Profits at Paddy Power increase 51% to €45.5m

Listed bookmaker Paddy Power made profits of almost €50 million last year, beating market expectations.

It also pledged yesterday to begin returning some of its €87.1 million cash to investors by buying back up to 10 per cent of its stock this year.

Chief executive Patrick Kennedy said the group had paid good dividends to investors, but held on to its cash to pay for expansion. He explained that the board believes the group has enough cash to continue expanding and hand some of it back to shareholders in 2007.

Turnover for the year was €1.8 billion up 31 per cent on the €1.37 billion recorded in 2005.

Gross win, the difference between the amounts staked by customers and those handed back as winnings - a key measure for the business - was €218.7 million, an increase of 36 per cent on the 2005 figure of €160.8 million.

This was a margin of over 12 per cent, meaning that the company was returning over 87 cent in winnings for every €1 wagered by punters - at the upper end of the range normally expected by bookmakers.

Operating profit for 2006 was up 51 per cent at €45.5 million from €30.1 million a year earlier. The company's pretax surplus was €49.7 million, up 59 per cent on the 2005 return of €31.3 million. A €2.1 million once-off gain from the sale of properties boosted Paddy Power's pretax figure.

Basic earnings per share (EPS) swelled by 45 per cent in 2006 to 78.6 cent from 54.1 cent the year before. The board is recommending a full-year dividend of 32.20 cent a share, up 56 per cent.

In terms of its three divisions, Paddy Power's online business once again delivered the greatest share of operating profit, accounting for €23.4 million of the €45.5 million total. This was a 38 per cent increase on 2005.

The total gross win from this business was €67.4 million, or 12.8 per cent of total turnover. Online includes both betting and casino games. The sports betting gross win was €39.1 million, a 7.9 per cent margin.

Its betting shops and telephone businesses grew profits at a faster rate. The retail division had operating profits of €16 million in 2006, a 69 per cent increase on the €9.5 million it delivered in 2005.

However, its British betting shops, which numbered 58 at the year's end, an increase of eight, had an operating loss of €6 million. The company attributed this to ongoing investment in new shops and infrastructure.

Gross win in Ireland was €104.4 million or 12.5 per cent. In the UK it was €15.5 million or 12.6 per cent from sports betting. Its British shops include gaming terminals, which doubled gross win to €8 million. Total gross win in the UK was €23.6 million, over 19 per cent. The operating surplus from telephone betting grew 65 per cent to €6 million from €3.6 million. This business showed a fall in the number of active customers to 19,971 from 20,931.