Paddy Power Increasingly Dependent on Internet Operations

March 3, 2009 (InfoPowa News) — The value of Internet gambling operations to Irish bookie group Paddy Power was powerfully illustrated this week in the company's full year report for 2008 — the Internet division of the firm contributed 70 percent of operating profit over the last six months of the year.
 
Highlights of the report, which covers the 12-month period to the end of December 2008, included:
 
* Growth in earnings per share of 10 percent to 140.5 cents.
 
* Operating profit of 5 percent to €75.7 million, despite a €5 million headwind due to adverse currency movements;
 
* Online operating profit growth of 34 percent to €42.8 million, with online activities generating over 70 percent of Group operating profit in the second half of 2008;
 
* Growth in EBITDA per shop in Great Britain of 17 percent in constant currency to €140,000.
 
* Market share growth in Irish retail, in spite of reduced operating profit of Euro 6 million as a result of less favourable sporting results and lower average turnover per shop;
 
* Ongoing investment in 15 shop openings, eight shops acquired in Northern Ireland, Paddy Power's newer online businesses and product development;
 
* Further squeezing of the cost base limiting cost growth in the second half of 2008 to just 6 percent in constant currency despite an 11 percent increase in average shop numbers;
 
* A strong cash balance of €77 million as at 31 December 2008, after €54 million of cash returns to shareholders in 2008.
 
* Group pre-tax profits were up 4 percent to €79 million, compared with €75.8 million last year.
 
"We have grown earnings per share by 10 percent in 2008 despite the challenging environment," said Paddy CEO Patrick Kennedy. "Our online operations performed particularly strongly with a 48 percent increase in operating profit in constant currency." The report observed that Paddy Power's share of the online market was still relatively small, indicating strong growth potential was possible in the sector.
 
"The results in the second half of 2008 also demonstrate the success of our strategy of geographic and channel expansion with online operating profit accounting for over 70 percent of Group profitability and profits from UK customers almost half of Group profitability," said Kennedy.
 
He added: "The Group faces a number of headwinds again in 2009, as has already been reflected in consensus expectations. In that context, the year has got off to a satisfactory start and we remain confident of the Group’s prospects."