Paddy Power Betfair holds off on first-year predictions

Paddy Power Betfair executives were light on detail when responding to questions from industry analysts after the newly-merged group published its "maiden" results yesterday.

The merger that created the gambling giant, worth €10.3 billion at its €122.80 closing price last night, went through only a month ago. As a result chief executive, Breon Corcoran, said that it would only be in a position to guide on its trading prospects when it publishes accounts for the first half of the year in August.

By then it will have come through a critical period in a bookmaker's year that begins next week with the Cheltenham National Hunt Racing Festival, embraces other big meetings such as Aintree, Punchestown and Royal Ascot, as well as the European Football Championships and the 2016 Olympics.

The football falls partly outside the first half as it ends in July and the Olympics takes place in August, long after the period ends on June 30th, but the group should by then in a position to shed some light on its trading performance and prospects for its first year as merged entity.

Cost savings

Corcoran and his colleague, chief operations officer, Andy McCue, also indicated they will be able to discuss more about plans for the cost savings that were among the key motivators for doing the deal in the first place.

The business will look very different when they do report. Its numbers will be in sterling as 80 per cent of its earnings are in this currency. It will have four divisions: Australia; online, which will cover both the Betfair betting exchange and Paddy Power's European websites; retail, the 600 or so Irish and British bookie shops; and the US, that is, Betfair's TVG and casino businesses.

Davy analysts David Jennings and Robert Stokes say that yesterday's figures include some hints on where the gambling giant can boost revenues. They published a note in the wake of yesterday's results highlighting the different margins in the pair's sportsbooks.

The margins are a measure of what bookmakers win from their customers, and so are the basis of their business.

Jennings and Stokes calculate that last year, Paddy Power’s were 7.2 per cent, meaning that they won 7.2 cent from every euro their customers wagered, while Betfair’s were 5.8 per cent. Applying Paddy Power’s risk management and pricing (odds) would yield an additional €33 million a year, they say.

Next week at Cheltenham, a big recruiting ground for corporate bookmakers, the pair will offer different promotions under their different brands to lure new punters and hold on to their existing customers, which is how they have said they will manage the merged business .

By August, those same customers will also have had time to form their view of the gambling giant.

It will be interesting to see how they will have judged it.