Paddy Power says operating profit to reach EUR82m in 2008

LISTED BOOKMAKER Paddy Power expects this year's operating profits to be €82 million, well ahead of current forecasts for the group.

At its annual general meeting in Dublin yesterday, chairman Fintan Drury told shareholders that in the first 20 weeks of the year, favourable sports results and growth in most of its businesses have resulted in margins increasing ahead of expectations.

"The group now expects operating profit of approximately €82 million in 2008, which would represent growth of 14 per cent compared to 2007 and is 8 per cent above the current consensus forecast," Mr Drury said in a statement.

About half the company's earnings before interest, tax and write-offs are in sterling. The firm expects the depreciation of sterling against the euro will cut operating profit by €5 million, on the assumption that exchange rates remain broadly in line with current levels.

"However, this will be more than offset by the benefit of favourable momentum and sporting results to date," Mr Drury's statement added.

Speaking after the meeting, chief executive Patrick Kennedy indicated that despite the slowing economy, there were no signs that the company's punters are feeling the pinch.

He pointed out that a key measure of this is the average slip value, that is the average bet placed by its customers, and said that this is continuing to grow in its retail and internet channels, while it is level in its telephone business.

The average bet placed with Paddy Power is between €22 and €23 in Ireland and €17 and €18 in Britain.

Some of the group's recent growth stems from a run of sports results that have gone against the majority of punters. This has kept its margins at the higher end of expectations.

Asked by a shareholder at the meeting yesterday if he expected the pendulum to swing back, Mr Kennedy said that it was "heavily odds-on" that results would be more normal next year.

He said this would leave the group with margins of around 12 per cent.

"But I would still be confident that our profits will still move ahead," he told the meeting.

Mr Kennedy also said that the company is pressing ahead with its plans to expand its British betting shop estate beyond London and into cities with strong Irish associations, such as Manchester and Glasgow.

Senior independent director Nigel Northridge will replace Mr Drury when he steps down as chairman at the end of this year.