Inside The World Of Business
Irish shops only blot on the landscape for bookmaker
IRISH BETTING shops provided the only blot on Paddy Power’s pristine first-half results yesterday. Operating profit in the 203 outlets fell 23 per cent to €9 million.
Jockey Tony McCoy’s first Grand National victory aboard the well-backed Don’t Push It in April and a string of fancied horses winning at Royal Ascot in June were partly to blame for the division’s performance.
Economics also played a part. Punters bet the same amount as they did last year – €476 million – but the size of the average bet fell by 20 per cent to about €18.60. Higher volumes and an increase in shop numbers helped offset this.
Investors were not worried – the stock gained 2.5 per cent yesterday to close at €26.60, which was not surprising in light of the overall results.
Almost exactly five years ago, a much sharper fall in the company’s interim betting shop operating profits contributed to a 3 per cent drop in the share price.
There were other factors as well, but there’s no getting away from the fact that while bookie shops might be the company’s traditional heart, they are a lot less core to the business.
The €9 million operating profit generated came to 18 per cent of the €45.5 million total. Contrast this with the near €37 million contributed by its on-line businesses, including activities in Australia. Next year, proceeds from its partnership with France’s State-owned tote, the Pari-mutuel, will kick in, adding a further string to the company’s bow.
This move into new businesses and territories will have another consequence: it will spread Paddy Power’s risk. A good run for punters at Cheltenham or Aintree might hit margins in Ireland and Britain, but it will not hit Australia or France, and vice versa.
Tullow’s heritage interest
Tullow Oil’s interim statement and results were positive yesterday and the numbers contained no surprises, nasty or otherwise. A key development for the exploration group will be the beginning of production from its Jubilee field off the Ghanaian coast by year-end. Within three to six months of that, it will have the capacity to produce 120,000 barrels of oil a day. The group has been getting an average of $77 a barrel for its oil, so you don’t have to be Einstein to work out how significant this will be.
Despite this, much of the media and analyst focus this year has been on its deal to buy Italian group Heritage, out of its interests in the Lake Albert rift basin field in Uganda, for $1.6 billion, and to bring in Chinese giant CNOOC and French player Total as development partners on a resource that could produce one billion barrels of oil and possibly more than twice that. Tullow holds licences for the bulk of the field, but Heritage had a stake in one licence, which the Irish company agreed to buy last January.
A dispute between Heritage and the Ugandan government over the Italians’ tax liability is all that stands between completion of the sale and the partnership deal. The row does not involve Tullow, which presumably wants it settled quickly. The company is saying it still expects an early resolution but acknowledged delays yesterday.
Even if things aren’t resolved soon, Tullow has other strengths. Analyst Job Langbroek of Davy said yesterday Uganda had partly overshadowed developments elsewhere in the company, including Jubilee, further positive exploration results and a generally strong cash position.
Rabo’s positive news
Following the decision by UK bank Lloyds to shut Bank of Scotland (Ireland), the Irish banking sector received what could only be described as positive news yesterday from the Dutch.
Rabobank, one of the world’s most cautious lenders, said it had no plans to exit the Irish market by selling struggling ACC Bank.
The bank’s chairman Piet Moerland said it was important not to be hasty with these things and wait for some recovery in the sector. This will probably come as a major surprise to the many property developers that ACC has chased through the legal system over unpaid debts.
The prudent Dutch caused major headaches for developers Liam Carroll and John Fleming last summer by pursuing them for their debts through the highest courts in the land.
The signals from ACC yesterday were that the bank is still keen to do business in Ireland and, despite laying off substantial numbers of staff and shutting branches, it was open to attracting BoSI customers looking to switch.
We shouldn’t be popping champagne corks just yet, though. The impression the Dutch left at their press conference in Utrecht was they were more eager to recover as much as they possibly can from their Irish retail banking investment than throw more loans about.
Today
Results are due from Guinness brewer Diageo and William Hill. Ulster Bank will publish its outlook for the economy.
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