Paddy Power Betfair shares slide despite jump in profits
Operating profits at Paddy Power Betfair rose 22pc to £180m (€199m) in the first six months of the year, but it wasn't enough to lift shares a day after news of its CEO's planned departure hit the stock.
Shares in Paddy Power Betfair closed down 3.89pc yesterday at €80.20 each in Dublin, extending losses as growth in the main European online market disappointed and with investors still digesting CEO Breon Corcoran's surprise exit plans.
Interim results yesterday showed profits were boosted by favourable Cheltenham racing results and foreign exchange movements. Revenue was up 9pc year-on-year to £827m.
Included in the revenue growth was a £40m benefit from the translation of non-UK revenues due to the weakness of sterling versus the prior year.
Underlying earnings before interest, taxation, depreciation, and amortization (Ebitda) increased by 21pc in the six months to £220m.
Paddy Power Betfair said it saw particularly strong growth in the first three months of the year, but its second quarter was impacted by a 1.5pc decline in the sportsbook net revenue margin as well Euro 2016 having fallen in the prior year.
Online revenue was flat year-on-year, while its underlying operating profit from online increased by 5pc year to £129m. The number of active customers online fell by 9pc year-on-year.
This week's big news for the firm was Monday's confirmation that Mr Corcoran will leave the business, and is being replaced by Peter Jackson, CEO of the British arm of global payments business WorldPay Group and already a Paddy Power Betfair non-executive director.
Market favourite Corcoran announced his plans to step down 18 months after completing the merger of Paddy Power and Betfair, sending shares lower.
He had been Paddy Power's chief operations officer, but left for Betfair in 2011, before returning to head the combined business post-merger.
He indicated yesterday that his replacement will be in situ within six to 12 months.
WorldPay is itself currently in the process of being sold to US rival Vantiv.
Commenting on the latest results, Mr Corcoran said the company was continuing to make substantial investments in technology to improve efficiency and minimise the cost of servicing its customers and to further "enhance the customer proposition".
"In the first half [of 2017] 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 22pc," Mr Corcoran said.
The company noted in its results that it will be impacted by regulatory changes in a number of countries including Ireland, the UK, and Australia.
The Government in May announced the launch of a betting tax review, which will among other things, look at the likely impact of an increase in the rates of betting duty on both exchequer revenues and the industry.