Irish bookmaker Paddy Power is on track to achieve underlying operating profit forecasts for 2008 of €75m but said the deteriorating economic conditions in the UK and Ireland were having an effect on the group’s results.
In a trading update for the 19 week period from 1 July to 10 November, the company said it was responding by providing outstanding value and markets to customers and keeping a close rein on costs.
The online gaming channel’s contribution rose to over 60% of the group’s operating profit during the period. Online gaming gross win, the amounts staked less the amounts returned to customers as winnings, grew by 15%; the amount staked on online and telephone betting grew by 13% during the period. This was broadly in line with expectations after exceptionally high growth in the first half of 2008 against softer comparatives, the company said.
Turnover for Paddy Power’s retail outlets declined during the period, 9% in both Ireland and the UK in October. This was partly due to the firm’s competitive advantage of being able to show Turf TV pictures during the comparative period. Machine gross win in the UK grew strongly, with like-for-like growth of 22% during the period.
In accordance with the guidance Paddy Power gave in August and assuming a normal run of sporting results until the end of the year, the firm’s annual trading should translate into earnings per share growth of around 10% over 2007, notwithstanding the fact that sterling depreciation is expected to reduce operating profit by approximately €5m this year. The group has no debt and €72m on its balance sheet as of the end of October, “a position of excellent financial strength and flexibility in the current environment”, it said.
Paddy Power said its operating profit would drop by €9m-€10m in 2009 because the rate of betting tax payable on bets placed in Irish outlets will double from 1% to 2% from 1 January 2009.