World Cup provides €50m revenue boost to Paddy Power
Betting giant expects full year earnings between £460m and £480m
The World Cup, which ended in July, will add £8 million to Paddy Power’s profits this year.
Paddy Power Betfair shares tumbled on Wednesday after the company warned that earnings would fall short of its previous predictions.
The Irish betting giant reported on Wednesday that profits in the six months ended June 30th rose 4 per cent to £106 million sterling (€118.6 million) and said that the World Cup boosted first-half revenues by £23 million.
However, its shares fell 7.13 per cent to €84 in Dublin, cutting the company’s value by €500 million to €6.9 billion. They plunged 7.14 per cent in London, where the group has its main listing, to 7,540 pence sterling.
Paddy Power Betfair said that it expected full-year earnings to be between £460 million and £480 million against the £475 million to £490 million it predicted at its annual general meeting in May.
The reduced prediction for earnings before interest, tax, depreciation and amortisation (Ebitda) – a measure of the cash the company generates – reflects weak revenues from its horseracing betting exchange business, extra Australian taxes and losses from its recent US acquisition, Fanduel.
First-half Ebitda dipped 1 per cent to £217 million from £220 million in the six months ended June 30th 2017.
Chief executive Peter Jackson noted that Betfair’s horseracing betting exchange business was facing “some challenges”, mainly from rivals such as Bet 365, which he claimed were operating at close to zero margins, allowing them to offer punters generous odds.
However, he noted that the number of bets on Betfair’s exchange was up 12 per cent.
The earnings estimate excludes possible gains from a recent US federal court decision legalising sports betting, which was banned in states outside Nevada.
Mr Jackson pointed out that unlike competitors, its existing US businesses, which employ 600 people, were already positioned to cash in on the new laws.
“The only uncertainty for us is around the money we are going to spend on marketing,” he said.
Paddy Power recently bought a stake in US operator, Fanduel, and did deals with racing and casino operators, Meadowlands and Boyd, that give it footholds in markets accounting 60 per cent of the US population, including New York and New Jersey.
World Cup betting boosted group revenues by £23 million in the first half of the year and will add £8 million to 2018’s profits. The tournament, which ran through June and July, generated an extra £45 million turnover for Paddy Power Betfair.
First-half revenues grew 5 per cent to £867 million in the first half of this year from £827 million during the same period in 2017.
Earnings per share increased 1 per cent to 103.7 pence from 102.9p, while Paddy Power Betfair is proposing an interim dividend of 67p, 3 per cent ahead of the 65p it paid shareholders at last year’s half-way point.