Paddy Power falls 4% as Australian boss quits

Paddy Power-Betfair shares fell by nearly 4% as investors reacted badly to news of the departure of the head of its key Australian division.

The company’s shares were down by more than 5% at one point yesterday.

Cormac Barry is leaving the group, to join car hire software company CarTrawler as chief executive. Mr Barry played a central role in building Paddy Power’s overall online presence and helped more than double the company’s share of the Australian online market since heading up the Sportsbet subsidiary after Paddy Power acquired it in 2009.

He will be replaced by Sportsbet’s chief commercial officer Barni Evans, who has been with the Paddy Power group since 2001. A further management change will see Dan Taylor — formerly Paddy Power’s UK and Ireland and retail division chief — assume the role of European chief executive.

While investors balked at the changes, analysts were less concerned.

“The news that Cormac Barry has decided to leave Paddy Power-Betfair is disappointing, given his very strong track record in helping to build in the first instance and then in leading Sportsbet as it more than doubled its share of the Australian online market. However, he leaves the business in very safe hands,” said Davy’s David Jennings.

“We do not believe the changes will impact the group’s ability to acquire businesses in Australia in the near-term. In Europe, the organisational changes make a lot of sense with a clearer streamlining of the Paddy Power and Betfair parts of the business,” he added.

The Australian arm is seen as the most probable route to acquisition for Paddy Power. Pending regulatory and tax changes are expected to usher in a wave of consolidation in the online market, there, and Paddy Power will likely need to scale-up to offset higher taxes.

It has been a tough week for Paddy Power-Betfair with its shares also being hit by broker concerns over the group’s ability to meet its online revenue growth targets and keep pace with industry consolidation.

Morgan Stanley analyst Ed Young effectively said the group’s share price could fall by 14% this year with new chief executive Peter Jackson needing to address “major strategic issues”.

Meanwhile, Britain’s financial watchdog has warned of “areas of serious concern” in the UK’s contracts for differences (CFDs) market, following a review, knocking shares of spreadbetting companies. Shares in CMC Markets, IG Group and Plus500 fell by more than 7%.

The Financial Conduct Authority (FCA) said it had sent a letter to all providers of these products to retail customers to ensure they “pay due regard to the interests of customers and treat them fairly”.

“We believe there is a high risk that firms across the sector are not meeting our rules and expectations when providing and distributing CFDs. As a result, consumers may be at serious risk of harm from poor practices,” the FCA said.

CFDs let investors bet on both the direction a share price, currency or other financial product will move, and the extent of the change in price. The FCA said firms should look at how they communicate with clients and due diligence around taking on new distributors, among other measures.

Additional reporting Reuters

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