Bookmaker's horse sense earns it €136m operating profit

Analysis:Ten years ago this year, Paddy Power's online business made its first profit – €1.4 million – confounding the predictions of both analysts and the group itself, which had predicted it would break even in 2003.

The figures it published yesterday show that its two internet operations, the original core Paddypower.comand Australian business Sportsbet, accounted for about €103.5 million of its €136 million operating profits, more than 75 per cent.

Barring a few minor bumps, Paddy Power’s growth has been unchecked since 2003. Sportsbet, in which it initially invested in 2010 before taking it over fully in 2011, added significantly to the group. It generated €30.8 million in operating profit last year, an increase of 32 per cent on 2011.

Italy is the latest territory the group has targeted for expansion. It launched there last May, on time for the European Championships, and has captured about 5 per cent of the online sports betting market, which chief executive Patrick Kennedy says is the continent’s biggest.

The move cost it €15 million last year, and is likely to take up most of the €14 million it plans to spend on development in 2013. It promises to be a longer haul than Australia.

One difference between the two ventures is the fact Power bought an established business in Australia, while it is building an operation from the ground up in Italy. Italian customers provide the other key difference. Betting there is led by slot machines, followed by football and tennis, with very little horse racing, a key feature of Power’s existing territories.

Investors are going to keep a close eye on how quickly it can turn the investment in Italy into a profit. The group is readying more betting products to launch in the market this year, with the help of another acquisition, games developer Cayetano, so 2013 will give a good indication of where the venture is going.

Paddy Power has been here before. At one point it was drawing criticism for spending money on developing a betting shop chain in the UK.

But with virtually the same number of shops, that division is now more profitable than its Republic of Ireland counterpart. Last year, the UK shops – including Northern Ireland – delivered €15.3 million in operating profit, compared with €14.4 million from the Republic.