In the game

The Friday Interview: Paddy Power chief executive Patrick Kennedy obviously doesn't play roulette, or at least not very often. Discussing the electronic version of the game, he refers to the ball falling on "27 red" but then pauses, corrects himself, and says "or 28 red".

As the boss of a bookmaking chain, he presumably knows it's an even money chance that both statements are either right or wrong, but it must come as a relief to his bank manager that he's not familiar enough with the game to be certain.

Roulette is a casino staple and not something you'd associate with the bookmaker whose business, and carefully developed image, is much more about the worlds of horse-racing and sports betting.

But casinos are one of the next steps that Kennedy and his colleagues will take to expand Paddy Power still further.

A report commissioned by outgoing Minister for Justice Michael McDowell has come up with proposals for ending the legal limbo in which casinos now operate, and regulating them.

Any action on this depends on the next government. But if the report is implemented, it makes casinos legitimate businesses, and thus a natural extension for an operation whose expertise is gambling and managing its associated risks.

"We will certainly look to play in that," he says. "We don't have operational experience in running casinos, but we do have a great brand in Ireland, and I think its values will stand us in good stead there and we know the Irish gambling market."

Ideally, he says that Irish casinos should be established in line with the "best that's out there", which covers everything from the facilities to the bonds put up by the operators, compliance with money-laundering legislation and other integrity issues, such as ensuring that underage people can't gamble.

In terms of the structure, the company has yet to settle on a how it would work, but Kennedy says it has spoken to international operators. "We may do it on our own, or we may team up with a really good international operator who has got the experience," he says.

"We're talking to people and we've gone overseas and looked at some of the models that exist in other countries, so that we can be best prepared to introduce what we think is going to work best here." But he stresses that a lot will ultimately depend on a final political decision.

Another Irish politician, EU internal market commissioner Charlie McCreevy (who's well known to bookmakers), has provided a more immediate prospect for expansion - continental Europe. He has set about liberalising its gambling markets, which up to now have been the preserve of various state monopolies.

The move brought one of the more unexpected turnarounds in in Kennedy's first year as chief executive. "This time last year, we would have been pretty confident that the US was going to open up [ to internet gambling]; at the same time, all the flux going on in Europe meant there was no certainty there."

The near opposite happened. The US closed down dramatically and Europe opened up to the point where the company was able to launch a German language website, which reaches 100 million people.

It will consider bidding for licences to operate betting shops in Italy and Spain, which are both due to offer permits later this year. If Paddy Power were to go in to these territories, it would do so with a local partner, the idea being that the Irish player would marry its risk management and marketing skills with local knowledge.

Marrying the product to the punters' tastes is key, Kennedy explains. "You can't just set up a German website and say, 'It's all about horse-racing, don't you know'," he says.

Building a presence in a new market will be tough. Paddy Power expanded into England, specifically London, five years ago. That part of its operation lost €6 million in 2006, a result of ongoing investment in both shops and developing a central infrastructure. Gross profit was up 60 per cent at €18 million, but costs grew at roughly the same rate to €24 million. It was the one negative in a year that saw the company make record profits of €45.5 million.

It has just broken rank with its peers in Britain by signing a television rights deal with Amalgamated Racing for what is now six, but by next year will be 31, British horse-racing tracks. The courses are not renewing their arrangements with Satellite Information Systems (SIS), which has been supplying all pictures to bookmakers since the 1980s.

High profile venues such as Ascot and Newbury are already on board, and will be joined next year by the likes of Cheltenham and Aintree. Big British players such as Ladbrokes and William Hill are blacking the new service, largely because it will add to their costs. Unconfirmed reports say that Paddy Power is paying an extra €1.8 million a year.

The deal applies to both sides of the pond and Paddy Power has launched a typically tongue-in-cheek marketing campaign - Got the Picture? - to back it up. Its efforts have already prompted Ladbrokes, its chief competitor, to ask how it can justify the extra spend to its shareholders.

Kennedy sums up the company's response: "We're not prepared to take our customers' bets and not show them the race." The outlay could look very small against the gains for all bookmakers from the failure of a string of fancied horses at the big three racing festivals - Cheltenham, Aintree and Punchestown - this year.

If these results continue, Kennedy could be presiding over a second set of record results in as many years at the helm at Paddy Power. You get the feeling he should play roulette more often, in which case he'd know that 27 is red.

ON THE RECORD

Name: Patrick Kennedy

Job: Chief executive, Paddy Power plc

Age: 37

Family: Married with four children

Career: Graduated with a B Comm and qualified as a chartered accountant.

Worked with consultants McKinsey & Co and KPMG and joined the food group Greencore in 1998, where he rose to chief financial officer.

Something that might surprise: Once ran in the New York Marathon.

Something you might expect: He served as an independent director on Paddy Power's board before becoming chief executive of the company.

Interests: Sport - watching and playing. He runs regularly and still plays soccer at weekends.

Why is he in the news? The quoted bookmaker is gearing up for expansion in a number of directions and in his first year as chief executive he presided over a record year for the group.