Solid stakes growth make for strong numbers at Paddy Power Betfair

Revenue at Paddy Power Betfair rose 9% on an underlying pro forma basis, the bookmaker and gaming firm said on Tuesday, to £827m, with EBITDA ahead 21% on the same basis to £220m.

The FTSE 100 company said it made an operating profit of £180m in the six months to 30 June, an improvement of 22%, with earnings per share rising 23% to 181.1p.

Its board confirmed first half dividends per share of 65p, up 25% from the 52p declared by the interim last year.

“We continue to make substantial investments to position Paddy Power Betfair as a structural winner in a dynamic and highly competitive market,” said chief executive Breon Corcoran.

“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.”

On revenue growth, Paddy Power Betfair’s board said it was driven by good stakes growth with online up 10%, or 15% excluding Euro 2016 from the comparator, and Australia ahead 16%, as well as a foreign exchange benefit.

Those factors were partially offset by increased investment in pricing and promotions.

The board said it saw strong first quarter growth which was driven by favourable Cheltenham results, with the second quarter affected by the absence of a “major football tournament” and “adverse” sports results.

Paddy Power Betfair said it saw continued strong cash conversion, with underlying free cash flow of £172m representing 113% of underlying profit after tax in the period.

It also made its entry into the daily fantasy sports market in the US during the half, with the acquisition of Draft.

Looking ahead, Paddy Power Betfair’s board said it expected full-year underlying EBITDA - including £15m of losses at Draft - was expected to be between £445m and £465m.

“The integration of our technology platforms is on track for completion by the end of the year and will bring significant benefits including increased quantity and pace of new product development in 2018 and beyond,” Corcoran explained.

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

“Operating efficiency and the annualisation of merger-related cost savings resulted in strong operating leverage in the period, with operating profit up 22%.”