Business

Argument for cut in fixed-odds stakes a losing bet for Paddy Power

Bookmaker’s share price slumps on reports of possible cut in UK limit from £100 to £2

A 2017 report from Barclays forecast that Paddy Power would lose about £60 million in annual turnover if the Fixed-odds terminals stake was cut to £2. Photograph: Dado Ruvic/Reuters

Thu Apr 26 2018 - 06:02

No good deed shall go unpunished. It's a well-worn phrase but one that must strike Peter Jackson and his team at Paddy Power Betfair as depressingly apposite.

Media reports this week that the UK government was minded to act on proposals to cut the amount punters could bet on fixed-odds betting terminals from its current limit of £100 to just £2 knocked the stuffing out of the listed bookmakers.

Paddy Power shares shed more than 7 per cent at one point – wiping about €400 million of its market capitalisation. The fact that rivals Ladbrokes Coral and William Hill were worse hit was likely little comfort at the group's Clonskeagh headquarters.

By day’s end, the losses had been trimmed to 3.8 per cent, or just over €200 million. They lost another 1.4 per cent on Wednesday and, year-to-date, are down more than 20 per cent.

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Ironically, Paddy Power had been one of those arguing for a cut in the betting limit on fixed-odds terminals. Former chief executive Breon Corcoran even wrote to the British government last year, suggesting the stake limit be cut to £10.

Paddy Power has form here. Founding chief executive Stewart Kenny was reported back in 2009 to have urged the Irish government to avoid the mistakes of the UK by not allowing such terminals into Irish betting shops.

Of course, the fact that it is less exposed to such terminals than its rivals is worth noting. A 2017 report from Barclays forecast that the Irish bookmaker would lose about £60 million in annual turnover if the stake was cut to £2. Bad though that is, it pales against the £288 million and £437 million that the analysts reckoned William Hill and Ladbrokes Coral respectively would lose.

What will really gall Jackson and his team are reports that the UK government will look to retrieve tax revenue lost on the fixed-odds terminals by introducing some other form of gaming tax. Essentially, Paddy Power would be forced to pony up extra cash to subsidise exchequer losses from its rival operators.

So much for being on the side of the angels.

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