* EBIT 136 mln euros vs analyst forecast of 138.5 mln
* Has captured 27 pct of mobile sports betting market
* Exchange rates could cut 2013 op profit by 10 mln euros
* Shares rise 2.7 pct as brokers' up target prices
By Padraic Halpin
DUBLIN, March 5 Paddy Power's
operating profits rose 14 percent last year even as the Irish
bookmaker spent big on expanding into Italy and larger rivals
challenged its online presence.
Paddy Power has been quicker than competitors William Hill
and Ladbrokes at reacting to punters moving from
shops to screens and made over three-quarters of its profit
there after online customers doubled to 1.6 million since 2010.
With the nine percent online share of the 333 billion euros
($433 billion) global gambling market set to rise sharply as
governments regulate internet betting, Ladbrokes, which in
particular has lost a lot of ground online, is beginning to
William Hill, Britain's largest bookmaker, has also spent
almost 1 billion pounds ($1.5 billion) to take full control of
its online business and expand into Australia and Spain as it
reshapes a familiar British high street name.
"We have had full control of our online business as long as
we've been around, we have had a business in Australia for some
time so the things that other people are having to deal with,
we're there already," Paddy Power chief financial officer Cormac
McCarthy told Reuters in a telephone interview.
"I'd never underestimate competition, particularly players
who have very strong brands and very strong positions but we've
been at the head of this for a long time now. We think, yes, we
have an edge. Absolutely."
The Dublin-based group has captured more than a quarter of
the fast-growing mobile sports betting market, around double its
share of the total online market, as revenue from smartphone and
tablet computer betting rose 185 percent to 129 million euros.
That represented one-fifth of the 31 percent rise in
full-year revenue as sales rose by 46 percent in Australia and
almost as much in UK retail after it increased its number of
shops by 44 to 217, still just one-tenth of William Hill's
The rise in operating profit to 136 million euros was less
than the 138.5 million forecast by eight analysts surveyed by
Thomson Reuters I/B/E/S. Excluding start up costs of 20 million
euros that were concentrated in Italy, profits rose 32 percent.
Shares in the group, which increased staff numbers by 20
percent last year, rose 2.7 percent to 65.8 euros at 1119 GMT as
both Investec and Credit Suisse upped their target prices.
NO RUSH INTO AMERICA
On a constant currency basis, the rise in operating profit
was just six percent and the group warned that a continuation of
current British pound and Australian dollar rates could reduce
operating profit by about 10 million euros this year.
Mirroring comments by William Hill, it added that trading
since the end of last year had benefited from favourable sports
results with revenues up 19 percent ahead of next week's
Cheltenham horse racing festival, its busiest week of the year.
Following an expansion that has also taken it into France
and Canada, Paddy Power was granted a preliminary gaming licence
in Nevada last year but McCarthy said it was not rushing into
anything in the slowly developing U.S. online market.
He said it will instead concentrate this year on Italy where
it has captured over 5 percent of the online sector in the hope
of breaking even there by the end of 2014.
Known for its provocative advertising, Paddy Power projected
a slot machine on the Milan stock exchange in January to mark
its expansion and chief executive Patrick Kennedy said Italy was
tailor-made for the group's cheeky approach.
"We figure that any country where Beppe Grillo can get over
25 percent of the popular vote has to be one that's open to the
Paddy Power brand approach," Kennedy told an analyst call,
referring to the former Italian comedian, turned political