Analysis: Paddy Power plc may well be looking forward to the Cheltenham festival more than most this year.
A host of leading contenders for jump racing's biggest festival have dropped out, including Kicking King, winner of last year's Gold Cup, and one of nine Irish Cheltenham 2005 winners that cost the bookmaker dearly.
A run of results like that in racing and football left its 2005 profits 2 per cent down at €31.3 million.
However, as Power chief executive Patrick Kennedy cheerfully exclaimed yesterday, Cheltenham 2006 is going to be very open, meaning bad for punters and good for bookies.
But behind this there are signs that Paddy Power's business is changing.
Its online division, which combines betting, poker and casino games, contributed €327 million to its €1.3 billion turnover, but accounted for €17 million, or 56 per cent of its €30 million operating profits. The division was its fastest growing.
Poker and casino products added €17 million to the online division's €43 million gross win, which is the difference between the amount staked and the payout on winning bets.
The "gross win" from poker and gaming is a commission. That left the company with a real win margin of €26 million from betting, which translates as 7.9 per cent.
Similarly, telephone betting, which delivered operating profits of €3.6 million, also had a low gross win margin, €19.5 million, or 7.8 per cent.
Telephone betting grew more slowly, which Mr Kennedy put down to restructuring. It is likely to play an increasingly important part in the business as well.
Both internet and telephone betting deliver low win margins. In addition Paddy Power has adjusted its long-term win margin expectations for its betting shops from the 12-14 per cent range to 11-13 per cent.
What that means is this division is going to be less profitable in the foreseeable future.
All this suggests that Paddy Power will continue to grow strongly, but be proportionately less profitable as it does so.
It's probably also worth noting that Cheltenham is always "open", and has a habit of delivering the unexpected, both for punters and bookmakers.
