(Fixes date to March 7)
By Padraic Halpin
DUBLIN, March 7 (Reuters) - Shares in Paddy Power Betfair PPB.I PPB.L fell by more than 4 percent on Wednesday afterthe gambling group's plans to increase marketing spend and boostsluggish European growth led to downgrades in earningsforecasts.
The bookmaker grew full year earnings by 18 percent, aheadof its guidance, and said the full integration of its businessesfollowing a 2016 merger would free up resources to develop newproducts either side of key trading at June's soccer World Cup.
It will also invest an additional 20 million pounds ($27.7million) this year in marketing and other activities to boostits Paddy Power brand in the highly competitive British marketand the Betfair betting exchange in international markets.
While underlying core earnings of 473 million pounds wereahead of the company's guidance of 450 to 465 million, itsonline division that accounts for two-thirds of that total andis dominated by the British business grew by just 6 percent.
"We've had to focus all our development resources internallyso we haven't been building out products for our customers. Ithink that's definitely impacted the performance of the businessin 2017," Chief Executive Peter Jackson, who took over inJanuary, told reporters.
"That's why we're beginning to add additional marketingspend, particularly behind the Paddy Power brand, which we thinkhas really suffered from the lack of product investment."
The group is the product of a 6 billion pound tie-up in 2016between online betting exchange Betfair and Paddy Power, whichruns betting shops as well as an online business. It was one ofa number of deals in a sector facing tighter regulation andhigher taxes.
Analysts at Goodbody and Davy Stockbrokers expected that theincreased investment, together with adverse currency movements,would knock 5 to 6 percent of their earnings forecasts for 2018.
Shares in the group were 4.7 percent lower at 88.20 euros by0945 GMT, which traders attributed to expected downgrades acrossthe board.
"While this is disappointing, we believe the increasedinvestment is the right step for the group to take to start tocatch up in the UK market," Goodbody analyst Gavin Kelleherwrote in a note, reiterating a buy recommendation.
Kelleher added that plans to target a medium term leverageratio of between 1 and 2 times net debt/earnings implied thatthe group would have 750 million to 1.25 billion pounds in cashto deploy on acquisitions and/or shareholder returns.
Chief Executive Jackson predicted that there would be moreconsolidation in Australia following rival William Hill's WMH.L exit this week amid tighter regulation that he said itsstrongly performing Sportsbet business can cope with. got a strong balance sheet and will be extremely wellplaced to participate as we see appropriate," said Jackson.($1 = 0.7215 pounds)