Paddy Power Betfair Expects Faster Cost Savings From Merger
(Reuters) - Gambling company Paddy Power Betfair PPB.I PPB.L increased the scale and pace of cost savings from its merger, fleshing out its strategy following a 31 percent jump in first-half earnings.
Online betting exchange Betfair and Paddy Power, which has a chain of shops as well as an online business, completed a 6 billion pound merger in February with the initial aim of annual cost savings of 50 million pounds.
It increased that figure to 65 million on Wednesday to be fully achieved in 2017, a year ahead of its previous target, adding that the integration of the two companies was also progressing ahead of plan
There has been a flurry of mergers or attempted deals in the industry as established bookmakers and newer online start-ups grapple with higher taxes and tighter regulation.
Casino and bingo hall operator Rank Group (RNK.L) and online gambling company 888 Holdings (888.L) last week abandoned efforts to take over William Hill (WMH.L).
Ladbrokes (LAD.L) and Gala Coral are pressing ahead with a merger in a sector now catering for a new generation of gamblers who bet online and have grown up on a rich diet of televised sport.
DIFFERENT BRANDS
Both Betfair and Paddy Power brands still operate side by side in Britain and Ireland and the company believes it can exploit their different strengths.
The group said on Wednesday it would adopt a more targeted approach to each, primarily aiming Betfair at "money-centric" customers while Paddy Power will concentrate on customers whose primary motivations are "social interaction and entertainment".
Betfair is best known for its innovative exchange where gamblers can bet directly against each other, while Paddy Power has made a name for itself through cheeky advertising campaigns.
Chief Executive Breon Corcoran told Reuters that the Betfair brand would typically be used for entries into other European markets and that the group would focus primarily though not exclusively on regulated markets.
It will also be selective on shop openings, expecting to add 10 to Paddy Power's stock of 603 in the second half, making it at most a small buyer of the 350-400 shops rivals Ladbrokes and Gala Coral must sell, Corcoran said.
Paddy Power Betfair's speedier integration and strong cash generation could see it seek further deals or return cash to shareholders in due course, Corcoran said.
"There are lots of moving parts in the market at the moment. We think we're in a pretty good position to get involved in that if we so wish," Corcoran, who worked at both firms before they merged, said in a telephone interview.
The combined group reported core earnings (EBITDA) of 181 million pounds in the first six months of the year and said the second half had started in line with its expectations, expecting full year earnings growth of up to 30 percent to between 365 million and 385 million pounds.
Shares in the group, up 25 percent since the end of June after more than recovering a hit from Britain's vote to leave the European Union, were trading 0.2 percent lower at 994.0 pence at 0825 GMT.
