Markets were jumpy following Paddy Power Betfair’s (PPB) latest trading update, in which it was revealed Donald Trump’s US presidential win and a string of European football results had cut into the group’s total revenue.
These “customer friendly results” cost the group close to £40m, though, it argued these were slightly offset by lower marketing and staff costs.
Shares in the company were down 2.2% at 8485p on Monday, making it the second worst performer in the FTSE 100 index. The index itself slipped by 0.34% to 7,174, thanks to PPB and Royal Bank of Scotland.
This comes not long after PPB decided to boost its full year profits guidance to between £390m and £405m, after weaker sterling and decent betting turnout for the Euro 2016 tournament led to a robust third quarter performance.
Factoring in the blowback from Trump and December football matches, the group said it expected underlying EBIDTA to land in the middle of the previously guided range.
Total revenue of over the fourth quarter fell flat, just 10% higher than the previous year on a constant currency basis at £388m.
There were no major surprises in PPB’s update, as far as Kames Capital’s Ryan was concerned, who pointed out that peers, Ladbrokes Coral and William Hill, were also negatively impacted by December’s football results.
“Having followed these stocks for some time, you do get periods like this wherein the punters are winning more than the bookmakers. But the individuals who win that cash typically have a propensity to spend it so those winnings are generally recycled.”
The Kames UK Opportunities fund, managed by Ryan, has PPB as its fourth largest holding (4.41%) as of 30 December 2016.
Although she admits the second half of 2016 was trying for the group, and many other tech and high multiple growth stocks, she thinks there are several key positives that separate the UK’s largest bookie from its competitors.
