Bookmakers’ value falls as punters keep winning

ALMOST €200 million was wiped off the value of Paddy Power after the bookmaker warned that a winning streak by punters would hit profits this year.

The company said that in the last three weeks results were €4m behind target as horseracing results went against bookmakers.

The unexpected trading update from the country’s biggest betting outfit said its gross win margin (the percentage of turnover after paying out on winning bets) had declined again.

In 2004 the gross win margin at the company’s betting shops was 14.2% but dropped to 12.4% in the first half of this year and has fallen to 11.3% since.

In a statement Paddy Power said: “Assuming reasonable gross win percentages for the remainder of the year, we now expect operating profits for the year to 31 December 2005 to be approximately €30m.” Operating profits in 2004 were €31m.

“While a significant element of the 2005 shortfall against expectations is due to poor horseracing results, we are of the view that the Irish retail market is in the process of structural change. Paddy Power will continue to lead the market and take advantage of this change,” the company said.

Turnover has continued to grow strongly, the company said, with its internet betting arm making up for some of the problems in its shops. Its online casino is also expected to do well.

The company said it was hopeful Finance Minister Brian Cowen would deliver a boost to the betting industry.

“The Budget in December could lead to nationwide tax-free betting in the coming months and, following last week’s resolution of the British Horseracing Board legal case in Ireland, the competitiveness of the market will increase further.

“This will drive turnover growth through recycling and the increased betting opportunities tax-free betting offers as well as transferring business from the grey market. The growth dynamics of retail tax-free betting in Britain have been well documented.”

The company said it could save €2m a year if a new agreement on pre-race data with the British Horseracing Board can be reached.

Shares plunged by 25% at one stage yesterday before recovering to end down 22% at €10.40, valuing the company at €523m.

This year has proved to be poor for the betting industry. Punters have enjoyed a good winning streak with favourites landing the gambles as most of the big meetings.

Paddy Power’s position was not helped last weekend when a major gamble was landed at Cheltenham - in a race sponsored by the company.