Paddy Power shares slump as adverse sports results hit sportsbook

Irish bookmaker Paddy Power has warned that it now expects full year operating profit to be approximately €11m lower than the mid-point of its previous guidance range, as adverse sporting results impacted the company’s results during the twenty week period ended November 17th.

Total net revenue for the period increased by 7 per cent compared to the same period last year. Paddy Power said that its overall underlying performance had been good during the period, but that sports results had been “unfavourable”.

July 1st to November 17th 2013 Results

“Sports results have remained poor,” said the company in an interim management statement released to the London Stock Exchange this morning. “The group experienced particularly unfavourable results in July, as disclosed at the announcement of our interim results.  

“Since then, adverse sports results have further reduced gross win versus our normal expectations by some €10m, with notably poor results at the recent Australian Spring Racing Carnival and on Champions League football.”

Net revenue from Paddy Power’s online channel (excluding Australia) remained at the same level as last year, with growth from the company’s gaming and B2B division offsetting a decline in sports betting.

Sports betting turnover from the channel rose by 15 per cent compared to the same period last year, although net revenue fell by 11 per cent year-on-year. Gaming and B2B net revenue rose 17 per cent versus a year ago.

Paddy Power said that with competition intensifying in advance of the new 'point of consumption' tax regime expected from December 2014 in the UK market, the company will continue to invest efficiently to “maintain and enhance” its competitive position for the long term.

The company’s Australian business continues to perform well, with online turnover climbing 26 per cent and online net revenues up by 30 per cent year-on-year. Total net revenue rose by 23 per cent versus the same period last year.

“We are increasing our investment in people, marketing assets and product and expect to continue to take market share and grow our profits strongly in Australia over the coming 12 months,” said the company.

In Italy, Paddy Power claims that it now holds an estimated 8-9 per cent share of the country’s online sports betting market, with average monthly stakes soaring 84 per cent in September to October compared to the quieter June to August period.

Nearly half (47 per cent) of total online revenue was generated by Paddy Power’s mobile channel, with 63 per cent of active customers transacting via mobile in October.

“Mobile remains at the core of our growth strategy in all our online markets,” said the company. “Over the coming months, we will launch a series of in-house developed, mobile device optimised products, with the first new product, a Games tablet app, launched last month.”

Marketing costs as a percentage of online net revenue remained at some 20 per cent in the period, consistent with the company’s long-term marketing efficiency.

Within retail, net revenue fell by 2 per centon a like-for-like basis, with sportsbook net revenue down by 3 per cent versus a year ago and machine gaming net revenue down 1 per cent driven by a weak July. Irish retail stakes grew by 5 per cent, exceeding that achieved in any six month period since 2007, although net revenue fell by 4 per cent. Telephone net revenue dropped 18 per cent compared to last year

“We now expect to achieve low to mid single digit percentage operating profit growth in 2013 in constant currency, before currency translation headwinds of 3 per cent,” said Paddy Power.

The company warned however that this would be approximately €11m lower than the mid-point of its guidance at the time of its interim results.

Shares in Paddy Power plc (Co. Data) (LSE:PAP) have slumped 8.80 per cent to €57.00 per share as at 09:02 GMT in London this morning following the announcement.