DUBLIN: Paddy Power shareholders are set for a €392m windfall as the Irish gambling company reported double-digit sales and profits growth despite increased taxes, regulation and volatility in sports betting.
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The bookmaker, known for its controversial advertising campaigns, said it would use a combination of cash and debt to pay shareholders €8 a share on top of a proposed full-year dividend rise of 13 per cent to 152 cents. Shares jumped as much as 9.2 per cent to €72.73.
Sales were up 18 per cent to €882m for the year to December 31, driven by growth in mobile, which now accounts for 55 per cent of its online revenue.
The results contrast with rival Ladbrokes’ dip in profits and store closures reported last week. Paddy Power has benefited from its lighter store base, investment in marketing and focus on online gambling — 77 per cent of its operating profits were online last year.
The €392m payout will come in the form of a B share type scheme, which will give shareholders the option of paying either capital gains tax or income tax on the return, writes Kadhim Shubber.
New shares will be issued to existing shareholders, who will then have the option of receiving a dividend from those shares, which would fall under income tax, or to sell them back to the company, which would be taxed under capital gains tax.
In Ireland, where 20 to 25 per cent of Paddy Power’s investors reside, income tax on dividends for high earners is almost 50 per cent, as opposed to a 33 per cent rate of capital gains tax. In the UK, income tax on dividends is around 30 per cent.
Once the return is completed, the company cancels the newly issued shares.
However, the fast-growing bookmaker has stumbled in Italy, where it said that overall market growth was “slower than expected” despite revenues up 85 per cent to €7.9m. It said it was reviewing its business in Italy to “position our business better for this market reality”.
