Poor betting results knock Paddy Power

A poor run of betting results left 2005 profits at Paddy Power trailing the previous year's earnings, figures released yesterday show.

The quoted bookmaker said pre-tax profits in 2005 dropped 2.5 per cent to €31.3 million from €32.1 million the previous year. Operating profits were down 3.2 per cent to €30.1 million from €31.1 million.

Turnover grew 18 per cent to €1.37 billion from €1.16 billion, driven by an expansion of its retail chain and growth in the number of on-line customers.

Earnings per share dropped 4 per cent to 54.08 cent. The company is proposing a full-year dividend of 20.59 cent per share, a 10 per cent increase on the 2004 payout of 18.72 cent.

It paid an interim dividend of 7.75 cent in August, meaning its final dividend is 12.84 cent.

Gross win margin, the difference between the total staked by its customers and the company's payout on winning bets, was €161 million, up from €134 million in 2004.

However in percentage terms, it was down to 12.4 per cent from 12.8 per cent in its betting shops, and at 7.8 per cent from 8.3 per cent in its telephone business.

The numbers show that its retail arm, which consists of 195 betting shops in the Republic and Britain, was hit hardest. Operating profits slumped by 46 per cent to €9.5 million last year from €17.7 million in 2004.

Telephone betting also suffered, with operating profits dropping 22 per cent to €3.6 million from €4.6 million. Newly-appointed chief executive Patrick Kennedy said yesterday that this was partly due to a restructuring of that operation.

The big winner for Paddy Power was its on-line operation, which had operating profits of €17 million. This was almost double the €8.8 million it accounted for in 2005 and was 56.6 per cent of last year's total operating profit.

The company's internet poker and casino games, which do not involved risk, were partly responsible for this growth. On-line gross win was up 67 per cent at €43 million. The margin was 13 per cent. However, the gaming business boosted this figure. The actual betting win margin was €26 million.

Mr Kennedy said yesterday that the company had endured a poor run of results in 2005, with a large number of favourites (the horse on which the bulk of money is wagered in a given horse race) winning high-profile races.

"Taking the year in its totality, at Cheltenham there were nine Irish winners, including in the three big championship races, which is bad news for any Irish bookmaker," Mr Kennedy said.

An Irish horse, Hedgehunter, also won the Aintree Grand National, which is the biggest betting race of the year.

In November, Paddy Power issued revised guidelines for its gross win margin. The company previously operated on the basis of gross win of between 12 per cent and 14 per cent in retailing, but dropped that to 11 per cent to 13 per cent.

It also said it expected reduced margins from online and telephone betting, which in future will be 8 per cent to 9 per cent.

Mr Kennedy yesterday stressed that this was based on analysis going back over a number of years, and was not a consequence of 2005's poor results.

He blamed increased competition in all three of its businesses, as well as tax-free betting for the trend.

Paddy Power company secretary Nuala Hunt made a €57,250 profit by exercising an option to buy 25,000 shares at €5.25 and selling 14,500 of them at last night's close of €13.