Markets: easyJet soars; Paddy Power slips; FBD and IFG also report
By Finfacts Team
Nov 19, 2013 - 3:51 PM

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Paddy Power, the bookmaker, said today that it expects full year operating profit to be about €11m lower than it forecast three months ago after poor football and horse racing results.

The firm said sports results had gone against it since July, particularly at the Australian Spring Horse Racing Carnival and Champions League soccer.

In a trading update, Paddy Power reported an operating profit rise of 12% to €75.4m in the first half of the year with the group's online division driving revenues up 22%.

Gavin Kelleher of Goodbody commented: "Guidance is now for EBIT growth of low to mid-single digit in FY13 (cc), c. €11m lower than the mid-point of guidance at H1 results and we will downgrade FY13 numbers by c.8% to reflect this (currently EBIT €149m).

In, net revenue was flat in H2 to date, (sports book -11% yoy and Gaming/B2B +17% yoy). On sports, amounts staked are +15% yoy, which is in line with our expectations.

Adverse sporting results (horseracing and football) have seen net revenue -11% yoy. Gaming/B2B revenues +17% is encouraging and highlights Paddy Power is taking market share. The group notes it has maintained online marketing as a % of net revenue at 20%, but the statement points to increased competition in the UK in advance of POCT. In, the group saw +84% growth in stakes in Sept/Oct vs. June-Aug and the group maintained its market share at 8-9%.

In Online Australia, in constant currency, amounts staked in online are +26%, and online net revenue is +30%, with total net revenue +23% (our forecast 33%). Spring Carnival results recently are likely to have cost the group c. €3-4m to FY13 divisional EBIT. The underlying performance highlights that the group is taking market share.

In UK Retail, lfl sports book stakes are +5% (Goodbody H2: +2%), but lfl net revenue is -3% due to results. Machine net revenue lfl is -1%, but +3% ex July, highlighting the benefit of the group’s new Eclipse Cabinet and maturing of the loyalty programme. In Irish retail, lfl stakes are +5% (Goodbody H2: +1%), but again results have seen lfl net revenue -4%. The group plans to open 65 new shops in total this year (YTD: UK 37 and Ireland 9).

We are likely to reduce FY13 EBIT forecasts by 8% from €149m currently, with the majority of this driven by the weaker results (c.€8/9m), with a c.€2/3m impact from increased competition in UK online. On FY14, we are likely to reduce EBIT forecasts by c.2% to €162m (downgrade to partially offset by increase in Australia forecasts). Management’s comments on competition intensifying in the UK in advance of POCT are likely to be the main focus on the conference call. The level of competition (e.g. TV, pricing and freebets) in the UK appears unsustainable after POCT is introduced in Dec 2014. We continue to believe Paddy Power is well placed to benefit from the likely POCT shake-out."

FBD Insurance said in a trading update that based on the assumption that large claims revert to norm and barring exceptional weather events during the remainder of the year, it "reaffirms previous guidance of full year operating earnings per share in the range of 145 to 155 cent."

FBD's gross written premium increased by more than 2% in the first nine months of 2013, "an improvement on the 0.7% growth in the first half. The group continues to outperform the market, which we estimate has declined by approximately 2% to 3% in the nine months."

The firm warned of early evidence of rates "hardening" in the market for some lines of business, especially car and business insurance.

Eamonn Hughes of Goodbody commented: "After 2% declines in 2011 and 2012, the 0.7% premium growth rate in H1 rose to over 2% ytd, driving 3%+ growth for H2. This implies further market share gains (market down c.2-3% ytd), with policy volumes ahead and early evidence of rates hardening. On claims, there has been no increase in the frequency of bodily injury claims and the attritional ratio is comparable to 2012. However, whilst the small number of large claims in H1 started to revert to norm in early H2, there has been a further uptick later in Q3. Full year experience of these large claims will likely be ahead of historic norms, though severe weather experience ytd has been benign.

Investment returns look a little ahead of expectations (annualised return of 3.2%) and the trading performance of the property & leisure jv is ahead of budget. Elsewhere, the solvency ratio was 71% in September (70% in June) and the reserving ratio was 240% (235% in June).

FBD’s H2 IMS reaffirms its full year operating EPS range of 145-155c. We pare our operating EPS from 155c to 153c on the Q3 larger claims, though the accelerating premium growth rate in H2 adds to 2014 earned premiums and operating EPS (+3%). The travails in recent weeks at RSA, the market leader, could imply greater potential for premium growth at FBD over the medium term, reinforcing its returns story and income potential. In combination with the IMS, we are lifting our fair value to €19.20 (+4%). We reiterate our Buy stance."

IFG, the financial services group, said in a trading update that it's performing well and the "trends of the first half have continued with performance indicators, such as new SIPP sales and private client wins, maintaining their momentum."

With a deleveraged balance sheet and positive net cash, the group is in a strong financial position.

Colm Foley of Goodbody commented - - "IFG released a strong IMS this morning. The core James Hay Partnership performing well and continues to deliver on its targeted 400 new SIPP sales per month, delivering 4,220 new SIPPs for the period to the end of October (October 2012; 1,938). There are now 42,000 SIPPs, SSAS and Wraps with c. £15bn in assets under administration. In addition average revenue per SIPP has remained stable and attrition levels year to date is running at an annualised rate of 8% below the 10% guided rate, post-acquisition. Investment continues in; sales, marketing and distribution, efficiency/IT and platform development while further appointments have been made to the senior management team.

Saunderson House continues to perform well and new client wins have accelerated. Its client base grew by 125 ytd (+50% yoy) compared to 85 for the same period last year. Having delivered 87% recovery rates of billable hours at the interim stage, the strong performance has continued and recovery rates remain above the targeted 80% level. Investment is on-going in the business through marketing, brand development, IT and management capability.

In Ireland, the Pension Advisory services and Pension Administration businesses are delivering a steady performance in difficult trading conditions. IFG Corporate Pensions grew funds under management to €930m at the end of October from €825m at the end of June and also added 31 new clients.

This is a strong statement from IFG. The James Hay business continues to perform well and is on track to meet our 4,854 FY13 forecast new SIPPS. Saunderson House is performing ahead of expectations and is on track to deliver 150 new client wins in FY13 compared to our forecast 112. The strong performance in Saunderson House and the stabilisation in rates at James Hay implies good momentum into FY14 and we are likely to make some revisions to our revenue numbers. However, this is likely to be offset by the on-going investment in senior management, IT/efficiency, sales, marketing and distribution."

Economic View: Diverging monetary policy in the developed economies; Dermot O'Leary, chief economist at Goodbody, comments - - {Central banks of the developed world could soon be on diverging monetary policy paths. In the UK, better economic data has meant that expectations of interest rate rises have been pushed closer, while in the US, it is simply a matter of time before tapering begins. Conversely, in the euro area, the ECB is more likely to be cutting interest rates further over the coming months.

These paths are by no means set in stone. In fact there are significant differences of opinion among policymakers on the correct direction of policy. For this reason, markets are currently hyper-sensitive about any comments made by central bankers. This is particularly the case in the US. Yesterday, two FOMC members gave their views on the latest developments. Fed dove Dudley was first more positive on the economy, but qualified the comments by saying that there may not be enough economic momentum to see improvement in the labour market. Fed hawk Plosser was more matter of fact about his views, saying that the Fed “cannot continue to play this bond-buying game by ear and risk the Fed’s credibility while creating lingering uncertainty about the course of monetary policy”.

In the euro area, more interesting comments came from the latest Bundesbank monthly report. The Bundesbank defended the ECB’s accommodative policy, albeit warning that it must be wary of the medium to long term risks of the policy. This was surprising given the reported German opposition to the recent ECB rate cut. It is likely that Bundesbank members may once again be playing to a different domestic audience in their reported comments about ECB policy."

UK low-cost airline easyJet reported that annual profits jumped 51%, after moves to attract more business passengers saw more 60m passengers board their aircrafts for the first time.

Profits increased to £478m in the year up to 30 September, up from £317m. The airline said  it would pay a £175m windfall to shareholders through a special dividend payment.

US Markets

In New York Tuesday the Dow is up 44 points or 0.28% to 16,006.

The S&P 500 slid 0.07 and the Nasdaq slipped 0.21%.

Asia Markets

The MSCI Asia Pacific Index added less than 0.01% Tuesday.

Japan's Nikkei 225 fell 0.25%; China's Shanghai Composite slid 0.19%; South Korea's KOSPI rose 1.04%; Australia's S&P/ASX 200 declined 0.59% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.19%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.58% in mid-afternoon trade Tuesday.

In Dublin, the ISEQ  is off 0.95%

PaddyPower has slipped 8.1%; FBD is off i.19% and IFG has risen by 3.52%..

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report


The euro is trading at $1.3517 and at £0.8393.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.


The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Monday, the BDI fell 7 points or 0.46% to 1,500.

Global rebalancing — the tanker scrapyard index?

Crude oil for December 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $92.98 down 5 cents from Monday's close. In London, Brent for January 2014 delivery is trading on the International Commodities Exchange at $108.14. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013:  US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,271.20 down $1.2 from Monday's closing.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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