LONDON (Alliance News) - Gambling group Paddy Power Betfair PLC on Tuesday said its Paddy Power business performed well in 2015, and posted a strong third quarter for its new Betfair division, as the pair start life as a combined company.
The group, which will join the FTSE 100 later this month following the merger of Irish bookmaker Paddy Power with smaller UK online rival Betfair Group, said operating profit for the Paddy Power business rose 10% year-on-year to EUR180.0 million for the year to the end of December, though this was held back by new taxes and product fees on the business. Stripping those new costs out, Paddy Power's operating profit would have increased 50%.
Pretax profit rose to EUR169.5 million from EUR166.6 million.
Revenue for Paddy Power rose 24% to EUR1.09 billion, with double-digit sales growth across its online and retail divisions. In the online business, sportsbook revenue increased 28% and e-gaming revenue rose 10%. In the retail business, UK retail revenue rose 15%, while Irish retail revenue increased 14%.
Paddy Power will pay a dividend of EUR1.80 per share, up 18% year-on-year.
Betfair, meanwhile, closes its financial year in March, so the group provided a third-quarter trading update for the business. Betfair's revenue for the third quarter to the end of December rose 21% year-on-year to GBP138.0 million, driven mainly by a 51% rise in sportsbook stakes in the period and more favourable football results.
Regulated markets revenue for the company grew 31%, driven by a 27% increase in customer numbers, offsetting a 22% revenue decline in other markets due to the company exiting Portugal in July. Earnings before interest, taxation, depreciation and amortisation rose 10% year-on-year to GBP26.0 million.
On a proforma basis, the enlarged group made GBP1.3 billion in revenue and GBP229 million in underlying operating profit in 2015, although Investec said this was 3.7% behind its revenue forecast and 6.7% short of its operating profit estimate.
Proforma results were hit by the translation effects from the euro to the pound, and Betfair shifting its financial year from an April year-end to the calendar year, in line with Paddy Power.
Paddy Power Betfair added that the the new financial year has started well, with revenue growth and trading across the group in line with its expectations.
"We were very pleased to complete the merger of Paddy Power and Betfair, creating one of the world's largest online betting and gaming companies with enlarged scale, enhanced capability and distinctive complementary brands. These results show that both businesses entered this merger on the back of strong trading momentum," said Breon Corcoran, the chief executive of Paddy Power Betfair.
"Our belief in the strategic rationale for the deal has only been strengthened following our early days as a combined operator. The combination of two industry leading operators, with aligned strategies and a strong cultural fit, is hugely exciting and the enhanced efficiency from operating at greater scale means we are well positioned to compete in both existing and new markets," he added.
Analysts were indifferent on Paddy Power Betfair's results, with Numis saying the benefits of the merger are "yet to be delivered".
Shares in Paddy Power Betfair were trading down 1.8% at 9,450.00 pence on Tuesday afternoon.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance and Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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