Paddy Power Profits Plummet Unfavorable Sports Results Contribute
DUBLIN, Ireland (Reuters) - Paddy Power's operating profit fell sharply in the first half of the year after a run of unfavourable sports results, but the Irish gambling company said a second-half rebound should deliver full-year earnings growth.
Paddy Power, which has more than doubled its annual profits since 2009 on an overseas expansion and a strong performance online, leads the industry in smartphone and tablet betting.
Its operating profit fell 20 percent to 60.1 million euros ($79.4 million), or 14 percent on a constant-currency basis, after warning earlier this year of a "horrific run of sports results".
"There has been an extraordinary run of results. We always say to people that the run of results can go against bookies. Every separate event is a new coin toss," Chief Financial Officer Cormac McCarthy told Reuters.
"The top line is powering ahead. We have seen a very strong return to more normalised sports results. That gives us a lot of confidence in the long run that our margins are fine," McCarthy added, pointing to a 17 percent rise in the amount staked by customers and a 32 percent jump in its online customer base.
Paddy Power shares dipped 1 percent to 49.2 euros by 0755 GMT, down from a high of 70 euros in April 2013. The stock has yet to recover since profit growth stalled suddenly last year following years of rapid expansion.
The company, which increased its interim dividend by 11 percent, said it expected mid-teen percentage growth in earnings per share (EPS) for the full year, with revenue up 45 percent so far in the second half compared to 7 percent in the first.
That was helped by favourable results in the final stages of the soccer World Cup - the industry's largest event - which McCarthy said exceeded expectations, echoing positive comments from Ladbrokes and William Hill.
Paddy Power said it accepted bets worth 198 million euros during the tournament - up 130 percent on the last World Cup in 2010 - while 20 percent of its 795,000 new online customers were acquired during the four-week tournament.
While the Dublin-based firm fast-growing Australian business continued to perform strongly, it pushed out its expectation for its Italian business to turn a profit by a year to 2016 following its launch two years ago.
"Frankly the market is not growing as fast as we'd like or expected. Our business is doing everything we expected it to do but the Italian economy is obviously hurting," McCarthy said.
Paddy Power, which had no debt and net cash of 244 million euros at the end of June, said it would recommence a share buyback, with the timing and amount to be purchased dependent on its pipeline of development opportunities. (Editing by Tom Pfeiffer)
