* Companies eye new markets after Spanish, Italian expansion
* Britain's 888 ready for U.S. as profits increase 81 pct
* Paddy Power marketing spend rockets
By Padraic Halpin and Rhys Jones
DUBLIN/LONDON, Aug 29 Betting companies Paddy
Power and 888 Holdings geared up to
aggressively increase investment in the second half of the year
as newly regulated markets open up and profits increase.
Paddy Power, Ireland's largest bookmaker, which has
increased its presence in Britain as well as Australia, Canada
and France in recent years, entered the Italian market this year
while online gaming company 888 was awarded a Spanish online
gaming licence in June.
Britain's 888, which saw earnings rise 81 percent from a
relatively low base of $20 million and revenues increase by just
over a fifth to $186.4 million, said it planned to spend some of
that in Europe and the United States by the end of 2012.
"The second half of the year will see increased investment
in Spain, where we will attempt to build on our market share,
and also in the United States, where we are preparing for
regulatory changes," said chief executive Brian Mattingley.
"We will also continue to invest in our technological
platform, the cornerstone of our offer, and make improvements to
our mobile channel."
Paddy Power's revenues for the six months to end-June were
over twice that of 888, rising 29 percent to 311.2 million euros
($391.07 million), more than the 285 million taken during the
whole of 2009 as growth online accelerated and its Australian
business performed particularly well.
Profit before tax rose 21 percent to 68.7 million euros,
tempered by the 6.3 million spent on four new online ventures,
including its Italian launch and a massive 74 percent increase
in marketing spending as it looked to take advantage of a rush
of gamblers betting on June's Euro 2012 soccer tournament.
Paddy Power's finance director Jack Massey told Reuters that
it would invest at a faster pace in the second half of the year
and hoped to increase its market share in Italy to 15 percent in
the next two years from the 4 percent captured since May.
The group continues to look at opportunities to break into
the U.S. too after receiving preliminary clearance to operate in
Nevada. Massey would not comment on whether it would join 888 in
Spain where the www.paddypower.es web address asks Spaniards to
join its mailing list "to be informed of progress."
"Long-run market leadership rather than short-term profit is
clearly management's goal," David Jennings, analyst at Davy
Stockbrokers, wrote in a note.
"That may come as a bit of an unwelcome surprise to some
investors, used to continuous earnings upgrades, but in our view
this sector's recent past is littered with too many examples of
operators who chose not to reinvest sufficiently in their online
businesses when revenue growth was strong."
That surprise saw shares in Paddy Power, which have doubled
in value since late 2010, fall 3.8 percent to 50.80 euros. 888
was 4.6 percent higher at 86.23 pence by 1106 GMT.
With the exception of Britain's biggest bookmaker William
Hill, bookmakers were cautious about getting any boost
from the world's biggest sporting event, the Olympics, and
Wednesday's releases provided the first post-Games update.
While 888 simply said trading during the two-week event in
London was in line with expectations, Paddy Power said it
managed to turn over 31 million euros from the Games, a 13-fold
increase from the Beijing Olympics in 2008.
Massey said that would still only equate to around half a
percent of the group's expected turnover for the year and
compared to the 78 million staked during Euro 2012 but that it
was nevertheless a positive surprise.
"It can be a bit of a distraction for some customers where
rather than going to their betting shop, they're enjoying the
Olympics but as an individual event, it definitely engaged our
customers," Massey said.
"As you would have expected tennis, football and athletics
were at the top and no surprise to see synchronised swimming and
trampolining at the bottom but a few people did enjoy a few bets
on the trampolining and we were happy to price all markets."