Paddy Power says new betting tax will cost it €9m

THE DOUBLING of Irish betting tax will cost listed bookmaker Paddy Power €9 million in profits this year, its chief executive, Patrick Kennedy, said yesterday.

Minister for Finance Brian Lenihan announced in his budget last last year that the Government would increase the tax on bookmakers’ turnover from 1 per cent to 2 per cent in 2009.

The tax is raised to contribute to the development of the Irish racehorse and greyhound industries. The introduction of the new rate has been delayed to the start of May.

Yesterday Mr Kennedy said the group expected the charge, which applies to all bets placed in its Republic of Ireland betting shops, to cost it €9 million in profits this year. The increase in the levy, combined with the impact the recession was having on the sector generally, could see up to 300 betting shops close over the medium term.

Mr Kennedy said around 40 shops have closed in the Republic already this year. However, he stressed that his company would not be closing shops, and intended to continue expanding its network.

Paddy Power yesterday reported its operating profits grew 5 per cent to €75.7 million in spite of an unfavourable sterling conversion rate which cost it €5 million. In constant currency terms, the company said the increase was 11 per cent.

The group’s turnover was up 4 per cent at €2.1 billion. Of this, it won €283.7 million from punters, a rise of 2 per cent on the €279 million it won last year.

That gave the company a gross win margin, the difference between the amounts staked by punters and that handed back to them on winning bets, of 11 per cent. This meant that, on average, its customers lost 11 cent in every euro they bet with the company. The gross win margin was down on the 11.5 per cent it returned last year.

This, combined with the fact that recession-conscious punters are betting smaller amounts, meant that Irish retail profits fell by €6 million to €28.3 million.

Mr Kennedy said yesterday the average bet in its shops was down 10 per cent at around €20, but that the actual number of bets that its punters were placing had held up.

Average bet size on its online business is between €90 and €91. This division was responsible for €42.8 million in operating profits last year, an increase of 34 per cent on 2007.