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Paddy Power, the bookmakers, today reported underlying pre tax profits rose 16% in 2011 to
€121.2m, up 16% on 2010's profits.
Net revenues* for the year jumped 17% to €499.3m
from €426.7m and 79% of its operating profits came from online activities.
Customers outside of Ireland accounted for 74% of total operating profits for
2011, up from 64% in 2010.
The company said it is proposing a rise in the
final dividend of 40% to 70 cent per share. This would bring the total dividend
for 2011 to 100 cent per share, a 33% increase on the 2010 dividend.
Gavin Kelleher of Goodbody commented
-- "Paddy Power delivered an excellent set of FY11 results this morning with
adj. EPS of 212c, +26% yoy and +6% ahead of our forecast. Gross win of €518m
(+17% yoy) and EBIT of €119.5m (+15% yoy), were 2% and 5% ahead of our
The online division delivered EBIT of €74.3m, +29% yoy and +5% ahead of our
forecast. Active user growth was exceptional, with online actives +41%, driven
by both acquisition and retention. In sports book, amounts staked were +40% yoy
and net revenue was +30% yoy to €114m. GWM was 8.2%, down 40 bps yoy but ahead
of range (7-8%). Mobile remains a key driver, with +225% turnover growth to
€366m (25% of total). 49% of online users transacted via mobile in February.
Gaming gross win of €92.1m, +27% yoy and in line with expectations, was driven
by growth in Games, Casino, Bingo & B2B, while Poker was flat in H2. The group
has also announced that it is to launch in Italy in Summer 2012 (we expect under
The Australian online division reported gross win of €110.6m (+14% yoy) and EBIT
of €22.8m (+17% yoy), 1% and 5% ahead of our expectations respectively. Growth
accelerated in H2, helped by the completion of its new platform launch. The
group also notes that it will be moving IAS customers to the Sportsbet brand.
In UK retail, gross win of €72.6m (+34% yoy) and EBIT of €10.5m (+42% yoy), was
+4% and -2% versus our estimates respectively. The yoy growth was driven by 41
new shops, along with lfl sports book net revenue of +3% and machine net
revenues +10% (weekly gross win pm of £1,210, +13% yoy). Guidance of 35-40 new
shops annually was reiterated. Irish retail EBIT was €10.9m, -38% yoy and driven
by poor results, with GWM of 11.0% (-110 bps yoy). The group notes that it
continues to take market share (34% share of value).
The group finished the year with net cash of €86m, despite spending €103m on
acquisitions. The DPS increased 33% to 100c, 11% ahead of our expectation.
On outlook, trading in the first 2 months of 2012 is described as
'satisfactory', with net revenue +16% yoy (cc) and the Board remains confident
of the group's prospects for the full year.
Overall, this morning's numbers represent another highly impressive performance,
driven by growth in its online businesses, along with an ever increasing
contribution from UK retail. At first glance, we are likely to upgrade our 2012
EPS forecasts by c3-4% from 221c currently, highlighting that our level of
upgrade is tempered by substantial investment in new markets (Italy). The stock
remains our key pick in the sector given its superior product offering and
strategy, which leave it well placed to deliver upgrades."
*As is the standard across the sector, the group is now reporting net
revenues i.e. after customer promotions/bonus. This restating has no impact on
divisional EBIT just reclassification of costs.
FBD, the insurance group,
reported operating profits for 2011 rose 60% to €63.9m, boosted by better
weather conditions compared with 2010.
Pre-tax profits rose to €59.7m from a pre-tax
loss of €3.1m in 2010.
FBD said it was recommending a final dividend of
23.25 cent per share, up from the 21 cent paid in 2010.
Eamonn Hughes of Goodbody commented
- - "FBD's FY11 operating EPS of 170 cent was 5% ahead
of expectations (161.8c) and above the 155-165c guided range. Operating profit
was €64.9m (+60% yoy and 3% ahead of expectations), with Insurance at €58.3m
(+61% yoy) and non-underwriting activities at €6.6m (+47% yoy). The dividend
increase of 9.5% to 34.5c was stronger than the 7% we had pencilled into our
forecasts and a welcome development. NAV per share was €6.30. While 2% shy of
our €6.45 estimate, this is almost fully explained by an increase in net pension
obligations in the year. Following last year's EPS of 170 cent operating, the
insurer is guiding a 145-155c outturn in FY12.
Our current operating EPS estimate of 150c
sits right in the middle of the range, so provisionally we are unlikely to
change our numbers. After the exceptionally benign weather in 2011 and low
incidence level of large claims, the claims ratio is anticipated to rise in
FY12, a factor already reflected in our estimates. Elsewhere, the insurer
indicates that it will continue to prioritise capital protection over returns
due to financial market turmoil and this will see negative investment variances
again in 2012. Again, our forecasts already incorporate such a dynamic.
Given the good FY11 outturn and outlook for FY12, the stabilisation in premiums
and the stronger dividend growth, we are increasing our fair value from €10 to
€10.70 per share."
Economic View 1: Polls suggest 60%
support for Fiscal Compact; Dermot O'Leary, chief
economist at Goodbody, comments - - "The results of the
first opinion polls on the proposed referendum on the Fiscal Compact Treaty
since its confirmation last week are in. These suggest that the referendum will
pass, with rising support for acceptance of the Fiscal Compact since the only
other poll on the issue were done at the end of January. The redC opinion poll
for the Sunday Business Post suggests that the referendum will pass by 60% to
40% (excluding don't knows). In January, a poll for the same paper put the Yes
side at only 53%. A separate poll carried out for the Sunday Independent gave
very similar results, with the Yes side standing at 59%.
It must be noted, however, that a large proportion of those polled remain
undecided as yet; The Sunday Business Post poll shows that the number of
undecided voters increased from 24% to 26%, while the Sunday Independent poll
puts the "don't knows" at 36%. Within this latter figure, two-thirds say that
their support "depends". This suggests that a significant proportion of voters
wouldn't be, as the Taoiseach Enda Kenny put it last week, opposed to be being
"bribed", with some further help from Europe. The Taoiseach has made his belief
clear that the issue of restructuring of the promissory notes and the upcoming
referendum are two very separate issues. However, it is clear that the
electorate would react favourably to a positive announcement on an easing of the
burden from the pro-notes.
There are likely to be many twists over the coming months in the run-up to the
proposed referendum, with a possible date of May now mooted. The initial poll
results though will be welcomed by both Irish and European leaders."
Economic View 2: Exchequer deficit in
line for opening two months of the year; Dermot
O'Leary added - - "For a number of reasons, it is difficult to take anything
conclusive away from the public finance statistics for the opening two months of
the year, the latest of which was released on Friday evening. A late payment of
corporation tax in January was compounded by a reclassification of income tax
receipts in February. VAT receipts received in January and February also relate
to activity occurring in November and December, so we do not yet know whether
the hike in the VAT rate had an influence on spending behaviour at the start of
the year. With all these caveats, the simplest comparison is the overall
Exchequer deficit. This stood at €2.072bn in the opening two months of the year,
relative to €1.945bn in the same period of 2011. The inclusion of a late payment
of corporation taxes in this year's figures is offset by the inclusion this year
of a one-off payment into the Insurance Compensation Fund.
The Exchequer deficit is pretty much unchanged on an annual basis, with a large
increase in the interest expenditure bill playing a huge role in this. It is
worth noting that adjustments to these cash figures must be made to come to the
general government deficit figure that is used for comparative purposes. Either
way, it is too early in the year to decipher whether Ireland is on track to meet
its 8.6% of GDP deficit target in 2012."
Focus on Irish Exchequer Returns: David McNamara, economist at Davy,
comments -- "Tax returns for February came in
12.5% ahead of target in figures released by the Department of Finance on Friday
(March 2nd). Revenues totalling €5,893m were €656m ahead of February’s expected
out-turn and €1,053m ahead of February 2011 returns. However, two anomalies in
the month’s data inflated the out-turn considerably. Firstly, unexpected
corporation tax receipts of approximately €250m delayed from December yielded
returns ahead of profile in the first two months of the year, while returns in
February were well ahead of an expected low out-turn.
Secondly, a re-classification of PRSI as
income tax accounted for income tax returns which were 289m (12.5%) ahead of
target. This unexpected windfall is revenue neutral, however, as it requires an
increased contribution to the Social Insurance Fund as PRSI is behind target,
thus pushing up on expenditure. Although the Department of Finance did not
detail the extent of the re-classification, it stated that an expenditure
out-turn which came in 4% ahead of target was mainly due to this anomaly.
Nevertheless, unexpected expenditure by the Department of Health and increased
capital expenditure across the board would still have brought the February
out-turn ahead of target. This is a slightly worrying sign as expenditure
routinely came in below target in 2011, offsetting weaker-than- expected tax
returns. Moreover, VAT and excise receipts were 1.3% and 2.3% below target
respectively in February. If this trend continues, the government may find it
increasingly difficult to meet its deficit target of 8.6% of GDP in 2012.
The Irish Services PMI came in at an
unexpected 53.3 for February this morning, a sharp increase from January's level
of 48.3. This indicates an expansion in activity and may be a sign of recovering
consumer sector. However, it remains to be seen whether this expansion is a
monthly blip or the beginning of a recovery in 2012. The overall eurozone number
is expected to be 49.7, a contraction in activity, in February."
The MSCI Asia
Pacific Index fell 0.8% Monday after China said it expected GDP to grow by
7.5% in 2012 - - the first time the official target was set below 8% since 2004.
Nikkei 225 declined 0.80%; China’s Shanghai Composite Index fell 0.64%. South
Korea's Kospi index dropped 0.98%. Australia's S&P/ASX 200 declined 0.24% and the
Bombay Stock Exchange Sensex 30 index in Mumbai dipped 1.41%.
The skyscrapers and
immaculate beaches of Singapore's seaport look out on one of the world’s largest
parking lots: mile after mile of empty cargo ships, as far as the eye can see.
Similar fleets bob at anchor,
with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And
dozens of newly built ships float empty near the giant shipyards of South Korea
and China, their owners from all over the world reluctant to accept delivery
during one of the worst markets ever for the global shipping industry.
As recently as six weeks ago
large freighters that can carry bulk commodities like iron ore or grain were
fetching charter rates of $15,000 a day. Now, brokers and owners say, the going
rate is $6,000 a day. If any customers can even be found.
between the US benchmark WTI (West Texas Intermediate) used on the New York
Mercantile Exchange and Brent is over $16 - - The Globe and Mail says that for
the past 10 months, Canadian producers - - whose prices are tied to WTI - - have
been taking steep discounts for their oil compared with international crude
prices that are benchmarked against North Sea Brent, which can be shipped more
readily. In the past, WTI tended to trade at a small premium to Brent, because
it is easier to refine.
hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then.
After plans for more pipeline capacity at Cushing, Oklahoma, the differential