Paddy Power Betfair plans name change as results hit targets

(Sharecast News) - Paddy Power Betfair said it was planning to change its name to Flutter Entertainment after reporting a rise in revenue but fall in profits for last year.Revenue for calendar 2018 of £1.87bn was up 7% on the prior year, while underlying earnings before interest, tax, depreciation and amortisation of £451m was down 5% or 3% if currency swings are ignored. This was towards the top end of guidance given by management.Online revenue rose 5% to £948m and underlying EBITDA by 3% to £316m, with Australia's online arm growing revenue 6% to £403m and profit 4% to £137m. The US arm, following the surge into online betting following July's acquisition of FanDuel that was sparked by the relaxation of federal rules, lost £24m, though the underlying horseracing business swung from a loss of £9m to a positive £10m.Betting shops revenues fell 1% to £331m, of which £110m was from fixed odds betting machines, and EBITDA fell 12% to £72m.If the £24m of losses from its expansion into US sports betting business are excluded as well as currency swings, underlying EBITDA was up 2% on the previous year.At the pre-tax line, profits fell 11% to £219m, with reported earnings per share down 6% to 241.7p. A 200p per share dividend was a repeat of the prior year, while the group finished the year with £162m of net debt.The move into the USA, said chief executive Peter Jackson, has "the potential to be the most significant development to occur within the sector since the advent of online betting". FanDuel, which had 8m customers at the time of the merger with the existing US business, launched a sportsbook in New Jersey in August and has achieving a 35% online market share, with the losses reflecting high levels of promotional activity and free bets that is customary to acquire customers in the early-stage evolution of a betting market.The UK operations also saw the Paddy Power brand taking back online market share following a number of years of decline. Gaming was a key area where product improvements made a big difference, Jackson said, with efforts to grow customer acquisition in 2019, including improvement to the sports app and a "return to the brands roots" with its cheeky-chappy personality in marketing and social media.On 2019's outlook, he said the year "has started in line with our expectations", with analysts expecting a fall in profits due to duty changes in the UK and Australia. The board plans to rename the group as Flutter Entertainment Plc, though Jackson said there were no plans to use the Flutter name, which was one of the businesses which formed the original Betfair Group, for consumers. Shareholders permission will be sought for the change at the forthcoming annual meeting.PPB shares vacillated between 6,340p to 6,090p in the first few hours of trading on Wednesday.EBITDA was at the top-end of guidance, analysts at Shore Capital observed, with online and underlying US were slightly better than forecast, offsetting a slightly softer than expected performance in Australia and retail."The key highlight for the year was the turnaround in gaming revenue in its online division, which increased by 13% for the full year and near 20% in H2 alone," said analyst Greg Johnson, noting that this helped offset lower than expected growth from sports betting.Broker Peel Hunt said, with the results in line, "The most interesting thing about today's announcement is the decision to rename the group Flutter Entertainment."For 2019 a sharp decline in profit is expected, driven by duty changes in the UK and Australia. "The group has made a material investment in the US and there is a useful update today where management notes that the New Jersey sports book will break even in 18-30 months post launch. With negative earnings momentum and continuing regulatory risk in the UK we remain cautious."