Gambling group Paddy Power Betfair (PPB) has become the latest victim of the disastrous Cheltenham horse racing event, as weak revenue growth sends the shares down 1.9% to £90.

Punters at Paddy Power Betfair received a whopping £20 million of net winnings from Cheltenham, resulting in first quarter revenue of £339 million – 16% higher than the previous year but 3.7% lower than analysts’ expectations of £352 million.

David Jennings, analyst at stockbroker Davy, says the miss is entirely due to adverse sports results. He estimates that if the results were ‘normal’ sportsbook revenue would have been at least in-line with expectations.

PPB - Comparison Line Chart (Rebased to first)

Aside from the adverse sports results, the revenue trends are encouraging with sportsbook stakes 21% higher at £2.3 billion and 1% ahead of Davy’s forecasts.

In the online division, gaming revenue grew by 17% and came in 3.3% ahead of expectations at £60 million, while the Exchange grew revenue by 5%.

EBITDA (earnings before interest, tax, depreciation and amortisation) totalled £59.1 million, which looks worrying as Paddy Power Betfair expects full-year EBITDA of £389.5 million. Jennings reckons it can still meet full-year expectations because 2015’s trends show the profit is weighted towards the end of the year.

‘At first glance, we estimate that we will revise down our 2016 forecasts by 2.4% to reflect the adverse sports results in Q1 but leave our future year forecasts unchanged,’ Jennings says.

Paddy Power Betfair says the post-merger integration is on track and it's confident of delivering synergy cost savings of £50 million a year.

Issue Date: 04 May 2016