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News : International Last Updated: Mar 5, 2012 - 9:31 AM


Markets: Paddy Power and FBD report strong 2011 results
By Finfacts Team
Mar 5, 2012 - 9:28 AM

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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.

Results detail

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 expectations respectively.

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 www.paddypower.it).

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.

Results detail

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."

Asia Markets

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.

Japan's 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%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.47% in early trading Monday.

The ISEQ has dipped 0.75% in Dublin.

Paddy Power has added 0.11% and FBD has gained 1.24%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3194 and at £0.8345.

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.

Commodities

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 0.537%, to 1,700 points, Bloomberg report.

On Friday last week, the BDI rose 8 points or 1.05% to 771 - -  the BDI plunged a full 70% from its recent mid-October peak of 2,173 to an all-time low of 647 on February 3.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

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.

Crude oil for February 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $106.70 unchanged from Friday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $123.51. The North Sea benchmark accounts for two-thirds of the global market.

The margin 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.

That spread 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 narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,703.20 down $7.80 from Friday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 6.

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

It's a simple fact that in the prevailing economic climate, the provision of high quality content cannot be sustained through advertising alone. 

Business executives who put a premium on time and value high quality information, should use our service.


© Copyright 2011 by Finfacts.com

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