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Paddy Power Betfair has fourth-quarter hiccup

The newly enlarged entity is still getting to grips with its scale
March 7, 2017

It's clear that the recent merger of Paddy Power Betfair (PPB) has left the now-combined entity's full-year figures a little discombobulating. Excluding merger fees, integration and restructuring costs and amortisation of merger-related intangible assets, adjusted pre-tax profits actually rose 139 per cent to £316m. A clearer picture is probably provided by underlying cash profits, which rose 44 per cent to £330m. This left adjusted EPS up by a similar rate to 331p. These numbers, as opposed to the statutory results, demonstrate what chief executive Breon Corcoran calls the most important determinant of the group's long-term success: scale.

IC TIP: Hold at 8,340p

Analysts at Numis homed in on the group's online division, specifically gaming, which suffered a slowdown in revenues during the final quarter. This was the result of lower activations on the Paddy Power brand, less cross-selling and reduced VIP activity overall. "Customer-friendly" football results also held back trading. Still, overall revenue was up 11 per cent in 2016 at constant currencies. So far in 2017, the online segment is 9 per cent ahead on the same measure.

Analysts at Peel Hunt expect pre-tax profit of £400m for 2017, giving EPS of 391p (up from £327m and 331p in 2016).

PADDY POWER BETFAIR (PPB)
ORD PRICE:8,340pMARKET VALUE:£7.01bn
TOUCH:8,330-8,350p12-MONTH HIGH:10,020pLOW: 6,525p
DIVIDEND YIELD:2%PE RATIO:na
NET ASSET VALUE:5,133p*NET CASH:£36m

Year to 31 DecTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20120.65139251120.0
20130.75141257135.0
20140.88167301152.0
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share
2015 (restated)0.79125239.9180¢
20161.5011.9-7.2165p
% change+89-90--

Ex-div: 6 Apr

Payment: 24 May

*Includes intangible assets of £4.47bn, or 5,318p a share