appropriate.

The company's statement comes following a report on the Legal Sports Report (LSR) website which did not give details on any bids or timing.

The move comes with investor interest high in business opportunities for the betting industry after the US Supreme Court on Monday paved the way for states to legalise sports gambling,

The LSR report noted that FanDuel CEO Matt King recently indicated that his company would be interested in getting into the sports betting space.

Gaming consolidation

FanDuel was part of merger discussion last year with rival DraftKings but the plan was scrapped in July after a legal challenge by the US Federal Trade Commission.

Almost exactly a year ago, Paddy Power Betfair acquired daily fantasy sports platform Draft in a deal worth around US$50mln.

In early morning trading, Paddy Power shares gained 0.8% at 7,825p.

Neil Wilson, chief market analyst at, said: "As far as bookmaker friendly results go, the Supreme Court's PASPA ruling is as amiable as they come.

“No great surprise therefore to see some moves already in the space and making the early running in terms of deals is PaddyPower Betfair, which is raising its stake in the battle for US sports betting market share.”

He added: “FanDuel rival Draft Kings has already said it will enter the sports betting market and there is some sense that local incumbents may be able to gain significant market share before UK/European operators get a chance to mobilise their forces.”

 -- Adds share price, analyst comment --

Wed, 16 May 2018 06:57:00 +1000
<![CDATA[News - Paddy Power Betfair a faller as betting giant posts 6% drop in first-quarter earnings ]]> Paddy Power Betfair plc (LON:PPB) saw its shares fall back on Wednesday after the merged betting giant reported a 6% fall in first-quarter earnings to £102mln due to new betting taxes, levies and start-up losses in the US.

In a trading update, the FTSE 100-listed firm also guided for a full-year underlying earnings (EBITDA) of £470mln to £495mln, which compares to last year’s outcome of £473mln.

READ: Changing horses: Paddy Power Betfair poaches new CFO from Saga

The bookmaker said that excluding a one-off annualisation of taxes and start-up costs, its core earnings would have been flat in the first three months of 2018.

The group said its first-quarter revenue fell by 2% to £408mln as customer activity in its main market of the UK and Ireland was adversely affected by a sustained period of bookmaker friendly sports results and a high level of racing fixture cancellations.

The firm - formed by the 2016 tie-up between online UK betting exchange Betfair and Irish firm Paddy Power -  announced plans to return £500mln to shareholders over the next 12 to 18 months in a share buyback programme to be initiated shortly.

Paddy Power Betfair’s chief executive, Peter Jackson, who took over in January, commented: "We have made good progress against our strategic priorities."

He added: "In Europe, the successful completion of our platform integration has resulted in a meaningful improvement to the Paddy Power product.

“In Australia, Sportsbet continues to perform well and is targeting further market share growth.”

In early morning trading, Paddy Power Betfair shares were down 7.7% at 6,695p.

Wed, 02 May 2018 08:41:00 +1000
<![CDATA[News - Paddy Power Betfair shares rise as Numis upgrades its rating to ‘add’ from ‘hold’ ]]> Paddy Power Betfair PLC (LON:PP) shares rose on Friday as city broker Numis upgraded the FTSE-100 listed bookmaker to ‘add’ from ‘hold'.

In a note to clients, Numis analysts said the UK online gambling market remains attractive for global online players but international diversification and scale remains equally important.

Therefore, the analysts turned more positive on Paddy Power Betfair following the company's recent share price weakness. 

READ: Changing horses: Paddy Power Betfair poaches new CFO from Saga

The broker’s analysts, however, said their key pick in the sector remains GVC Holdings PLC (LON:GVC).

The analysts said: “We calculate that both are discounting a worst-case scenario of a 5ppt rise in a point of consumption tax (POC), a £2 maximum fixed-odds betting terminals (FOBT) stake and the exit of online gambling in Germany.”

The government has been looking at reducing the maximum bet to £2 from £100 on FOTBs to address problem gambling.

In lunchtime trading, company’s shares rose 1.5% to 7,105.0p.

Fri, 27 Apr 2018 11:14:00 +1000
<![CDATA[News - Changing horses: Paddy Power Betfair poaches new CFO from Saga ]]> Paddy Power Betfair PLC (LON:PPB) said on Wednesday that it has appointed Jonathan Hill, the current chief financial officer (CFO) of Saga PLC (LON:SAGA), as its new CFO.

The FTSE 100-listed bookmaker said Hill would replace outgoing CFO Alex Gersh, who announced his intentions to step down in early March, in the autumn.

READ: Paddy Power Betfair likely to find the going heavy in 2018

In its own statement, Saga said Hill would remain at the group until September, adding that the search process for a successor will start immediately with the over-50's holidays and insurance specialist to update the market as soon as this has concluded.

Hill was previously group finance director at housebuilder Bovis Homes.PLC (LON:BVS) and has held senior financial roles at travel company TUI AG (LON:TUI) and British gas-owner Centrica PLC (LON:CNA).

Commenting on the appointment, Paddy Power Betfair's chief executive Peter Jackson said: "We're delighted that Jonathan is joining us. He brings substantial strategic and operational finance experience in consumer businesses and I am confident he will make a significant contribution to Paddy Power Betfair's future success."

Hill added: "I am excited to be joining a business with great brands, differentiated products and substantial international scale. There are many opportunities to drive shareholder value and I look forward to being part of the team to deliver this."

Shares in Paddy Power Betfair were down 1.5% at 7,155p in mid-morning trading, while Saga shares lost 1.9% at 111.4p.

Wed, 28 Mar 2018 10:46:00 +1100
<![CDATA[News - Paddy Power Betfair likely to find the going heavy in 2018 ]]> Shares in bookmaker Paddy Power Betfair plc (LON:PPB) were recovering lost ground down the back straight as market pundits weighed in on its prospects.

The shares fell as low as 7,680p before recovering to 7,950p – down 3.3% on the day – as the market digested a set of full-year results made just that bit more difficult to interpret by exceptional costs related to the merger of Paddy Power and Betfair, which operates an online betting exchange.

READ: Paddy Power slides as punters become wary of frittering away their winnings

The general view seems to be that, while the going was good in 2017, it is likely to turn heavy in 2018.

Spread betting firm Accendo Markets drew attention to proposed regulatory changes in both the UK and Australia that threaten to temper growth, which the group has pledged to overcome by an almost 7% increase to its vast £300m advertising budget.

“A quick trawl of Paddy Power’s Twitter account suggests that what customers would rather see is free bets to get them ticking over; however, in Australia – one of the best performing divisions for the group (revenues +29%) – ‘credit betting’ is set to be outlawed in the next three months,” Accendo's Henry Croft observed.

“While peer William Hill has already exited the market down under in anticipation of the law change, Paddy Power Betfair is sticking to its guns and hoping an increased advertising drive can compensate, and with a jam-packed summer of sporting events to get customers going, perhaps targeting a wider audience that saves money for top tier tournaments is a wiser strategy,” suggests Croft.

“With that said, shareholders don’t appear too hopeful about prospects, seeing shares fall the best part of 7% at this morning’s lows. This either reflects that the advertising push won’t be enough to stymie slowing growth, or that it won’t be able plug the impact of aforementioned Australian law changes and a potential £150m black hole from a cap on UK fixed-odd betting terminals,” he added.

Russ Mould, the investment director of AJ Bell, noted that “the stock market often gives the thumbs up to cost cutting and the thumbs down to increased investment”.

“In reality, spending more on keeping your business relevant has to be a good move if the money is spent well.

“Paddy Power has a very good track record of being innovative with its marketing and branding, so its rivals may actually be shivering in their boots that it is splashing some serious cash on getting its name right in front of gamblers once again,” Mould opined.

UBS noted that the company has stated it will target keeping net debt at somewhere between one and two times annual Ebitda to improve balance sheet efficiency, and said it expected the market to “take the leverage commentary in particular positively”.

The Swiss bank remains a seller of the stock with a 12-month price target of 6,900p.

Numis Securities, which rates the shares a 'hold', said the bookie had reported a solid end to 2017 but the outlook for 2018 is mixed as management is set to invest an additional £20mln in its online offering.

On the plus side, its new net debt/Ebitda target implies around £1bn may be returned to shareholders.

“With £244mln of net cash as at December 2017, this would imply returning £950mln to shareholders at the midpoint of this [debt/Ebitda] range,” Numis said.

“We think visibility for 2018 remains low with the conclusion of the UK triennial review, potential Australian POC [point of consumption] tax and an uncertain recovery profile for gaming. In order to improve online performance, management intends to invest an additional £20m across marketing and retention activities in 2018, which is not in our forecast (FY18 EBITDA of £524m) or consensus (£518mln) implying at least c.5% downgrade,” Numis observed.

“However, the platform migration is now complete and, in Australia, we think competition may continue to suffer distractions from consolidation,” it added.

Numis has a target price of 8,000p for the stock.

Wed, 07 Mar 2018 11:13:00 +1100
<![CDATA[News - Paddy Power slides as punters become wary of frittering away their winnings ]]> Shareholders at Paddy Power Betfair plc (LON:PPB) can now empathise with the bookie's punters as the bets-taker produced disappointing results.

The shares were slow out of the traps, shedding 4.1% at 7.880p, after the bookmaker grumbled that “sporting results favouring bookmakers” had significantly affected customer activity, including a “reduced recycling of customer winnings”.

READ: Morgan Stanley downgrades “high quality” Paddy Power Betfair, questions whether online growth can meet market expectations

Revenue in 2017 was up 13% at £1.75bn from £1.55bn the year before, while underlying earnings (Ebitda) improved 18% to £473mln from £400mln in 2016 and was £10mln higher than the median forecast among analysts who follow the stock. Adjusted earnings per share of 398p were 10p higher than the market had expected.

Underlying profit before tax rose to £388.5mln in 2017 from £315.6mln the previous year, but exceptional costs related to the merger of Paddy Power and Betfair reduced this to £246.6mln (2016: £11.9mln).

Year-end net cash was £244mln, versus UBS's prediction of £182mln.

The board recommended a final dividend of 135p, which means the full-year dividend has been whacked up to 200p from 165p in 2016, 10p more than UBS had forecast.

“The business saw continued good growth in 2017, with operating profits increasing by 19%. Our Australian and Retail operations performed particularly well, growing profits by over 40%,” said Peter Jackson, the chief executive officer of Paddy Power Betfair.

“Our considerable development resources will now be focused on bringing more new products to customers, some of which will be delivered ahead of the World Cup,” Jackson pledged.

Richard Hunter, the head of markets at interactive investor, said the bookie faced some challenges and that the general consensus is that the share price is currently up with events. 

“Particular challenges come in the form of competition in the sector and regulation in PPB’s key geographies, both of which will require careful navigation. In addition, the gaming space has seen under-performance versus the market in both brands, whilst the start to the new year has been hampered by results going against the customer, who does not then recycle any winnings. Whilst earnings and revenue are in line, the profit figure is shy of estimates, which has put pressure on the stock based on its fairly rich valuation,” Hunter observed.

“More positively, the earnings per share metric has shown healthy growth of 20%, whilst investment in product development such as PPB’s apps should continue to reap rewards. The company’s marketing campaign is well known and well received, with the upcoming World Cup presenting another obvious opportunity for revenues. The current dividend yield of around 2.5% is not especially generous, but the 21% increase announced shows an element of management confidence in prospects,” he added.

Wed, 07 Mar 2018 08:59:00 +1100
<![CDATA[News - Paddy Power Betfair reveals CFO’s plan to resign, full year results due Wednesday ]]> Paddy Power Betfair plc (LON:PPB) has told the market that chief financial officer Alex Gersh intends to step down from his position.

The bookmaker has launched an executive search process to identify and appoint a successor.

READ: Morgan Stanley downgrades “high quality” Paddy Power Betfair, questions whether online growth can meet market expectations

Gersh will depart once his replacement is in place, the company confirmed. It comes ahead of Paddy Power Betfair’s full year results which are due on Wednesday.

UBS analyst Chris Stevens is expecting Paddy Power Betfair plc (LON:PPB) to reveal full year revenue of around £1.7bn and underlying earnings (EBITDA) of £457mln. Adjusted earnings are forecast by UBS at around 380p per share, with the dividend anticipated at 190p.

The market is expecting good things from Paddy Power, particularly in the online operations.

However, last month, analysts at Morgan Stanley raised caution while downgrading its view on the share to ‘underweight’, as the bank’s analysts reckon the expected online  “acceleration” may not materialise.

“We see few silver linings from regulatory changes in Australia and the company needs to address some major strategic issues (which may also limit balance sheet redeployment)."

Mon, 05 Mar 2018 07:46:00 +1100
<![CDATA[News - Morgan Stanley downgrades “high quality” Paddy Power Betfair, questions whether online growth can meet market expectations ]]> Morgan Stanley has described Paddy Power Betfair plc (LON:PPB) as a “high quality company with strong technology and a robust balance sheet”, nonetheless, the investment bank downgraded the bookmaker.

The rating moves to ‘underweight’, with a £75 per share price target which suggests some 14% downside to the current price of £87.10.

READ: Paddy Power Betfair raises full-year guidance after strong third quarter

Analysts reckon the market is expecting a “significant acceleration” in the group’s online revenue growth following the integration of the two formerly separate gambling businesses though, according to Morgan Stanley, the acceleration may not materialise.

“We see few silver linings from regulatory changes in Australia (and the 15% EPS hit not fully in consensus), and the company needs to address some major strategic issues (which may also limit balance sheet redeployment).

“These could all put pressure on the stock's premium valuation, and we see better returns elsewhere.”

READ: Paddy Power Betfair to gain share in a growing market, predicts Macquarie

Ladbrokes Coral Plc (LON:LAD), which is also navigating a post-merger integration, is seemingly not deemed to be in favour with Morgan Stanley has also been downgraded.

Morgan Stanley moves its rating to ‘equal weight’ from ‘overweight’, with the price target adjusted to 198p from 200p.

Mon, 08 Jan 2018 10:22:00 +1100
<![CDATA[News - Paddy Power Betfair raises full-year guidance after strong third quarter ]]> Shares in Paddy Power Betfair plc (LON:PPB) were quick out of the traps on Wednesday morning after the bookie raised its full-year earnings guidance.

The company said in its third quarter trading update that full year underlying earnings, or EBITDA, are now expected to be between £450mln and £465mln, which represents an uplift of £5mln at the bottom end of the range.

READ: Paddy Power Betfair to gain share in a growing market, predicts Macquarie

Revenue in the third quarter rose 9%, or 8% on a constant currency (CC) basis, to £440mln from £404mln the year before.

Underlying EBITA rose 7% (9% on a CC basis) to £121mln from £113mln last year.

Barclays had forecast underlying EBTIDA of £116mln on revenue of £423mln.

"Q3 was an encouraging quarter for Paddy Power Betfair, with good stakes growth despite the absence of a major football tournament,” said Breon Corcoran, who is due to step down as chief executive in the new year.

“Our international businesses performed particularly well. In Australia, the winning combination of innovative product and marketing excellence continued to deliver exceptional results, with revenue up 29%2, while US revenue was up 18%.

READ: Change of jockey at Paddy Power as CEO Breon Corcoran dismounts

“Paddy Power Retail also continues to outperform the market through its sports-led proposition and is well positioned to respond to regulatory changes,” he added.

Since Paddy Power acquired Betfair, the integration of the technology platforms has occupied a lot of management time but is nearing completion, and in 2018 customers will start to benefit from an increased pace of new product delivery, Corcoran promised.

Corcoran made no mention of yesterday's preliminary recommendations from The Department for Digital, Culture, Media and Sport on fixed odds betting terminals, other than to say “the industry remains highly competitive and is exposed to regulatory risks”.

Shares in the bookie were up 4% at 8,010p in the first half-hour of trading.

Wed, 01 Nov 2017 08:45:00 +1100
<![CDATA[News - Paddy Power Betfair to gain share in a growing market, predicts Macquarie ]]> Aussie finance house Macquarie has initiated coverage on bookie Paddy Power Betfair plc (LON:PPB) with an 'outperform' rating.

That is despite the stock trading at around a 60% premium to the sector median price/earnings ratio (based on earnings forecasts for 2018) of 10.8.

“In our view, it is crucial, when investing in highly competitive industries with potentially fluid market shares, to invest in companies with structural advantages. We believe that the gambling industry is one of those and that PPB is the clear structural winner,” Macquarie Capital said.

The gambling industry has low barriers to entry, especially in the sports betting market, and competition is not only intensifying but is set to get tougher still as more markets regulate, Macquarie reckons.

“In such an environment, we believe it is essential to invest in companies with strategic advantages. This does not simply mean investing in the market leader. Indeed, this can be a dangerous approach if it is a legacy position; however, if built on a sustainable and growing competitive advantage, it is a huge opportunity,” the Aussie firm said.

Paddy Power describes itself as “a structural winner in a dynamic and highly competitive market” and Macquarie agrees with this assessment.

According to Macquarie, Paddy Power's ace-in-the-hole is one of scale, both at a global and a local level, which gives the bookie the ability to invest meaningfully in technology and marketing.

The bookie is capable of gaining share in a growing market, but will need to continue investing in technology, marketing, price and new markets, which will likely constrain any expansion in margins.

Macquarie has a price target of 7,590p for Paddy Power; the shares currently trade at 7,630p.

Wed, 11 Oct 2017 11:26:00 +1100
<![CDATA[News - Paddy Power Betfair continues to fade down the back straight ]]> The second half of the year has started in line with expectations at bookmakers Paddy Power Betfair plc (LON:PPB).

Most of the headline news from this morning’s half-year results was revealed in yesterday’s announcement about the chief executive officer succession, in which the company revealed expectations for the full-year are for underlying earnings (EBITDA) of between £445mln and £465mln, including the impact of the acquisition of daily fantasy sports games operator DRAFT.

READ Change of jockey at Paddy Power as CEO Breon Corcoran dismounts

Revenue in the first half of the year rose 9% to £827mln from £759mln a year earlier; the comparative figures have been presented on a pro forma basis to take into account acquisitions.

Online revenue rose 10% from a year earlier, when takings were boosted by the Euro 2016 football tournament; stripping out the effects of the tournament, the rise would have been 15%.

The Aussie business did well, growing revenue by 16%.

Online gaming revenues – poker et al – eased 3% to £120mln, with the company acknowledging that it needs to invest in its gaming product in order to achieve market growth rates.

EBITDA climbed 21% to £220mln from £181mln, with the EBITDA margin up three percentage points to 27%.

The ability of bookmakers to make money out of nothing has always been a wonder, and Paddy Power demonstrated this with underlying free cash flow of £172mln, which was 13% higher than underlying profit after tax in the reporting period.

The interim dividend was bumped up 25% to 65p from 52p.

"We continue to make substantial investments to position Paddy Power Betfair as a structural winner in a dynamic and highly competitive market. The focus of this investment is to use technology to improve efficiency and minimise the cost of servicing our customers and to further enhance our customer proposition,” said Breon Corcoran, chief executive of Paddy Power Betfair.

The company revealed that, at times, more than 70% of its European technology resources were engaged in integrating the Paddy Power and Betfair platforms.

Corcoran reiterated that the integration is on track for completion by the end of the year, after which the company will be in a position to hit the accelerator pedal in terms of new product development.

“Ahead of that, our customers and shareholders are already seeing benefits from efficiencies and investments. In the first half alone, customers enjoyed approximately £30mln of extra value through better odds, more generous offers and new loyalty benefits,” Corcoran claimed. 

Peel Hunt reiterated its ‘buy’ recommendation and its dismay over the market’s reaction to the stock.

“Paddy Power Betfair’s P/E [price/earnings] rating has gradually sunk to its knees and it makes no sense to us,” the broker said.

“A market leader in a structural growth market it has Internet cash flow characteristics, it is close to unifying the Online business onto a single tech platform and is investing in margin and marketing to sustain market share,” Peel Hunt added.

The broker thinks the shares are worth ten quid.

Shore Capital would not go that high. Its price target is 7,500p, making the shares no more than a ‘hold’, as it notes that the casino gaming offering continues to be a drag on growth.

The stock trades at around 20 times the current year’s projected earnings per share while the enterprise value (market capitalisation adjusted for cash and debt) is approaching 14 times annual EBITDA.

“Although this is arguably towards the bottom end of Paddy Power’s trading range since the financial crises we remain concerned with the slowdown in its key European online division especially given the premium valuation relative to peers,” Shore said.

Numis Securities also has a ‘hold’ rating on the shares, with a target price of 8,000p, and prefers Playtech and GVC in the sector.

“We downgraded PPB to Hold in July. Whilst we expect online gaming growth to improve, competition remains high and we continue to be mindful of external regulatory headwinds facing the business, particularly further online taxes in the UK and Australia. We think the combination of slower growth and CEO succession will mean momentum stays negative,” Numis said.

The shares were down 5.2% at 7,155p in mid-morning trade.

--- adds share price and broker comments ---

Tue, 08 Aug 2017 07:41:00 +1000
<![CDATA[News - Change of jockey at Paddy Power as CEO Breon Corcoran dismounts ]]> Non-executive director Peter Jackson is to be the new boss of bookmaking group Paddy Power Betfair plc (LON:PPB).

He will replace Breon Corcoran, who is cashing in his chips after sixteen years with the bookie.

Jackson has been the chief executive officer of payments services provider Worldpay Group PLC (LON:WPG) since March 2017 and will take up his new role in due course; in the meantime, Corcoran will continue in his current role.

Jackson has been a non-executive director of Betfair Group since 2013. Betfair was taken over by Paddy Power in February 2016.

The news came out of the blue, one day ahead of the announcement of the company’s half-year results.

The company said those results will confirm the company has been trading in line with expectations, with year-on-year revenue growth of 9% and underlying earnings (EBITDA) growth of 21%.

The group said it expects full-year underlying EBITDA to fall somewhere between £445mln and £465mln.

Mon, 07 Aug 2017 07:28:00 +1000
<![CDATA[News - Paddy Power Betfair buys US fantasy sports firm Draft ]]> UK bookmaker Paddy Power Betfair plc (LON:PPB) said it has bought US fantasy sports event business Draft for US$48mln.

Paddy Power will pay an initial cash consideration of US$19mln and a further cash consideration of US$29mln depending on the performance of Draft.

The company expects to make substantial marketing investment in Draft over the next few years to boost growth. It sees an underlying EBITDA loss of US$20mln in 2017.

"We are excited to be bringing Draft into the group and to further increase our presence in the United States," said Paddy Power's chief executive Breon Corcoran. "Draft has a differentiated product and we believe the business, with the support of our marketing and technology expertise, can take share in the fast-growing daily fantasy sports market.”

Draft will continue to be run by co-chief executives, Jeremy Levine and Jordan Fliegel.

Wed, 10 May 2017 09:47:00 +1000
<![CDATA[News - Grand National not so grand for bookie Paddy Power Betfair ]]> The Cheltenham festival was kind to the bookies this year, boosting the first quarter performance of Paddy Power Betfair plc (LON:PPB).

The bookies are never happy, however, and the bets taker grumbled that since Cheltenham the punters' favourites have done well in the Grand National steeplechase, the Premier League football and the US Masters golf tournament, which meant overall gross win margins were weak in April.

Revenue in the first three months of 2017 was up 23% from a year earlier, or 15% on a constant currency (cc) basis, to £416mln.

CLICK HERE: For a daily round-up of all the Proactive news

The growth was driven by sports betting, with stakes on the sports-book up 18% (cc: +9%) year-on-year.

The high street outlets had a good quarter, with revenue up 23% (cc: +18%) to £82mln from the year before.

Online revenue rose 15% (cc: +12%) to £224mln, while the Aussie operations saw revenues rise 21% in local currency.

Underlying earnings, or EBITDA, were up 87% to £111mln.

Underlying profit more than doubled, rising 114% (cc: +117%) to £91mln.

“A key strategic focus for 2017 is the integration of our technology platforms. This project is on track and we expect both our European brands to be operating on a common platform by the end of the year, at which point customers will start to benefit from increased pace of new product delivery," said Breon Corcoran, chief executive of Paddy Power.

Shares in the company fell 1% to 8,685p on the results.

CLICK HERE: For a daily round-up of all the Proactive news ]]>
Wed, 03 May 2017 08:04:00 +1000
<![CDATA[News - Revenues almost double, but merger expenses hit Paddy Power Betfair’s bottom line ]]> Paddy Power Betfair plc (LON:PPB) saw revenues almost double last year thanks to the merger that brought the two bookmakers together, although the same £7bn transaction also weighed on the group’s bottom line.

Total revenues for the year to 31 December 2016 – which include an 11 month contribution from Betfair – increased 89% year-on-year to £1.5bn (2015: £794mln).

The merger between the two companies, completed on 2 February, came at a cost though, with the enlarged group forking out £116mln in cash expenses.

As a result, operating profits slumped to £15mln from £125mln a year earlier, while the costs also forced PPB to slip into the red and post a loss of £5.7mln for the period.

The bookie made a statutory loss per share of 7.2p in 2016, compared to a 239.9p profit in 2015.

Despite the loss for the year, the gaming firm was bullish about future performance as it handed back another 113p a share to investors, taking the Total dividend for the year to 165p.

“2016 was a transformational year for Paddy Power Betfair with much of the integration of the businesses completed sooner and more efficiently than expected,” said chief executive Breon Corcoran.

“We have created a business with considerable scale that is stronger and better able to compete than either of the individual legacy companies. The group is well positioned to deliver sustainable, profitable growth.”

Paddy Power was also hit by the ‘worst Cheltenham ever’ when several favourites stormed to victory, although this was marginally offset by a strong Euro 2016 Championships.

“Customer friendly football results” towards the end of the year weren’t quite the Christmas present shareholders had hoped for, depressing the company’s winnings for 2016.

With the rollercoaster ride of sporting results, Paddy Power Betfair said revenues from its sports gambling business were “marginally lower than our normal expectations”.

Paddy Power told investors that trading so far in 2017 has been in-line with expectations, with sportsbook stakes across the group up 12% at constant currency.

Much of that growth is coming from Australia, which has seen sportsbook stakes increase by 19% in the year to date.

What the City is saying

Liberum’s Jason Holden has reiterated his ‘hold’ recommendation for Paddy Power and also repeated his £88.08 target price.

The analyst said: “After a disappointing fourth quarter, the comment that current trading is ‘in line with expectations’ will lend some reassurance.

“However, the lack of a comment on gaming will be a focus and it seems likely that operational challenges will continue around the performance of cross-sell to sports customers and the investment required to stimulate growth.”

Shares were down £3.10, or 3.5%, to £84.75 in early deals.

--Updates for background information, broker comment and share price--

Tue, 07 Mar 2017 07:45:00 +1100
<![CDATA[News - Trump victory, football results hit revenues at Paddy Power Betfair, with profits seen mid-range ]]> Merged betting giant Paddy Power Betfair plc (LON:PPB) saw “customer-friendly” results knock around £40mln off group revenues in the fourth-quarter, with Donald Trump’s unexpected US election victory costing the firm almost £5mln.

The FTSE 100-listed group - which on Friday halved its odds on the newly-inaugurated US president getting impeached or resigning before the end of his term of office - also said its European sportsbooks lost money on football bets in the month of December, before any benefit from the re-cycling of winnings.

Paddy Power Betfair added, however, that “the impact on profitability of these results was partially offset by lower than expected marketing and staff costs.”

The firm said it continued to see good sportsbook staking growth, although results favoured customers, and it said overall group revenue in 2016 was up 18% year-on-year to £1.551bn.

It said, notwithstanding worse than expected gross win margins in November and December, it expects full-year group underlying earnings (EBITDA) to be around the mid-point of its previously guided range of £390mln to £405mln.

The group added that the adverse sports results, coupled with some weakness in gaming, meant that fourth-quarter revenues in its Online division actually fell by 3% year-on-year, despite a 15% growth in sportsbook stakes.

But Paddy Power Betfair said the benefits of the group's geographical diversification were highlighted by a strong performance from Sportsbet in Australia, which saw stakes growth of 25% and revenue growth of 18%  in local currency terms in the fourth-quarter,  helping to partially offset the poor gross win margins in its European businesses.

Shares ease …

In reaction to the update, Paddy Power Betfair shares were down 1.3%, or 115p at 8,475p in early trading.

In a note to clients, Shore Capital analyst, Greg Johnson, said: “Overall, this statement is broadly in line with our expectations, with the unfavourable sporting results impacting the full year EBITDA, albeit the downside has been materially mitigated by lower costs.

“However, the slowdown in sportsbook staked(online Europe) and gaming revenue in the quarter, somewhat masked by Australia and cost savings, may disappoint, especially given the rating.”

The analyst said he expects to downgrade 2016 pretax profit estimates for Paddy Power Betfair by around £10mln to £326mln after the update, and will maybe “need to reflect more modest growth assumptions in 2017.”

He added: “We have a HOLD rating on the stock reflecting concerns that the valuation was discounting am unrealistic level of market share gains.”

But buys remains …

Analysts at Liberum Capital retained a ‘buy’ rating on Paddy Power Betfair shares with a price target of 8,800p, calling today’s trading statement “in-line”.

Although they noted: “In our view there are cheaper and just as attractive growth companies elsewhere in the sector.”

In a note to clients, the Liberum analysts said: “On a P/E for FY17 of c.23x ongoing delivery of double digit underlying growth is priced in.

“Therefore the market may focus this morning on Q4 Sports revenue growth of negative 1% (largely explained by unfavourable results) but also gaming revenue which was only up 3%”.

But analysts at Peel Hunt were more bullish, keeping a ‘buy’ rating and 1,100p price target on Paddy Power Betfair shares.

They said, in a note to clients: “Paddy Power Betfair is something of a behemoth and so it must be getting harder to pull a rabbit from the hat with every trading statement.

“However, our forecast is low in the forecast range and we are optimistic about the tone of next week’s update. And the market focus will shift to the upside potential for 2017/18.”

The Peel Hunt analysts added: “Paddy Power Betfair has multi-year growth potential and an underexploited balance sheet. We believe it will continue to turn its scale to its advantage.”

 -- Adds shares price, broker comment --

Mon, 23 Jan 2017 07:51:00 +1100
<![CDATA[News - US election costs cocky Paddy Power Betfair US$5.5mln ]]> UK bookmaker Paddy Power Betfair plc (LON:PPB) has been hit for its biggest political payout ever in the wake of Donald Trump's victory.

Paddy Power had already paid out US$1mln last week to customers who backed Hillary Clinton and has now been hit for US$4.5mln by customers who backed Trump.

The bookie said: "We're in the business of making predictions and decided to put our neck on the line by paying out early on Hillary Clinton, but boy did we get it wrong."

A huge surge in bets for ‘The Donald' followed the FBI’s re-opening of its investigation into Hillary Clinton’s emails, it added.

It may have  been the bookmaker’s biggest political hit, but far from being deterred it is already running odds of 4/1 for Trump to be re-elected in four years.  

Shorter odds (6/4) are on him appearing in court before the end of his term as president and Paddy Power seems to be doubtful that the controversial wall along the Mexican border will be built. You can get  20/1 on that happening.

Shares shed 1% to 9,075p. 


Wed, 09 Nov 2016 09:05:00 +1100
<![CDATA[News - Paddy Power Betfair will beat its own expectations ]]> Investec has taken a bullish stance on Paddy Power Betfair plc (LON:PPB) and thinks the bookmaker will surprise the market with better-than-expected underlying earnings figures this year.

The bookie – which came about after the merger of Paddy Power and Betfair back in February – recently upped its guidance for full-year EBITDA (underlying earnings).

It said it expects to report underlying earnings of between £390mln and £405mln for the 12 months to December, although Investec thinks it should beat this comfortably.

“FY16 EBITDA guidance looks too low and we expect the company to derive a further £30m of synergies in FY17,” said Investec’s Alistair Ross.

Ross now expects underlying earnings for this current financial year to come in at £408.1mln, although he concedes that even this will likely be beaten.

“We think our forecasts are still cautious given the possibility of faster synergy realisation than expected higher cost synergies expected overall as well as revenue synergies.”

In addition to this, Ross said in his last sector note that online-focused bookies – such as Paddy Power Betfair – are in a better position than retail bookmakers such as William Hill.

The City broker upgraded the stock to a ‘buy’ recommendation on the back of the low guidance and thinks there is still some white space for the stock to grow into, setting a target price of 10,000p.

Shares were up on Tuesday Morning to 9,185p.

Tue, 08 Nov 2016 10:38:00 +1100
<![CDATA[News - Faster merger benefits prompt upgrades at Paddy Power Betfair ]]> Shares in Paddy Power Betfair plc (LON:PPB) 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. 

Fri, 04 Nov 2016 09:27:00 +1100
<![CDATA[News - Bookie Paddy Power already paying out on Clinton victory ]]> Irish bookmaker Paddy Power is already paying out 1mln euros ($1.1mln) to customers who bet on Hillary Clinton to win the US election - with three weeks still to go before American voters head to the polls, according to the company's blog site.

The London-listed bookmaker said “recent revelations” about Donald Trump – the Republican candidate has been forced to reject allegations of unwelcome advances towards women – have caused his chances of victory to “plummet like the value of sterling”.

Paddy Power is currently offering odds of 9/2 for a Trump victory, representing an 18% chance. This has come down from 13/8 as recently as May, implying a 38% chance of victory.

Paddy Power is paying out on single bets placed on October 18 backing Clinton to enter the White House. Read more.

Tue, 18 Oct 2016 16:51:00 +1100
<![CDATA[News - Hodgson's horror is Paddy Power Betfair's boon ]]> 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.

Wed, 24 Aug 2016 08:40:00 +1000
<![CDATA[News - Paddy Power Betfair takes a whipping at Cheltenham ]]> Bookmaker and online betting exchange platform operator Paddy Power Betfair plc (LON:PPB) said all four of its brands traded well in the first quarter.

The company, which owns the Sportsbet and TVG as well as the eponymous Paddy Power Betfair brands, said underlying earnings (EBITDA) were up 27% to £59mln on a pro forma basis from a year earlier.

The figures have been expressed pro forma to account for the takeover of Betfair by Paddy Power.

Revenue rose 16% from a year earlier to £339mln, with Aussie revenues up 25% year-on-year to £58mln and US revenues up 20% to £20mln. Back in the UK, the results at the Cheltenham Festival were not helpful to the company, with punters' net winnings totalling more than £20mln.

Breon Corcoran, chief executive, said the post-merger integration of Paddy Power and Betfair is on track, with the group looking to bring the best of each business to the combined group.

“Our marketing, technology and operations performed well throughout the key spring racing period and we are now focused on preparations for Euro 2016,” Corcoran said.

Shares in Paddy Power Betfair stumbled 170p to £90 in early trading.

Wed, 04 May 2016 09:35:00 +1000
<![CDATA[News - Paddy Power Betfair PLC sees competitive market despite merger ]]> Shares in Paddy Power Betfair plc (LON:PPB) fell after the newly merged gaming group rang up higher profits but cautioned on a competitive outlook.

The stock dropped 185p to 9435p in lunchtime trading after the Irish bookie said group operating profits rose 10% to €180mln on a 24% increase in revenue to €1.1bn.

The merger, which was finalised last month, created one of the world's largest online betting and gaming companies.

On a proforma basis the enlarged group had £1.32bn of revenues and £229mln of underlying operating profits in the year to December 31. Online business contributed 80% of group revenues and 87% of operating profits.

PPB said it would need to cut jobs to remove some duplicated roles from its 7,000-strong workforce in the enlarged company, but did not say how many.

Chief executive Breon Corcoran said the new financial year had begun well, adding: "We continue to operate in a highly competitive industry. We are excited however, by the opportunity to enhance our competitive position."

The group said it benefited from double-digit growth across all its online and retail divisions. It boosted its full-year dividend by 18% to 180 cents per share.

Online revenue lifted 23% and online operating profit rose 11% to €152mln. UK retail revenue put on 15% and 6% on a like-for-like basis while operating profit increased 12% to €23mln.

Tue, 08 Mar 2016 13:15:00 +1100
<![CDATA[News - Paddy Power-Betfair to win online, Nomura says ]]> Soon-to-be-combined bookies Paddy Power (LON:PAP) and Betfair (LON:BET) will be number one in the online gambling market in the UK, says Nomura analyst Richard Stuber.

The analyst has put the merger, expected to close in the first quarter of 2016, under the spotlight this morning, following results from Betfair at the end of last month.

“We think the combination is a good fit, with Paddy Power’s distinctive brand targeting the recreational customer and Betfair attractive to the more sophisticated, price-sensitive customer,”

“Scale is increasingly important and we expect the combined entity to be the UK market leader in online betting and gaming.”

Stuber estimates the combined business would have an 18% share of the online market, slightly more than current leader William Hill (LON:WMH) which has about 15%, and he believes this leading position to improve to about 20% by 2020.

The analyst also highlighted what he sees as the “consistently and materially underestimated” impact of operating leverage for the online elements of the businesses. He forecasts Paddy Power-Betfair will generate an earnings margin of 35% by 2019 widening to 40% by 2024 (he says peers see between 20-25% for 2015).

“If we are correct on margins, the current share price suggests revenue growth (possible revenue synergies) above 7% pa. This upside potential is finely balanced from the risk of increasing cost of sales (taxes),” he added.

Nomura currently rates Paddy Power as ‘neutral’ and today upgraded Betfair to ‘neutral’ from ‘reduce’.

Looking at Betfair’s results, Stuber highlighted that the top-line momentum continued for the business through the second quarter.

Betfair reported £274.4mln of revenue, up 16%, compared with 15% revenue growth in the preceding quarter. “This is consistent with its four-year record for revenue growth from sustainable markets of c16%, Stuber highlighted.

Earnings (EBITDA) increased 9% to £80.5mln and operating profit rose 12% to £67.2mln.

Tue, 08 Dec 2015 12:38:00 +1100
<![CDATA[News - Betfair increases divi by 67% ahead of Paddy Power merger ]]> Betfair (LON:BET) hiked its interim dividend after a strong first half ahead of its merger with rival bookie Paddy Power (LON:PAP).

The bookmaker has ramped up its dividend by some 67% to 15p from the 9p pay-out shareholders received this time last year, as sales and profits rose in the first half.

Revenue in the six months to October climbed 15% to £274.4mln (£237.6mln in 2014) while operating profit lifted 12% to £67.2mln (59.9mln).

The group performed particularly well, given the tough comparative period which featured last year’s FIFA World Cup.

Breon Corcoran, chief executive, said the results were “ahead of our original expectations,” adding that its two largest markets, the UK and US, accounted for most of its growth.

Growth in its Sportsbook drove revenues higher, with stakes up some 93% year on year, she said.

Betfair also updated on the timeline of its merger with Paddy Power, which it expects to be completed in the first quarter of 2016, subject to shareholder and regulatory approval.

The new group, which will be called PaddyPower Betfair, will create one of the world's largest public online betting and gaming firms with revenues of more than £1.1bn.

 It comes as Ladbrokes’s (LON:LAD) shareholders approved its £2bn merger with Gala Coral on Tuesday.

Shares in Betfair rose 3.4% or 118p to 3,599p on Wednesday.

Wed, 25 Nov 2015 08:43:00 +1100
<![CDATA[News - Paddy Power and Betfair plan to save £50mln from tie-up ]]> Paddy Power (LON:PAP) expects to save £50mln from its planned merger with rival Betfair (LON:BET).

The two bookmakers said they expected to save money from "efficiencies which reflect the complementary nature of the businesses".

A spokeswoman was unable to confirm the scale of any job cuts or branch closures, but she said: "It's not a job-cutting play."

They expect to achieve the full savings in the third full year following completion. They also anticipate savings from offering new products and services to existing and new customers.

Paddy and Betfair say the new group, to be called Paddy Power Betfair, will create one of the world's largest public online betting and gaming firms with revenues of more than £1.1bn.

The merger will result in Paddy Power shareholders owning 52% of the new company. They will receive an €80mln special dividend immediately before completion of the deal. 

Betfair investors will own 48% and will be entitled to receive 0.4254 new Paddy Power Betfair shares in exchange for each Betfair share.

The merger represents the latest move in consolidation of the sector, following on from news of Ladbrokes's (LON:LAD) planned merger with Gala Coral.

Bwin.Party (LON:BWIN) has also confirmed plans to merge with GVC Holdings (LON:GVC), which beat off a rival offer for Bwin from 888 Holdings (LON:888).

Paddy's chairman Gary McGann said: "The merger of Paddy Power and Betfair will create a company of world-class capability and people who will deliver substantial up-front synergies and a platform for very exciting business expansion."

Betfair chairman Gerald Corbett said: "The combination makes huge strategic sense."

Tue, 08 Sep 2015 08:25:00 +1000
<![CDATA[News - Paddy Power and Betfair tie-up heralds more gaming industry deals ]]> Merger and acquisition activity in the gaming industry is set to continue following Paddy Power's planned tie-up with Betfair, particularly among small-caps.

Irish bookie Paddy (LON:PAP) provided the sector’s latest takeover interest as it announced the planned deal with Betfair (LON:BET), which the pair said would create one of the world’s biggest online betting and gaming firms.

Paddy's move means four big deals are now in the pipeline and analysts say others are unlikely in the short term.

But smaller AIM-listed players are tipped to make more bolt-on acquisitions and regulators could force changes to the planned mega-mergers, sparking asset sales.

Online gaming group 32RED (LON:TTR) has made a couple of buys in the last year while interactive gaming group Netplay TV (LON:NPT) snapped up digital marketing firm Otherside earlier this month.

Online bingo group Stride Gaming (LON:STR) , which floated on AIM in May, also announced the acquisition of International Mobile Social Gaming Company for up to US$39.2mln on July 31.

Sophie Blandford at Daniel Stewart & Co said: “I think you will still see some deals at the lower end of the market.”

Paddy's play for Betfair marks the fourth major deal currently taking place in the industry as firms try to cut costs in the face of new gaming taxes.

Ladbrokes (LON:LAD) has announced a plan to merge with Gala Coral and Bwin.Party (LON:BPTY) is in talks with rival bidders GVC Holdings (LON:GVC)  and 888 Holdings (LON:888) about a potential tie-up.

Canada's Contentious Gaming has also made a play for football pools operator Sportech (LON:SPO).

M&A activity gathered pace after the government introduced a new 15% “point of consumption” tax on gaming firms in last year.

Firms saw tie-ups as a way to cut costs and develop the financial muscle to cope with the new duties.

William Hill (LON:WMH) failed to take over 888 in February after the latter rejected its approach as inadequate.

But takeover speculation resurfaced in June, with Paddy Power talked about as a potential bidder for Ladbrokes.

Ladbrokes later announced a possible deal with Gala Coral while Bwin, which has been in talks with various parties since last year, is discussing a tie-up with GVC following an earlier bid by 888.

Robert Stokes at Davy Stockbrokers in Dublin said the Paddy Power/Betfair combination was “a match made in heaven” which he expects to go through.

But he stressed that all the deals on the table still have to be agreed and signed off and there was still potential for rival bidders to enter the race.

The proposed tie-up between Ladbrokes and Gala Coral could also face competition questions because of the size of the pair’s shop estates.

William Hill and Paddy Power could be interested in buying shops from the pair if regulators force them to sell some of their outlets.

“Paddy Power is still looking to open 25 shops a year for the next three to four years,” he said.

Nigel Driffield, Professor of Strategy & International Business at Warwick Business School, said the Paddy Power/Betfair deal was ”a simple case of consolidation”.

He said: “There are simply too many betting shops that do not pay their way, and online there are huge economies of scale. Online betting encourages people who make small bets ‘for fun’ but still have to be processed.

“Betfair’s niche is that they make smaller margins than the high street bookies, and are one of the strongest online providers with the exchange service, as well as pioneering initiatives others have copied like cash out.

“Paddy Power typically have their roots in horse racing and seem to be struggling to establish a presence in other sports - the growth in sports betting in the last 10 years has been in football.”

Wed, 26 Aug 2015 16:10:00 +1000
<![CDATA[News - Paddy Power to merge with rival Betfair ]]> Paddy Power (LON:PAP) has announced plans to merge with rival Betfair (LON:BET) in a deal to create a gaming giant.

Paddy said its shareholders would own 52% of the group while Betfair investors would have a 48% stake.

Immediately before completion, Paddy Power shareholders would receive a special dividend of €80mln.

It represents the latest move in consolidation of the sector, following on from news of Ladbrokes's (LON:LAD) planned merger with Gala Coral.

Paddy and Betfair said the new group, to be called Paddy Power Betfair, would create one of the world's largest public online betting and gaming firms with revenues of more than £1.1bn.

Paddy Power chairman Gary McGann would become chairman of the combined group and Betfair chief executive Breon Corcoran would become chief executive. Paddy's chief executive Andy McCue would become chief operating officer.

The companies said talks about the terms of the deal remained ongoing and were subject to completion of due diligence.

They announced the proposed deal as Paddy Power unveiled half-year results including operating profit growth of 33% to €80m.

Net revenue rose 25% with strong double digit growth across all online and retail divisions.

Diluted earnings per share increased 31% to 144.8 cents and the group hiked its interim dividend by a fifth to 60 cents a share.

It also returned €391mln to shareholders through a B share scheme.

Wed, 26 Aug 2015 07:35:00 +1000
<![CDATA[News - World Cup and racing boost Betfair ]]> Online gaming group Betfair (LON:BET) reported rises in punters and profits but warned that investment was crucial to keep up with rivals.

Betfair said customer numbers had increased by 52% to 1.7 million and pre-tax earnings before interest, depreciation and amortisation lifted 32% to £120.2mln in the year to April 30.

The group attracted 65% more new customers following increased marketing investment and last year's World Cup, which it said drove trading momentum.

That trend continued in the rest of the year, culminating in record customer numbers and betting volumes at the Cheltenham Festival and Grand National.

It proposed a full year dividend of 34p per share, up 70% against a year ago.

Chief executive Breon Corcoran said Betfair continued to invest heavily in the business.

It spent about £28mln more on marketing and customer bonuses and added more than 60 people to its product development teams.

Chief executive Breon Corcoran said Betfair had momentum, current trading was good and it was confident it could hit targets for the coming financial year.

But he added: "The market remains highly competitive and, despite the introduction of the UK point of consumption tax, operators are still spending heavily on marketing and promotions.

"We continue to believe scale is critical and we have opportunities to invest for profitable growth."

Shares fell 49p to 2465p in early trading in London.

Wed, 17 Jun 2015 08:55:00 +1000
<![CDATA[News - UK election risks heat up with four weeks to go ]]> Nominations for the UK general election officially shut at 4pm last night. 

The event was supposed to mark the start of the final countdown to voting day on 7 May.

From an investment perspective though, the clock has been ticking for some time.

Yet still, much to the annoyance of market participants, no one can call the result.

Polls have leaned towards Labour and Ed Miliband in recent days, but the Tories are virtually level. 

In these situations, it’s tempting to take a gamble on the outcome and its worth nothing that Betfair (LON:BET) is set to see record political betting volume heading into the election. 

Shares in the firm have already rocketed 42% to 2242p since the start of the year.

Other UK betting names to watch include William Hill (LON:WHM) and Paddy Power (LON:PWL)

Looking at sectors, investors will find it difficult to get clear view of what is exactly is going to happen, as Nicolas Ziegelasch, head of equity research at Killik admits.

“From an investment perspective, there’s a multitude of sectors at risk of becoming political punch bags,” he said.

Most City analysts, including Ziegelasch, agree that quoted energy companies and outsourcers face the strongest headwinds if Labour scrapes into power.

Shares in Centrica (LON:CNA) and SSE (LON:SSE) are down 6% and 4.5% respectively since the start of the year, even as the FTSE 100 index reached record highs.

That’s largely due to investors pricing in Ed Miliband’s policies, which include a 10% energy retail price cut and handing regulator, Ofgem, greater powers.

There’s also an overwhelming market view, one shared by Barley too, that outsourcers would suffer more under a Labour government. 

Last month, the party said it would award fewer NHS contracts and introduce a “profit cap” for private sector contractors.

That would be damaging to Serco (LON:SRP), Capita (LON:CPI), G4S (LON:GFS) and Babcock (LON:BAB).

When it comes to housing stocks, any pledges regarding measures to increase homebuilding could prove fruitful for UK homebuilders including Persimmon (LON:PSN), Barratt Developments (LON:BDEV), Berkeley Group (LON:BKG), Bovis (LON:BVS) and Redrow (LON:RDW).

Today, broker Jefferies sent out over a dozen upgrades on housing related stocks, raising seven names from Hold to Buy and three from Underperform to Hold. 

“The latest data points to a stronger pre-election housing market than we had anticipated,” it said. 

Meanwhile, David Cameron’s promise of an EU referendum poses particular problems for others, particularly financials.

“Typically, UK equity markets have reacted more positively to the Conservative victory than to the Labour one,” explains JP Morgan equity strategist, Mislav Matejka.

“This time around though, the prospect of David Cameron pressing ahead with plans for a referendum on EU membership, could dampen any meaningful relief rally.”

Matejka reckons shares in London-listed banks would come under pressure as London’s position as a major global financial hub would be weakened.

Big businesses were reluctant to give their views on the Scottish referendum until the polls tightened at the last minute.

But HSBC (LON:HSBA) analysts have started early on Europe.

Last month, researchers at the lender said a “Brexit” would be a bad move as the UK would miss out on more open markets.

 “Expect markets to be roiled if a ‘Brexit’ becomes a real possibility,” fund house BlackRock warned recently.

The world’s largest fund manager also warned that markets are currently too complacent over the general election. 

With four weeks to go, things are changing. 

Fri, 10 Apr 2015 16:50:00 +1000