8th Aug 2018 11:17
LONDON (Alliance News) - Paddy Power Betfair PLC on Wednesday said the second tranche of its share buyback is to commence shortly, as it reported profit growth in the first half of 2018.
However, the bookmaker at the same time lowered its earnings expectations due to uncertainty over Australian tax reforms and its FanDuel acquisition.
Shares in Paddy Power were 4.7% lower on Wednesday at 7,736.52 pence each, making it the worst performer in the FTSE 100 index.
The FTSE 100-listed betting company reported a pretax profit of GBP106 million for the six months to the end of June, up 4% from GBP102.3 million a year before. Underlying pretax profit dropped, however, to GBP172.2 million compared to GBP177.6 million.
Meanwhile, revenue grew to GBP866.7 million, up 4.8% from GBP827.0 million a year prior, with revenue in sports rising by 12%, gaming up by 14%, and online revenue increasing by 13%. On a constant currency basis, group revenue grew by 7%.
The company posted a 2% decline in revenue for the first quarter of 2018, adversely affected by reduced customer activity in the UK & Ireland.
However, this was offset by 12% revenue growth in the second quarter of 2018, boosted by the football World Cup. Revenue from the tournament totalled GBP23 million in June.
"The World Cup was a showcase event for Paddy Power, with a series of successfully executed marketing campaigns leading to it being one of the UK's most talked about brands in social media conversations around the tournament," said Chief Executive Peter Jackson.
The company has proposed an interim dividend of 67 pence per share, up 3% from 65p paid the year before.
Paddy Power reported underlying earnings before interest, tax, depreciation and amortisation ofGBP217.0 million, down 1.4% from GBP220.0 million the same period a year earlier. Excluding changes in betting taxes and levies, Ebitda rose by 6%.
Looking forward, the company said it now expects Ebitda for the full-year to come in between GBP460 million and GBP480 million, due to the the introduction of additional taxes in Australia and losses from the FanDuel daily fantasy sports business. In 2017, underlying Ebitda was GBP473 million.
Back in May, the company had guided underlying Ebitda for the full-year to be between GBP470 million and GBP495 million.
At the same time, the company agreed to combine its US assets with fantasy sports operator FanDuel. Following the transaction completion in July, Paddy Power owns 61% of the combined business.
Although not included in the reported first half results, the company said FanDuel revenue increased by 4% year-on-year and it generated a small Ebitda loss in the period.
In recent months, the Australian government has confirmed plans to introduce point of consumption taxes, with the overall impact for Paddy Power being an additional cost equivalent to 13% of revenue from 2019, which on revenue for the year to June 30 levels equates to AUD95 million, or GBP54.6 million.
In addition to that, in June, Racing Victoria Ltd and Racing & Wagering Western Australia announced changes to the structure of their racefield fees. The net impact of these changes will bring AUD4 million adverse to Paddy Power revenue.
"In Australia, despite significant upcoming tax headwinds, Sportsbet continues to target further market share gains by using its scale to increase investment in marketing, product and its value proposition," added Jackson.
In parallel, the UK government published its review of gaming machines & social responsibility measures, which included a proposal to implement a new stake limit for gaming machines of GBP2.
Paddy Power said it estimates the changes to have a negative 33% to 43% impact on its total machine gaming revenue.
"We now have much better visibility of the regulatory and fiscal changes in the UK, Australia and the US, and believe that our scale, leading customer propositions and strong balance sheet mean we are well positioned to build a business that can generate sustainable shareholder returns over the long term," added Jackson.
In a separate statement, Paddy Power said it will progress with the second tranche of its share buyback programme GBP300 million.
In May, Paddy Power announced its intention to return up to GBP500 million to its shareholders. The first tranche of the buyback, worth GBP200 million, is currently underway.
The second tranche, which will commence after the initial trance continues, will be completed no late than at the end of February 2019, Paddy Power said. The purpose of the buyback is to reduce Paddy Power's share capital and, accordingly, shares repurchased in both tranches will be cancelled.
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