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Paddy Power profits drop on US spend

The bookie is focus on US expansion, and is considering a name change
March 7, 2019

One of the biggest changes to the global gambling market over 2018 was the repeal of legislation banning sports betting in the US. Since then, bookies have been keen to introduce American consumers to their brand. In July, Paddy Power Betfair (PPB) bought fantasy spots website FanDuel, and has since launched a sportsbook in New Jersey following the state's legalisation of sports betting, gaining 35 per cent of market share in the first five months of operation. But group underlying cash profits fell 5 per cent to £451m due in part to the £24m spent on developing the US business. Otherwise, this figure would have been up 9 per cent.

IC TIP: Hold at 6245p

Another important area for Paddy Power is online. After having lost market share in recent years, the group began to win back market share losses. Online revenue increased by 5 per cent to £948m, with improvements from both the Paddy Power and Betfair brands, and underlying operating profit 3 per cent higher at £275m.

For investors, the company may not be known as Paddy Power Betfair for much longer. It’s considering changing its name to Flutter Entertainment to “better reflect the increasing diversity of the group”. It’s a throwback to the name of a brand it acquired in 2001, so it’s unlikely to incur any brand consultancy fees.

Analysts at Peel Hunt expect adjusted pre-tax profit of £302m, giving EPS of 323p, compared with £356m and 365p in 2018.

PADDY POWER BETFAIR (PPB)  
ORD PRICE:6,245pMARKET VALUE:£4.88bn
TOUCH:6,230-6,245p12-MONTH HIGH:9,180pLOW: 6,000p
DIVIDEND YIELD:3.2%PE RATIO:26
NET ASSET VALUE:5,119p*NET DEBT:4%
Year to 31 DecTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20140.88167301152
Year to    TurnoverPre-taxEarnings Dividend
31 Dec (£bn) profit (£m)per share (p) per share
20150.79125240180¢
20161.5011.9-7.2165p
20171.75247258200p
20181.87219242200p
% change+7-11-6-
Ex-div:11 Apr   
Payment:21 May   
*Includes intangible assets of £4.65bn, or 5,958p a share