Costs arising from the £7 billion merger of Paddy Power and Betfair pushed the combined group into a loss during the first six months of the year, but savings from the tie-up will be larger and come faster than originally expected.
Releasing its maiden interim results following February’s deal, Paddy Power Betfair yesterday reported double-digit growth across its four core divisions, and an increase in underlying earnings. However, £195 million of merger costs saw the group slide £49.3m into the red at the bottom line.
The FTSE 100 firm said there will be £65m of cost savings from the merger in 2017, up from an original estimate of £50m and a year earlier than previously forecast. Chief executive Breon Corcoran said the company “hit the ground running” upon completion of the deal, with 650 of its 7,200 staff departing in the immediate wake of the merger.
Discounting merger costs, Paddy Power Betfair reported an increase in underlying earnings to £181m on revenues that were 18 per cent higher at £759m.
Group digital revenues reached £440m, with sportsbook wagering up 20 per cent following a strong Uefa Euro 2016 performance. That helped offset losses from the Cheltenham horse-racing festival.
The strong digital performance was supported by Paddy Power retail, which recorded a 12 per cent rise in revenues to £147m. US revenues rose 16 per cent to £43m and Australia was up 17 per cent at £129m, though the outlook for the latter market has been clouded by an uncertain regulatory regime.
The figures come amid a period of increasing consolidation within the gaming industry, with Paddy Power and Betfair soon to be followed by the marriage of Ladbrokes and Gala Coral. However, William Hill has resisted pressure for a three-way tie-up with Rank and 888.
Corcoran said Paddy Power Betfair sustained good momentum through a “period of considerable change”, with the restructuring now largely complete.
The group also announced that Paddy Power co-founder Stewart Kenny is stepping down as a non-executive director after 28 years with the company. Kenny helped set up Paddy Power in 1988 and served as its chief executive until 2002. He was then chairman until 2003, and has been a non-executive for the last 13 years.