Paddy Power profits increase

BOOKMAKER Paddy Power is expected to report a 13.5% rise in pre-tax profits today despite laying losing bets during a winning run for punters at Cheltenham and Aintree.

The company is one of a number of online bookmakers targeted by hackers who are threatening to shut down sites that refuse to pay them money.

NCB Stockbrokers David Odlum, who maintains a buy recommendation on Paddy Power shares, said their results estimates for 2003 should show turnover up 39.2% (year-on-year) to €937.6m, with fully diluted earnings per share (EPS) and profit before tax (PBT) of 33.8c (+16.5% year-on-year) and €20.2m (2002: €17.8m) respectively.

“Our 2003 dividend per share forecast is 13.1c (+28%). After a difficult start to 2003, due to unfavourable results at Cheltenham and the Grand National, we expect a rebound in profitability in H2, with the gross win margin set to return to more normal levels.

“The online betting business, 21% of turnover in H1 (first half) 2003, has made good progress and is likely to show a profit for the second half of the year, and the year as a whole. We are forecasting on-line operating profit of €0.2m for 2003 (H1 2003: loss €0.4m).

“The telephone betting business (19% of turnover in H1 2003) is also set to see a significant increase in turnover, as Paddy Power has been actively marketing its dial-abet offering in the UK,” he said.

Mr Odlum said Paddy Power’s betting shop business, 60% of group turnover in the first half of 2003, remains the main driver of turnover and profits.

“The UK is an obvious market for expansion with the same bets, same events, same language, and competition as in Ireland. Paddy Power’s focus is in North West London, inside the M25. The company’s very small UK presence should allow it to generate substantial revenue growth, without disrupting the overall market,” he added.

“Overall, results are likely to be mixed, with strong turnover growth being offset by a depressed gross win margin, due to the first half performance. The second half margin performance will be watched closely, as an indication of future profitability. We maintain our buy recommendation, given Paddy Power’s growth prospects,” he added.

The shares closed at their opening price of €7.55.