Paddy Power Betfair (PPB) has slashed the stakes on its full-year performance. The group now expects to deliver between £460m and £480m in underlying cash profits, revised down from previous estimates of £470m-£495m. Part of this is down to new point of consumption taxes in some Australian states - something which is expected to take a 13 per cent bite out of 2019 sales. But the region currently accounts for just over a fifth of group revenue, so further investment looks the likely method to grow market share.
At the time of acquiring US fantasy sports website FanDuel, management expected cash profits across the combined businesses to break even. But losses are now expected in the second half due to the seasonality of fantasy sports, and as more money is spent on marketing and launching sports betting options.
Finally, gambling around this summer's World Cup resulted in around £8m of profit - once you consider marketing and sales costs - but the benefit won't be felt until the second half. As for the stake cut on fixed odds betting terminals (FOBTs) across UK retail shops to just £2, management doesn't expect it to dramatically affect the strategy.
Analysts at Numis expect pre-tax profits of £386m during 2018 giving EPS of 411p, increasing to £400m and 435p in 2019.
| PADDY POWER BETFAIR (PPB) | ||||
| ORD PRICE: | 7,055p | MARKET VALUE: | £5.85bn | |
| TOUCH: | 7,050-7,055p | 12-MONTH HIGH: | 9,180p | LOW: 6,635p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 5,053p* | NET CASH: | £148m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 827 | 102 | 103 | 65.0 |
| 2018 | 867 | 106 | 104 | 67.0 |
| % change | +5 | +4 | +1 | +3 |
| Ex-div: | 23 Aug | |||
| Payment: | 24 Sep | |||
| *Includes £4.3bn of intangible assets or 5,166p a share | ||||
