Business Irish

Saturday 21 October 2017

Betfair set aside €6.5m for LTIP in share surge

Betfair merged with rival Paddy Power this year. Photo: Bloomberg
Betfair merged with rival Paddy Power this year. Photo: Bloomberg
John Mulligan

John Mulligan

Shares in Betfair rose so much last year that the company was forced to set aside an additional £5m (€6.5m) to cover likely social insurance costs linked with the cost of long-term incentive share awards that will eventually be exercised by senior executives.

Betfair merged with rival Paddy Power this year in a €10bn deal that created one of the biggest online gambling groups in the world.

When the merger was announced last August, it helped to send shares in Betfair up over 20pc in just a day to £31.34.

The shares had traded as low as £15.48 in the 12 months before the merger with Paddy Power was consummated last month, and hit £44.20 just before the deal closed.

Shares in Paddy Power had also performed strongly, rising 20pc on the day the planned merger was announced, and eventually hitting €142 the day before the merger went through.

Companies typically use long-term incentive share plans to incentives key executives, including directors and senior management.

Betfair says it uses the long-term incentive plan (LTIP) as an "incentivise and reward" for the creation of medium to long-term shareholder value, and notes in its annual report that the scheme aligns the interests of senior executives with those of shareholders.

The LTIP is generally aligned with key metrics such total shareholder return, earnings per share, and group revenue.

Among those who have benefited from the scheme are Breon Corcoran, the Betfair chief executive who is now CEO of the enlarged Paddy Power Betfair group. He saw shares worth over £10m (€13m) vest last year.

They had been awarded as part of his recruitment to the group in 2012. He also had other share options that were due to be eligible to vest in 2017.

Paddy Power Betfair chief financial officer Alex Gersh, who also benefited from the LTIP, confirmed that some of the increased costs incurred by Betfair last year were as a result of the doubling in the share price.

"We are liable for the employee portion of the national insurance contribution, and that is based on the time the employees exercise their shares," he said, noting that the Betfair share price had effective doubled last year.

"We accrue those on a regular basis. But when the significant share price movement happens, we adjust our accrual for this additional national insurance contribution that we'll be making on behalf of employees."

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