Paddy Power Betfair’s third quarter trading update could be overshadowed by the release of a government report on fixed odds betting terminals.
The Department for Digital, Culture, Media and Sport (DCMS) made a preliminary recommendation on Tuesday on the machines dubbed as “the crack cocaine of gambling”,
Currently, the maximum stake is £100 but the government is looking at, and asking for feedback on, four options involving the reduction of the maximum stake to: £50; £30; £20; £2.
HSBC thinks the £50 option “is most unlikely” as effectively it leaves things much as they are currently.
A £20 limit looks like a good compromise option, but the government has been keen of late on stealing Labour’s policies so a £2 limit, which would bring it in line with the views held by Labour and the Liberal Democrat party might be “politically attractive”, HSBC suggests.
The £2 option would be the nightmare scenario for the bookies, but because Paddy Power Betfair has less exposure to the high street than the other major players it would probably take the blow in its stride.
The UK Gambling team at Barclays expects Paddy Power to announce third quarter net revenue of £423mln and underlying earnings (EBITDA) of £116mln.
“The key focus will likely be on European Online wagering growth / gaming growth (we forecast 7.9% / 2%), progress on the technology integration, EBITDA guidance (Barclays £459m, company-consensus £455m, guidance range £445-465m) and clarity on Peter Jackson's start date as CEO,” Barclays predicted.
Fashion firm Next has a strong tradition of under-promising and over-delivering, so expect a trading update that lays on the gloom a bit thick, even if the actual trading for the third quarter was on the all-right side.
“While current trading in the high street stores will be of interest given some signs of weak consumer sentiment, the market will again be focusing mostly on the full year guidance,” suggested Graham Spooner at The Share Centre.
Later in the day, focus will be on the US Federal Reserve and its decision on interest rates.
Economists are still not completely certain whether the Federal Open Market Committee will sanction another 0.25% hike at the end of the latest meeting on Wednesday, or wait until the last of the year on December 12-13, particularly given the uncertainties over the future of Fed chair Janet Yellen, whose tenure ends next year.
Significant announcements expected
Trading updates: Next Plc (LON:NXT), Paddy Power Betfair plc (LON:PPB), Standard Chartered PLC (Q3) (LON:STAN), Just Group PLC (Q3) (LON:JUST)
Interims: Apax Global Alpha Limited (Q3) (LON:APAX), Smurfit Kappa Group PLC (Q3) (LON:SKG)
Economic data: BRC shop price index; UK manufacturing PMI; US ISM manufacturing; US construction spending; Federal Reserve US rate decision