Paddy Power's profits stay flat but online operation wins

A run of good betting results for punters kept first-half profits flat at quoted bookmaker Paddy Power, but its online division proved to be a winner for the company.

Paddy Power yesterday said that pretax profits for the six months to the end of June were €18.4 million, a €300,000 drop on the same period in 2004, when it made €18.7 million.

Operating profit performed similarly, coming in at €17.8 million compared with €18.2 million last year.

The company blamed a run of favourites (horses on which the bulk of punters bet) winning big races in the UK and Ireland for the poor performance.

The company also pointed out that, during the first half last year, it benefited from a series of sports results that went against punters, namely unfancied Greece winning the European soccer championships.

Financial officer Ross Ivers said yesterday that up and down betting results were a natural part of the business. "We've always said that we would get bad runs and that we would get good runs," he said. Turnover grew by close to 30 per cent to €704.1 million from €554.1 million last year.

Gross win, the amount staked minus the winnings returned to punters, was €81 million. This was just over 11 per cent of its first half turnover, placing it at the lower end of the 11- 15 per cent range the company targets for its gross win returns.

In contrast, gross win for the corresponding period last year was €72.2 million, or over 14 per cent of turnover and well into the higher end of its target range.

However, the performance of individual divisions differed sharply. Its retail business, made up of 178 betting offices here and in the UK, had a 47 per cent fall in operating profits to €6.7 million this year from €12.2 million in the first half of 2004.

Turnover in this element of the business grew 18 per cent to €401.3 million. Gross win was €49.6 million, a 12.4 per cent share of turnover, in contrast to €48.3 million 14.2 per cent last year.

While the company blamed results for the poor performance of its largest division, Davy Stockbroker analyst David Jennings suggested that the retail division was underperforming.

In contrast, its online business delivered a 62.5 per cent increase in turnover to €175 million, and 123 per cent growth in operating profit to €8.1 million, which was a record performance for this division. Gross win at €20.3 million was 11.6 per cent of turnover.

Mr Jennings said that the online performance was far ahead of expectations.

The telephone business had a 20 per cent increase in turnover to €127.6 million.

Operating profit grew 28 per cent to €3 million, but gross win remained at 11 per cent, or 8.6 per cent of turnover.