Operating profit at Power Leisure fell almost 20 per cent to €8.5 million (£6.69 million) due largely to the start-up and running costs of its online betting operation. The company, which trades as Paddy Power Bookmakers, was hit by losses of €9.1 million at its online division.Online turnover rose 410 per cent to €34.8 million, while the gross margin improved from 4.5 per cent in the first half to 7.7 per cent in the second half as risk management procedures were improved, said Mr Ross Ivers, chief financial officer at the company.

Mr Ivers expects the online business, which now has turnover of €1 million a week, to break even in 2003.

Overall turnover at the company rose by 27 per cent to €461.1 million in 2001, despite the impact of foot-and-mouth disease early in the year.

"The second six months saw turnover increase by 35 per cent over 2001 with strong growth in all channels," said Mr Ivers.

Turnover at its licensed betting offices grew by 17.7 per cent to €370.7 million, while operating profit rose by 30.5 per cent to €16.6 million. Like for like growth in its betting office operation was up by 10 per cent, Mr Ivers said.

Eight new outlets, seven in the Republic and one in the UK, were added to Power Leisure's betting office operations last year, bringing the total number to 126 outlets.

The group's two UK shops have traded above expectations and it expects to open between four and five new outlets in the UK, according to Mr Stewart Kenny, chief executive of Power Leisure.

Telephone betting turnover grew to €55.5 million, up 40.9 per cent on the previous year, while operating profit rose by 10.9 per cent to €1 million.

However, Mr Kenny described the progress of its interactive TV channels as disappointing. "But the expenditure has been made and the ongoing investment is not huge. It is another channel," he said.

The company had a net cash balance of €18.3 million at the end of December 31st, 2001.

"We're building up a nice war chest for growth going forward," said Mr Ivers. Future expansion would be through organic growth and acquisitions, but the company had no immediate plans to acquire, he said.

Trading in the early part of this year had been positive and had been unaffected by the euro changeover, the company said. "Turnover is up 20 per cent to the end of the changeover period," said Mr Ivers.

Mr Kenny will take over as chairman of the group following the decision by current chairman, Mr John Corcoran, to retire at the end of the year. Mr Kenny said the company was in the process of recruiting a new chief executive.