November 19, 2013 6:03 pm

Paddy Power falls on profit warning

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The battle for online punters has been getting ugly. That was how traders read a profit warning from Paddy Power, which put the rest of the bookmakers under pressure.

Paddy Power warned that rivals had increased marketing spend to bulk up ahead of tax changes due to take effect next year, meaning its UK growth had been slower than expected.

“Desperation among sub-scale operators is starting to set in,” said Davy analyst David Jennings. “While such behaviour is not sustainable, it is not likely to cease until some point post the introduction of UK online gaming tax in December 2014.”

Paddy Power, down 8 per cent to 57.5p, also confirmed fears that horse-racing and football results had favoured the punters.

Ladbrokes, down 1.8 per cent to 175p, was forced to deny last week that poor results meant it was heading towards a fifth profit warning, but added that speculation about the remainder of the year was “extremely premature”. The caveat baffled analysts, who noted that all the year’s main events had already happened.

Meanwhile, strong figures from Paddy Power’s Australian business sparked worries that it may be picking up market share from William Hill, which slipped 2 per cent to 361.3p.

The wider market turned lower for the first day in four, with the FTSE 100 down 25.45 points or 0.4 per cent at 6,698.01.

Aberdeen Asset Management lost 3 per cent to 475.2p, having jumped 14.7 per cent a day earlier in response to its £550m purchase of Scottish Widows Investment Partnership. Numis, which cut Aberdeen off its “buy” list, said Swip was “likely to at best be a no-growth business for a number of years”.

Intertek fell 2.5 per cent to £31.02 after the testing specialist cut growth and margin guidance, blaming prolonged poor trading in Europe and weakness among minerals customers.

Vodafone drifted 1 per cent to 232.1p in spite of Citigroup giving takeover theories yet another airing.

“We regard AT&T and SoftBank among global telcos large enough to be credible potential bidders for Vodafone, with América Móvil as a candidate to take part of the company in a possible breakup,” Citi said. Calling Vodafone a “unique strategic asset” with £20.2bn of tax losses on its balance sheet, it reckoned any successful bid would need to be pitched at around 290p a share.

Easyjet led the blue-chip risers, up 7.1 per cent to £13.45. A reassuring outlook statement came with its final results, which was in contrast to Ryanair’s profit warning two weeks earlier.

Enterprise Inns jumped 11.6 per cent to 154p in spite of the retirement of its founder and chief executive Ted Tuppen.

Mr Tuppen’s departure was confirmation that Enterprise had been “nursed back to good health”, said Deusche Bank, which added that it was the first time in five years that Enterprise’s annual results had not triggered downgrades.

Oil explorer Afren was up 8.1 per cent to 161p after saying its Ogo discovery off the coast of Nigeria was nearly four times bigger than the pre-drill estimate.

Thomas Cook climbed 5 per cent to 147.5p as Credit Suisse advised buying ahead of results and a strategy update due next week. It expected Thomas Cook to set out a target for second-wave cost savings of between £50m and £100m.

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