The odds get longer for Paddy Power Betfair

At the start of the 2016, Breon Corcoran was enjoying a moment of triumph. He was overseeing a merger between the two companies he had worked for over a 16-year career — Irish bookmaker Paddy Power and UK-based online betting firm Betfair.

The £5bn combination was widely lauded, with gambling executives viewing it as a sure thing rather than a risky punt. Betfair was to gain additional financial and marketing muscle, while Paddy Power would benefit from technological systems to push forward its online business. The tie-up had forced its rivals into seeking similarly transformational deals.

By the end of the year, Mr Corcoran, who announced his departure as chief executive of Paddy Power Betfair on Monday, was contemplating his future.

“In very normal conversations with the chairman, I had told him I had ambitions to do other stuff and that we should think about a succession process and start mapping out talent in the market,” he says. “It’s a personal thing more than a professional comment on the state of the business, which I still think has great prospects.”

Without Mr Corcoran at the helm, however, there is doubt over how great those prospects are.

In March, the company revealed a £5.7m loss for the financial year ended December 2016, weighed down by £318m expenses related to its merger. At the time, the company argued that its performance was better understood through its underlying results, which showed revenues up 18 per cent to £1.55bn.

“Integrating the technology side of the business has been difficult,” says a senior industry executive who knows Mr Corcoran. “[The integration of the two companies] has not been as quick as people have expected.”

Mike van Dulken, head of research at Accendo Markets, a trading group, says it is “interesting” that Mr Corcoran signalled his departure “very soon after the merger”, adding: “I don’t know whether he saw that as his swansong, and that he could see he has taken the company so far and made it as big as it can ever get.”

The FTSE 100 group’s stock has fallen by more than a quarter since the merger was completed and on Monday, the share price fell a further 4.7 per cent on the news of Mr Corcoran’s departure.

The company attempted to calm nervous investors, revealing that Peter Jackson, the UK head of Worldpay and a Paddy Power Betfair board member, will succeed Mr Corcoran.

The betting group is due to announce results for the first half of this year on Tuesday. Paddy Power Betfair suggested it had performed strongly in the six months to June 30, with revenues rising 9 per cent and underlying earnings before interest, tax, depreciation and amortisation up 20 per cent. It also said it would “confirm that trading is in line with expectations”.

But Simon French, an analyst at the brokerage Cenkos Securities, says the leadership change “highlights a lack of long-term planning . . . and the group is also left in somewhat of a strategic vacuum with growth slowing”.

For the first six months of last year, Paddy Power Betfair reported that revenues had risen 18 per cent to £759m and underlying ebitda increased 31 per cent to £181m

Mr French says other “more obvious candidates” for the top seat have left the company since the merger, including Andy McCue, former Paddy Power chief executive who now heads the Restaurant Group, and Mark Brooker, former chief operating officer at Betfair who has since joined the board of William Hill.

In October, the UK government is set to reveal the findings of a regulatory review into the gambling sector. Among the expected changes include a clampdown on fixed-odds betting terminals (FOBTs), in-store machines that have been criticised by campaigners as the “crack cocaine of gambling”.

Analysts at Barclays predict that Paddy Power Betfair could lose up to £55m in revenues in 2018 should the government opt to cut stakes on FOBTs to £2 from up to £100 now. However, rivals Ladbrokes Coral and William Hill will be more severely hit, say analysts and are expected to lose hundreds of millions of pounds each.

The wider impact would occur after the review is completed, when a fresh round of consolidation is expected to break out across the gambling industry. Paddy Power Betfair is among those on the hunt for deals, though that task will now fall to Mr Jackson.

The new chief may find it hard to repeat the Mr Corcoran’s successes. “He’s seized on the opportunities,” says Mr van Dulken. “Its rise has been incredible along the way.”

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