Paddy Power Betfair - A doubling of Irish turnover tax reduces group EBITDA by c.4%

Davy Research
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The prospective doubling of the gambling turnover tax has become an almost annual pre-Budget discussion point in Ireland. However, as had been widely anticipated in recent weeks, this has ultimately come to pass as part of the 2019 Finance Bill (details announced by the government this afternoon, October 9th). In simple terms, it represents yet another costly regulatory development for the sector. We estimate that it will impact Paddy Power Betfair (PPB) EBITDA by over 4%. However, it has also resulted in Ireland now having one of the more penal regulatory backdrops for gaming in the world (equating to a c.30% tax on online net revenues). This will almost certainly influence the competitive environment, allowing larger operators, including PPB, to partially offset its now enlarged cost base.