Paddy Power Betfair shares fall despite 'solid' results

Shares in Paddy Power Betfair fell on Tuesday despite the company unveiling final results for 2016 in line with forecasts.

In their first full-year results announcement as a merged company, Paddy Power Betfair reported revenue up 18 per cent to £1.55 billion, with double-digit growth across all four operating divisions of online, Australia, US and retail.

Underlying ebitda (earnings before interest, taxation, depreciation and amortisation) was up 35 per cent to £400 million, but for statutory purposes the group reported a loss of £5.7m, blamed primarily on expenses relating to their merger last year.

The company said trading in 2017 had been in line with expectations, with group sportsbook stakes up 22 per cent.

Nevertheless, shares in Paddy Power Betfair fell by almost six per cent (515p) on Tuesday, closing at £82.70.

Chief executive Breon Corcoran said: "2016 was a transformational year for Paddy Power Betfair with much of the integration of the businesses completed sooner and more efficiently than expected.

"The integration of our technology platforms is on track and customers are already seeing some benefits, including more markets and better odds."

The company said the battle between punters and bookmaker had "ebbed and flowed" during the year, with a high number of favourites winning at the Cheltenham Festival before surprises at Euro 2016 boosted revenues in June and July. The year ended with customer-friendly football results in December.

Corcoran said their customers would be getting good value at Cheltenham next week.

"In keeping with our dual-brand strategy we are serving different parts of the market with distinct value propositions," he said.

"For instance, at Cheltenham next week Paddy Power has a generous money back offer for second place, and Betfair will reward winners with a free bet offer and exceptional odds."

Breon Corcoran: the outgoing Paddy Power Betfair chief has called for a FOBT stake reduction to £10 or less

While Betfair has been an authorised betting partner of British racing, Paddy Power has not and the government's proposed replacement of the levy system is set to have a "net incremental impact" of around £10m per annum for the group.

Corcoran said much of the firm's focus in 2017 would be on putting the two brands on the same technology platform and hinted further acquisitions had not been ruled out, telling analysts the platform "will include the flexibility of operating further brands in the future".

He concluded: "We've 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."

Analyst Gavin Kelleher of Goodbody described the announcement as a "solid update", adding: "We believe once the online Europe platform integration is complete, underlying growth in online can accelerate."