17th Nov 2005 07:00
Paddy Power plc17 November 2005 Paddy Power plc Trading Update Turnover has continued to grow strongly across the business, in line withexpectations for the second half of 2005. Shop openings will also be in linewith expectations. Strong growth in the online division is continuing across allproduct lines particularly in the gaming products. However, the disappointing gross win percentages in the second half of 2005,noted in our interim statement of 30 August, have continued. In particular,gross win over the past three weeks has been some €4 million below internalexpectations, principally due to poor horse racing results. Assuming reasonablegross win percentages for the remainder of the year, we now expect operatingprofits for the year to 31 December 2005 to be approximately €30 million. Bookmaking gross win percentages by channel have been as follows: H2, 2005 Retail* 11.3% Online* 8.3% Telephone 6.9% (*excluding Fixed Odds Betting Terminals ("FOBTs") and online gaming) Future Guidance Gross win percentages in the Irish retail division were at the mid point oftheir expected annual range for the year to December 2004. However, as aconsequence of the disappointing gross win percentage in the current year, andas part of the annual budget process, we have conducted, in the last month, adetailed review of expected ongoing gross win percentages. This review has resulted in a change to our expectations going forward : 4a lowering of the retail gross win range (excluding FOBTs) by approximately 1%,offset to some extent by additional turnover growth 4an increase in the online gross win range by approximately 0.5% 4a lowering of the telephone gross win range by approximately 0.5% While a significant element of the 2005 shortfall against expectations is due topoor horseracing results, we are of the view that the Irish retail market is inthe process of structural change. Paddy Power will continue to lead the marketand take advantage of this change. The levels of tax free betting and concessions we offer in the market haveincreased considerably recently and may well increase further in 2006. The IrishGovernment budget in December could lead to nationwide tax free betting in thecoming months and, following last week's resolution of the British HorseracingBoard legal case in Ireland, the competitiveness of the market will increasefurther. This will drive turnover growth through recycling and the increased bettingopportunities that tax free betting offers as well as transferring business fromthe grey market. The growth dynamics of retail tax free betting in the UnitedKingdom in recent years have been well documented. The continued expansion of the non retail channels and their ongoing customerand product mix changes have resulted in an overall improvement in the gross winpercentages for non retail. Expansion of the online business into the massmarket, together with improved risk management techniques and product mixchanges, have increased its expected gross win range by approximately 0.5%. As aresult of our successful policy of focusing on the higher end of the mass marketin the phone business, we believe it is prudent to reduce the expected telephonegross win range by approximately 0.5%. In aggregate these changes represent anet increase in non retail gross win percentages due to the greater level ofonline turnover in comparison to phone turnover. Operating Costs Following the outcome of a legal case between Irish bookmakers and the BritishHorseracing Board, Paddy Power expects in future to acquire its pre-race data ata considerably reduced charge for its non United Kingdom customers. This shouldgenerate a year on year saving of €2m in 2006. -ENDS- 17 November 2005 Conference Call There will be a conference call at 9.30am. The participants will be JohnO'Reilly, Chief Executive, Ross Ivers, Finance Director and Patrick Kennedy,Chief Executive Designate. Conference call details are as follows: Ph 353 1 664 7602 PIN 52804 For reference: Paddy Power Plc: John O'Reilly 353 1 404 5912 Patrick Kennedy 353 1 404 5912 Ross Ivers 353 1 404 5912 Drury Communications Billy Murphy / Oonagh Daly 353 1 2605000/353 87 231 3085 Holborn PR David Bick 44 207 929 5599/44 7831 381 201 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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