Pretax profit down 15% at Paddy Power

THE UNBEATEN run of champion racehorse Sea the Stars and a series of wins for popular English premiership football teams in the autumn helped dent profits at bookmaker Paddy Power last year.

The company released results for 2009 yesterday showing that pretax profit fell 15 per cent to €67.2 million from €79 million the previous year.

Chief executive Patrick Kennedy said yesterday that the bookmaker is likely to take up its option to buy the 39.2 per cent of Australian online operator Sportsbet that it does not own.

Paddy Power last year paid an an initial €27 million for a majority stake in Sportsbet, which added €4.6 million to its Irish shareholder’s operating profit. Mr Kennedy said the bookmaker has an option to acquire the outstanding shares in September 2012, and added that the company was likely to take this up.

Paddy Power won €296 million from its customers, an increase of 4 per cent on the previous year. However, the winnings represented 8.5 per cent of the €2.75 billion staked by punters in 2009. In contrast, its win margin in 2008, when it retained €283.7 million of the €2.1 billion total bet by its customers, was 11 per cent.

Last year’s lower margins were a result of results that favoured punters. These included the Irish rugby team’s grand slam, a higher than usual number of favourites winning premier league soccer games, and champion racehorse Sea the Stars’ six consecutive group one victories, culminating in the Prix de l’Arc de Triomphe in October.

Paddy Power’s own efforts to attract new customers, which included offering better or guaranteed odds, money-back concessions on some losing bets and other incentives, cost it about €10 million more in 2009 than in 2008.

However, the group said yesterday that these contributed 14 per cent to turnover growth, which was up 36 per cent at €2.75 billion, despite the contraction in its two main markets, Ireland and Britain.

Mr Kennedy pointed out yesterday that the recession has made punters more value conscious. “Two or three years ago, there was a lot more inertia,” he said. “The key thing is that every €1 invested in giving value to customers is worth three to five times more than before.”

Mr Kennedy added that the company’s market share in Ireland has grown from between 25 per cent and 26 per cent to 32 per cent in recent years.

The firm generated €75 million in cash last year, after investing €48 million and returning €26 million to shareholders.

Paddy Power: 2009 results

Turnover:€2.75 billion (+31%)

Pretax profit:€67.2 million (-15%)

Earnings per share:120.7 cent (-12%)

Dividend per share:58.4 cent (+8%)

SUMMARY

A tougher economy and more success for Irish rugby players and horses saw Paddy Power pre-tax profits slip 15 per cent to €67.2 million last year. Its online division performed best, with winnings of €52.5 million and a rise in operating profits of €45.7 million. Punter-friendly results left operating profits from its 198 Irish bookie shops trailing at €16.3 million.

The company added 25 new shops in Britain to bring its estate there to 93 outlets, which generated operating profits of €1.3 million. Poor results meant that operations in its telephone business lost €1.2 million.

The company is confident that its joint venture with French state-owned betting operator, PMU, will be launched on time for this year’s World Cup.