Bookmaker expects to break even in Italy despite €16.8m in losses

Paddy Power expects its Italian operations to break even this year, despite seeing losses there increase by over 14% during 2013.

The Irish gaming and betting services company entered Italy — the largest betting market in Europe and the fourth largest in the world — in 2012; and already controls around 10% of the country’s online sports betting market.

Yesterday, as part of its 2013 annual results presentation, the company said losses in its operations in Italy grew from €14.7m to €16.8m.

Almost a year ago, Davy Stockbrokers downgraded the Paddy Power stock from ‘outperform’ to ‘under-perform’ (a rating it still has attached), despite calling the firm the highest quality name in the European gaming sector.

Davy’s decision was driven by concerns over what it saw as faltering returns from the UK retail segment, a declining online customer base, and the Italian expansion, where it said “a lack of sufficient market growth” would see the company require a substantial period of time to recoup its initial investment.

However, Paddy Power’s chief financial officer, Cormac McCarthy said yesterday that the Italian business should exit 2014 breaking even. As well as a 10% share of the online sports betting market, Paddy Power also controls around 3% of the gaming market, having only launched its online casino offering last November.

CEO Patrick Kennedy added that the company is focused on building “a multi-decade business” in Italy and that the division is progressing on track. He added that the company will continue to look for entry opportunities in exciting new markets.

Davy said it will be reviewing its numbers and will provide an updated view on Paddy Power in the coming days, following discussions with the company’s management.

Regarding other jurisdictions, Paddy Power said its broad US plans — where it has an online licence in Nevada — are still, effectively, on hold.