If there was any uncertainty as to what value Paddy Power (PAP) saw in a merger with Betfair (BET), these results will put that to bed. Betfair managed a 15 per cent jump in revenue during the reported period, in spite of the tough comparable in last year's World Cup. Its two largest markets, the UK and US, were the company's high rollers with sports revenue up 11 per cent to £185m, while Betfair US saw revenues increase 38 per cent to £39.3m.
The unregulated portion of its business suffered a decline in revenue due mainly to the decision to close its Portuguese operations. But the regulated core of what management calls "sustainable" markets more than made up for this. Chief executive Breon Corcoran said these markets grew "faster than people had expected". Crucially, though, management said it would maintain its marketing spending at the same levels as during the World Cup and added this was likely to increase in the second half, as well as continued spending on technology and hiring staff. Mr Corcoran said these things were key given it was "hard to see another catalyst" for the industry such as the rise in mobile gaming and that two rivals in particular were "making it tougher for the rest of the market".
Analysts at Numis Securities expect pre-tax profit of £102m in the 2016 financial year, leading to EPS of 90.8p, compared with £94.8m and 77.5p in FY15.
| BETFAIR (BET) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,532p | MARKET VALUE: | £3.28bn | |
| TOUCH: | 3,528-3,532p | 12-MONTH HIGH: | 3,580p | LOW: 1,319p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 39 | |
| NET ASSET VALUE: | 102p* | NET CASH: | £139m | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 238 | 67.3 | 55.0 | 9.0 |
| 2015 | 274 | 66.3 | 60.3 | 15.0 |
| % change | +15 | -1 | +10 | +67 |
Ex-div: 17 Dec Payment: 15 Jan *Includes intangible assets of £78.7m, or 85p a share | ||||
