Paddy Power Betfair's good start to the year at the Cheltenham Festival was undone by results that "favoured customers" at the likes of the US Masters and Grand National, the bookmaker said today.
Earnings at the firm spiked in the first quarter but it failed to impress the market as shares fell over two per cent in morning trading.
Sportsbook stakes grew by 18 per cent to £2.7bn. In constant currency terms this was a nine per cent increase.
The revenue percentage from Sportsbook increased from 7.5 per cent to 8.8 per cent.
Sports revenue grew by 28 per cent to £326m while gaming revenue rose six per cent to £90m.
Earnings jumped 87 per cent to £111m with operating profits rising 114 per cent to £91m.
Why it's interesting
News of a good Cheltenham Festival, which chief executive Breon Corcoran said reversed "the trend of the past two years", came as welcome relief to investors in the bookmaker.
Although the amount of revenue Paddy Power makes from Sportsbook increased, the firm admitted "it was slightly behind our expectations in the quarter". This was because it had a torrid Cheltenham Festival in 2016 and so would have expected the increase to be more.
Nevertheless, Paddy Power said 19 of Cheltenham's 28 races were profitable in 2017, compared with 11 races in 2016.
What the company said
Results at Cheltenham 2017 favoured bookmakers and this contributed to good revenue growth.
Combined with the annualisation of merger-related cost savings and continued focus on operating efficiency, this resulted in a doubling of operating profits in the first quarter.
Since then, however, at high-profile events such as the Grand National, Premier League football and the US Masters, results favoured customers, and overall gross win margins were weak in April.
A key strategic focus for 2017 is the integration of our technology platforms. This project is on track and we expect both our European brands to be operating on a common platform by the end of the year, at which point customers will start to benefit from an increased pace of new product delivery.