Paddy Power shares fall despite profit growth

Online betting company Paddy Power has reported a 12 per cent increase in pre-tax profits and basic earnings per share for the first half of the year (release).

Pre-tax profits rose to €77.0m (£66.4m) from €68.7m in the same period the year before. Basic earnings per share increased to €1.394 from €1.240.

However, investors ditched shares in the company this morning after chief executive Patrick Kennedy mentioned "very poor" recent sports results and currency "headwinds" potentially hitting profits.

Results at Wimbledon, horse racing, and the British Open went against the company, chief financial officer Cormac McCarthy said in an interview. Analysts are expected to reduce full-year earnings estimates by around five per cent. Current expectations are for full-year pre-tax profits of €159m.

Shares fell as much as 5.8 per cent to €56.60 - the biggest intraday fall since April 22nd, but has since recovered.

Nevertheless, the online business showed considerable strength. Net revenues grew by 22 per cent to €379.8m, with the online business generating 43 per cent of this. Online revenues were up 23 per cent in Australia and 11 per cent in the rest of the world. Meanwhile, mobile revenue more than doubled to €104m, making up 43 per cent of all online revenue.

Kennedy said that Paddy Power had a “very good” first half.

The excellent performance of our Australian business was a particular highlight. Almost two thirds of the Group’s online sportsbook customers now transact with us via mobile and this continues to grow.

The second half of the year has started very well from a turnover point of view with sportsbook stakes up 25% in online and 4% in retail on a like-for like basis. Despite very poor recent sports results, we are on track to achieve low to mid double digit operating profit growth in constant currency in 2013. Currency translation headwinds if maintained at current levels for the full year would lower this constant currency year-on-year profit growth by 4%.

The company added that the outlook for the future is “strong”. Chairman Nigel Northridge said:

We are well positioned in our existing online markets, with leading penetration in mobile and social media. We are using our capabilities to launch new products and to explore expansion into new markets. In retail, we continue to grow our market share and achieve strong returns from new shop openings. The Board is confident of the Group’s prospects for the balance of the year and beyond.

The interim dividend has been increased 15 per cent to 45 cents.

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