Australia boosts Paddy Power profit to record levels

Strong growth in bookmaker Paddy Power’s Australian business compensated for a tougher time nearer home and played a key role in increasing its profits by 1 per cent to a record €141 million last year.

Paddy Power yesterday reported an increase in net revenue in 2013 to €745 million from €663 million the previous year and said that pretax profit was up 1 per cent at €141 million from €139.2 million.

Operating profit grew at a similar rate to €137.4 million in 2013 from €136 million in 2012.

However, "adverse results", including a large number of fancied horses winning at the Cheltenham racing festival and punter-friendly outcomes in golf and football, meant profits across its Irish and British businesses were either down or flat.

Its Australian online subsidiary Sportsbet delivered 25 per cent growth in operating profit last year to €33.5 million, while net revenue was up 28 per cent to €179.5 million.

The company also noted that it had to pay €2 million extra in fees last year to racing and other sports bodies in Australia.

Online growth
Growth in its broader online division, which includes the Republic, the UK, Italy and its partnerships in Canada, France and Solvakia, was 1 per cent to €73.5 million. Net revenue was up 15 per cent at €300 million.

Along with the poor sports results, competition in online betting in the UK stepped up considerably as many smaller operators began marketing drives to attract new business, inflating the cost of customer acquisition.

Chief executive Patrick Kennedy said the company expects this to intensify during 2014 as rivals seek to continue to grow customer numbers ahead of the introduction of a tax on online gambling in the UK later this year and to use the World Cup as a platform for recruiting new business.

Mr Kennedy noted Paddy Power had 10 per cent of the Italian market by the end of the year, up from 5 per cent 12 months earlier. The group began trading the in the country midway through 2012, in time for the European Football Championships.

The punter-friendly sports results hits its bookie shops in the Republic and the UK hardest. Net revenue in its outlets in the Republic was up 5 per cent at €115.6 million, but operating profit slipped 2 per cent to €14 million.

Punters in the Republic staked a total of €981 million across the counter in its 223 shops, a 6 per cent increase on 2012. Mr Kennedy said 2013 was the first year since 2007 it had experienced top-line growth.

Total net revenue in the UK shops grew 17 per cent to €127.5 million but operating profit slipped 6 per cent to €13.9 million. The British government introduced duty on gaming machines last year, which cost the business €1.8 million. There was also a €600,000 hit on adverse currency movements between sterling and the euro. Its customers wagered a total of €619 million last year, 20 per cent more than in 2012.

The group is stepping up its investment in shops in both Ireland and Britain, refitting them, installing new screens and touchpads. Mr Kennedy said research carried out last year by the group shows that up to seven out every 10 of the customers in its bookies in both countries are "online rejectors" – that is they have tried betting over the internet but prefer going to the betting shop.

Paddy Power customers bet a total of €6.18 billion across all its channels and territories last year, a 12 per cent increase on 2012. Operating cash flow last year was €141 million. The group spent €40 million on new technology and shop openings. It had net cash, excluding customer balances, of €172 million at the end of the year.