Irish bookmaker Paddy Power posted a 10 per cent rise in 2008 earnings, but forecast a drop this year due to a deeper recession, higher tax, a weak sterling and less bookie-friendly sports results.
The sudden end of Ireland's economic boom will hit earnings and slow the expansion of its retail network this year, but it hopes to snatch business from rivals which are forced to close shops, it said today.
"We've benefited from the Celtic Tiger and, logically, one would expect to see an impact when that slows down," finance director Jack Massey said.
Adjusted earnings per share rose in 2008 by 10 per cent to 140.5 cent, while operating profit rose by 5 per cent to €75.7 million ($96 million), slightly above an average forecast for €74.8 million.
Analysts acknowledged Paddy Power's ability to pick up sales in Ireland from rivals, which could shut as many as 250 shops by the end of next year, but some advised caution on the stock as like-for-like turnover began to decline in late 2008.
"We expect things to get tougher as 2009 progresses," said NCB analyst Neil Glynn, who has a 'Hold' recommendation on the stock and expects to cut his 2009 operating profit forecast to around €50 million from an earlier projection for €55.7 million.
Shares in Paddy Power traded 1.9 per cent higher by 12.15 GMT at 11.21, after earlier dropping to €10.78, outperforming a 2 per cent fall in the wider Irish market.
After a better-than-average year for sporting results, from the bookmaker's perspective, in 2008, Paddy Power said it expected outcomes to be closer to the long-run norm this year.
Last year's appointment of Giovanni Trapattoni as Republic of Ireland soccer coach had been one of the best results in Paddy Power's history as it had come from a pool of more than a dozen "favourites" for the job, Mr Massey said.
The bookie also did well from the Cheltenham horse race and Europe's golf loss in the Ryder cup, while this year it could take a small hit from Ireland's strong showing in the Six Nations rugby tournament, Massey said.
Earnings have been eroded by a rise in betting tax in Ireland and the weakness of sterling versus the euro, it said, adding that it would still press ahead with the expansion of its retail network in the United Kingdom.
"The group faces a number of headwinds in 2009 which are projected to reduce profits, as has already been reflected in consensus market expectations," it said. Paddy Power increased its 2008 dividend by 6 per cent to 54 cents per share, leaving it with €77 million in cash, down from €88 million a year earlier.
"While the Board does not rule out further share buybacks, retention of cash has therefore become more attractive," it said.