Paddy Power open to more deals as industry shrinks

Enlarged betting services provider Paddy Power-Betfair has said it remains open to conducting more acquisitions — noting that further consolidation in its industry seems “inevitable”.
Paddy Power open to more deals as industry shrinks

Presenting the group’s first set of results since its merger earlier this year, chief executive Breon Corcoran yesterday said it is understandable that Paddy Power-Betfair is being linked with possible further merger and acquisition (M&A) activity, noting its highly cash generative status, strong balance sheet, and ambitious management team and said that “further consolidation is probably inevitable”.

However, he said that nothing is in the pipeline at present and further cash could be returned to shareholders, down the line, if no M&A or other capital deployment options are identified.

Yesterday’s results show an operating loss of £47.5m (€55.8m) for the first half of the year, brought about by the costs of the merger. On an underlying basis, operating profit was up by 39% at £147.6m and total revenue for the six months rose by 18% to £759m, aided by a strong betting finish to Euro 2016.

The group said the second half of the year has started well and full year earnings are expected to come in at between £365m and £385m, representing a small upgrade in guidance.

Double-digit revenue growth was seen in the first half across all key divisions of online, retail, Australia, and the US — with online/digital revenues up 20% at £440m.

While Mr Corcoran said the group will continue to gradually increase its retail portfolio in Ireland and Britain he said online/digital will be the primary growth area, with 87% of group revenues currently coming from that area.

To that end, he said the group would not be a bidder for any element of the 400 or so UK shops having to be sold to enable the merger of rivals Ladbrokes and Coral.

As expected, the Paddy Power-Betfair merger is set to deliver more cost savings than anticipated and in a shorter period of time.

While previously anticipating £50m in synergies over a three-year period, the group yesterday said full savings should amount to £65m with the full benefit being achieved in 2017.

About 60% of those savings are coming about through headcount reduction — 300 Irish-based job cuts having already been announced — with the rest from other areas such as centralised purchasing.

Mr Corcoran also warned that Horse Racing Ireland’s call for a doubling in betting tax for Irish-based bookmakers — to 2% of turnover — would squeeze more independent players out of the market, result in more shop closures and job losses.

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