Paddy Power leaves forecasts unchanged despite 20% fall in profits

Bookmaker Paddy Power is leaving its forecasts for its full- year performance unchanged despite a run of punter-friendly results that left first-half profits trailing by 20 per cent at €60 million.

Power reported that net revenues grew 4 per cent to €396 million in the six months to the end of June. However, results in the English premiership early in the year, and at the World Cup and Royal Ascot towards the end of the period, hit the group's bottom line.

Operating profit slid 20 per cent to €60.1 million from €75.4 million. Paddy Power’s gross win margin dropped to 9.1 per cent from 10.1 per cent, meaning that the group handed back €9.09 in winnings out of every €10 staked during the six-month period compared to €8.99 last year.

Chief executive Patrick Kennedy noted that the second half of the year had started well, with a rebound in results and good stakes growth.

“At this juncture, we expect mid-teen percentage growth in earnings per share for the full year, despite an €11 million headwind from product fees, new taxes and currency translation,” he said.

This is in line with the guidance given by the company when it published its 2013 accounts in March.

The group said that the “slew” of punter-friendly results masked strong underlying growth in the business.

Punters staked a total of €3.42 billion with the company during the six-month period, 14 per cent more than the €3 billion they bet during the first half of 2013.

It had €244 million in cash on June 30th, up from €214 million 12 months earlier.

During the World Cup, it recruited 148,000 new on-line customers and the tournament generated a betting turnover of €198 million for the business, ahead of the €160 million that the bookmaker predicted at its annual general meeting in May.

Its European online businesses, largely made up of Ireland, Britain and Italy, took the worst impact of the sports results. Operating profits tumbled 48 per cent to €22 million from €42 million.

Clients bet €1.4 billion, but the group kept just 7 per cent of this in winnings, leaving it with net revenues of €81.7 million, 21 per cent short of the €103.2 million it earned last year.

Net revenue in its Italian business was up 126 per cent at €4.6 million, but the group conceded that it did not now expect that business to break even until mid-2016. It had predicted that this would happen by the end of this year.

In contrast, its Australian online business delivered 32 per cent growth in operating profit to €21.8 million from €16.5 million.

Amounts staked rose 1 per cent to €925 million and net revenues were €98.6 million, up 14 per cent from last year when they were €86.5 million.

Operating profits in its Irish bookie shops rose 13 per cent, to €8.6 million from €7.6 million. Its UK shops delivered a €9.5 million operating surplus, 22 per cent ahead of 2013’s first half.

Paddy Power is proposing an interim dividend of 50 cents a share. It is also planning to resume share buybacks. Equity markets and possible acquisition or growth opportunities will determine the timing and amount.