Online good for Paddy Power

Irish bookmaker Paddy Power Plc has delivered a strong performance, particularly in its online and mobile channels, in preliminary results for the year ended December 31, 2011 that were released this week.

Group highlights over the period include:

– Underlying profit before tax amounting to Euro 121.2 million, a growth of 16 percent

– Adjusted diluted EPS growth of 26 percent to 212.3 cent

– A 40 percent increase in the proposed final dividend to 70 cent per share, implying full year dividend growth of 33 percent to 100 cent per share

– Strong balance sheet with no debt and cash of Euro 136 million at 31 December 2011

– 79 percent of operating profit from online activities; 74 percent from customers outside Ireland

Online highlights include:

– Active customers up 35 percent to 1.1 million

– Net revenue amounting to Euro 295 million, up 26 percent

– Operating profit of Euro 95 million, up 26 percent

– Paddypower.com showed strong growth with active customers increasing by 41 percent, net revenue up 30 percent to Euro 199 million and operating profit up 29 percent to Euro 74.3 million

– Strong and continually increasing Australian growth with online stakes up 15 percent in constant currency (growth of 7 percent in the first half and 23 percent in the second half) and operating profit up 17 percent to Euro 22.8 million

– A leading share of the rapidly growing mobile market with group mobile net revenue up 299 percent to Euro 43 million

Important strategic acquisitions and agreements over the period included the British Columbia Lottery Corporation B2B partnership which will raise Paddy Power’s profile in North America and with other lottery operators. The acquisition of Bulgarian online and mobile games developer Cayetano will additionally enhance the group’s product portfolio and development capabilities.

Following Paddy Power’s online expansion into France, Canada and Australia, the company is focusing on entering the Italian market with its own brand before the middle of this year, timed for the start of the European soccer championships.

“Italy is overall the largest (market) in Europe when you combine online and retail and it’s actually relatively small at this point in terms of an online market,” said Paddy Power’s finance director Jack Massey in an interview with Reuters.

“We feel there’s good potential to flow into the online market from retail. We feel that the regulator has been allowing regulated companies to add more product to their online offering and that can be a driver of growth,” Massey added.

Retail Highlights over the period included:

– UK Retail like-for-like sportsbook stakes and machine gaming net revenue both up 10 percent in constant currency and operating profit up 43 percent to Euro 10.5 million;

– 41 shops opened during 2011 bringing Paddy Power’s UK Retail estate to 169 shops. Expectation of opening 35 to 40 shops annually;

– Irish Retail like-for-like stakes up 1 percent, direct operating costs per shop down 4 percent and operating profit down 38 percent to Euro 10.9 million, attributed to adverse sports results.

– Market share increase of 34 percent.

Commenting on the results, Patrick Kennedy, chief executive, Paddy Power plc said:

“These results demonstrate the strides we’ve made in building an international business of scale in regulated markets. Online markets are growing at pace and Paddy Power continues to invest aggressively in talented people, product and technology to capitalise on this dynamic market. Our class leading mobile product, married to the strength of our brand and strong value offering has driven acquisition and retention, leading to 1.1 million active customers online.”

The company reports a “satisfactory” 16 percent increase in net revenue year on year over the past two months.