Newly-merged Paddy Power Betfair's share price has fallen over three per cent after the company posted its first quarter revenues this morning, as the company was hit by "adverse" sales results following a harrowing Cheltenham festival.
Paddy Power Betfair's revenues were up 16 per cent to £339m across all four of the company's divisions: online, retail, Australia and the US.
However, the Irish betting giant said its quarterly sportsbook sales had been hit by "adverse sports results", especially at Cheltenham, where a number of bookies lost out this year. Customers' winnings totalled over £20m at the annual races.
This put the company 3.7 per cent below an analyst estimates of £352m, according to Davy Research, although the results exceeded two other forecasts by Morgan Stanley and Barclays, and was almost level with expectations from Goodbody.
Towards the end of April, fellow bookie Ladbrokes said it was reeling from the "worst Cheltenham ever" in a trading update.
The merged bookmaker posted a 36 per cent rise in operating profit to £42.5m. Online revenue increased by 17 per cent to £195m, within which revenue from regulated markets was up 21 per cent and unregulated revenues fell by 14 per cent - mostly due to the impact of exiting Portugal last summer.
The company said the integration was "on-track" (including an £11m profit boost) with "some early benefits" for customers as products had been shared between brands.
Paddy Power Betfair's share price had fallen 3.65 per cent by mid-afternoon trading.
Why it's interesting
The merger between Paddy Power and Betfair completed in February this year, after which both companies entered the tie-up with "strong trading momentum" after posting strong results in 2015.
The chief operating officer of Paddy Power Betfair, Andy McCue, stepped down from his position on 30 April and the company also announced in March that it would bring in global payment provider Worldpay to work together on services and insights.
Paddy Power Betfair's strong online results bode well for the group, as a recent report from Moody's predicted that despite the pressure from increasing taxes and regulation, online gaming markets are the most likely source of growth for gambling firms over the next few years.
Online gaming markets, according to Moody's, are expected to grow to approximately €42.8bn by 2018, up from €36.9bn in 2014.
Earlier this year in the UK, bookies were hit by the first full-year implementation of the point-of-consumption tax, which charges 15 per cent on online gambling profits.
What Paddy Power Betfair said
Breon Corcoran, chief executive, said:
All four of our brands − Paddy Power, Betfair, Sportsbet and TVG − continue to trade well in a highly competitive environment. This good start to the financial year is a credit to our colleagues, particularly at a time when we are bringing together two businesses. Our marketing, technology and operations performed well throughout the key spring racing period and we are now focused on preparations for Euro 2016.
The post-merger integration is on-track. A strong leadership team is in place and restructuring of the business has commenced. We are working to bring the best of each business to the combined group and customers are starting to see some early benefits as we roll out product features across the brands.