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Paddy Power Betfair share price: Underlying EBITDA in line with guidance

Paddy Power Betfiar (LON:PPB) has updated investors on its recent performance, reiterating its full-year earnings outlook despite adverse sports results which weighed on the company’s fourth-quarter performance.

**Highlights from the company statement:**
Group revenue in FY2016 was up 18% year on year (+11% in constant currency, “CC”2) to £1,551m. We expect full-year Group underlying EBITDA3 to be around the mid-point of the previously guided range of £390m to £405m, notwithstanding worse than expected gross win margins in November and December.
Since our Q3 trading update, the Group continued to see good sportsbook staking growth but results favoured customers. This started with the unexpected US election outcome, which cost the Group almost £5m, and concluded with our European sportsbooks losing money on football bets in the month of December. We estimate that the impact on Group revenue from the customer friendly results, before any benefit from the re-cycling of winnings, was approximately £40m in the quarter. The impact on profitability of these results was partially offset by lower than expected marketing and staff costs.

In our Online division, the adverse sports results, coupled with some weakness in gaming, meant that Q4 revenue reduced by 3% year on year (-8% in CC2), despite 15% growth in sportsbook stakes (+10% in CC2). The benefits of the Group’s geographical diversification were highlighted by a strong performance from Sportsbet in Australia, where Q4 stakes growth of 25% and revenue growth of 18% (both in local currency) helped to partially offset the poor gross win margins in our European businesses.

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