Increase in revenues and delays in regulation changes boost betting firm.
Shares in Paddy Power Betfair jump 5% in response to Q3 numbers
- Bookmaker posts 12% increase in revenues in Q3 but rule changes and tax increases weigh.
- Delay in implementation of regulation changes will be seen as positive by sector.
- We recommends Paddy Power Betfair as a ‘hold’ for growth seekers.
Betting group Paddy Power Betfair reported third quarter figures today which showed revenues ahead of expectations. They rose 12% on a constant currency basis to £483m although earnings dropped 16% due to losses at the recently acquired US fantasy sports business FanDuel alongside start-up costs. Investors should acknowledge that despite that the company still sees a good opportunity for future growth in the US, especially for online activity.
Revenues in Australia were down 2% and the betting shops in the UK and Ireland also experienced a drop in revenue in the third quarter. The company edged up its full year earnings forecast to £465m-£480m although the outlook is mixed with good prospects for growth in the US offset by increases in taxes and rule changes in the UK relating to fixed odds betting terminals and the increase in remote gaming duty.
Indeed, the headlines this week have been dominated by the resignation of Sports Minister Tracey Crouch following her resignation in response to the government delaying its plans to decrease the maximum stake on fixed odds betting terminals. The delay is mildly positive for the companies affected, including Paddy Power Betfair.
Overall the figures are mixed with good prospects in the US and for online revenue growth offset by increased regulation and taxes in the UK. The shares do not look especially cheap but remain a ‘hold’ for medium risk investors seeking mostly capital growth.
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