Profits fall but Paddy hails progress

Bookmaker Paddy Power said a “cracking” year for punters had left it with a 15% slide in profits after a run of exceptionally customer-friendly sporting results.

The firm said it “took a proper pounding” in the racing at Cheltenham in 2009, while Six Nations rugby did not go its way and football saw a dearth of draws.

Consequently Paddy’s gross win – the amount left by losing punters – was lower than expected, down by an estimated €29m on sporting results after a strong 2008.

Pre-tax profits for the year to December 31 were €67.2m from €79m in 2008.

Last year’s profits fall came despite a 31% rise in the amount staked by customers to €2.72bn.

The Dublin-based firm said while the results had shaved profits, this was a fact of life for bookmakers and said trading in 2010 so far has been “satisfactory” as more favourable sports outcomes offset racing cancellations in snow-hit January.

Chief executive Patrick Kennedy said: “Despite the economic problems, 2009 was a cracking year for Paddy Power punters on two fronts.

“The year saw a slew of punter-friendly sporting results which was the exact opposite to the experience of the prior year.”

He said the firm had invested in offers and concessions to attract extra custom, while also expanding the business with acquisitions in Australia and a further 25 new shops in the UK.

The firm now has 93 outlets in the UK and teams in Glasgow and Manchester aimed at boosting the firm’s high street presence further outside London.

Paddy said it intends to have at least 150 shops in the UK by 2011 “and don’t intend to stop there”.

In Australia the firm snapped up Sportsbet and IAS in the year to move into the online market.

It is hoping to capitalise on a substantial regulated betting market and a “high gambling spend per capita”.

The Australian division made up 7% of operating profit in the year – at €4.6m – while the UK accounted for 44% with €29.4m.

Paddy’s online division – excluding the Australian arm – increased its proportion of group profits, from 57% in 2008 to 69% last year.

The firm said the potential growth of online betting still had a long way to go with the roll out of “super-fast” broadband in the UK and elsewhere over the next few years.

It said once home internet is fast enough to watch live television streaming it will drive further online participation, while despite economic worries the firm said research had shown that broadband was among the very last items consumers were prepared to do without.

Paddy said sporting results had started to turn in its favour towards the end of 2009, but not before a run of punter-biased results.

“We did okay in the early shadow boxing at the start of the year, but it’s Cheltenham when the punters really get their gloves off and this year we took a proper pounding,” Paddy said.

The firm said a run of nine Irish winners – one short of the record – had proved “very costly”.

This was followed by the Six Nations where the favourites won every match except France’s narrow win over Wales, but this was the one game when punters had backed for the underdog.

Football was another losing area for the firm amid the success of England’s big four football teams at the beginning of the year and the firm said the summer saw the situation deteriorate further.

A lack of Premier League draws – just four in the first 66 matches – proved a headache, but the situation improved as the season continued, with 18 in the next 51 games.

Matthew Gerard, of Investec Securities, said: “Trading improved across most channels in the last few months of 2009 and, although the current trading update is brief, 2010 appears to have started similarly well.”

He said the year was one of “significant progress” when it came to Paddy’s online and geographical diversification strategies.

Mr Gerard said profits were ahead of expectations for the year and anticipated raising estimates for 2010.