Irish gambling giant Paddy Power saw pre-tax profits plummet by 20% despite its sportsbook performing strongly during the 2014 financial year.
Paddy Power revealed it has made pre-tax profits in 2014 of €61.6 million, down from €77.0 million in 2013. Like most major bookmakers have in recent times, Paddy Power pinned the blame on a “slew of punter friendly results.”
In January and March, 16 and then 17 out of the 21 most backed football teams won their matches, including nine from 10 favourites in the Premier League. Premiership favourites went on to win 64% of their matches, compared to 53% during 2010 to 2013.
Horse racing favourites fared better than average, too. These results led to Paddy Power’s sportsbook gross win falling from 10.1% to 9.1%, resulting in a €34 million gross impact on its figures.
All other aspects of the sportsbook performed superbly, especially in its retail brick-and-mortar betting shops in the UK and Ireland.
Operating profit from Paddy Power’s UK retail arm increased 22% to €9.5 million, despite a 28% increase in operating costs (€49.9 million) and a 1.4% reduction in is gross win percentage. The controversial Fixed Odds Betting Terminals accounted for €42.9 million of the €79.6 million net revenue in the UK, and increase of some 43%.
Profits from Paddy Power’s Irish retail arm soared 13% to €8.6 million.
Patrick Kennedy, the Chief Executive of Paddy Power, said of the financial results:
“The punter friendly results in football and racing which impacted the gross win percentage in the initial six months of 2014 failed to put a halt to our gallop with strong underlying performance and accelerating top lime momentum delivered in the period. For example, we acquired more new sportsbook customers on paddypower.com in these six months than in all of 2013. We had a cracking World Cup which generated stakes of almost €200 million, 130% ahead of the previous tournament. Australia continues to power ahead and Italy has made significant progress.”
“The second half has started well with good stakes growth and a rebound in sports results. At this juncture, we expect mid-teen percentage growth in EPS (Earnings Per Share) for the full year, despite an €11 million headwind from product fees, new taxes and currency translation.”
You can read the full breakdown of Paddy Power’s financial statement in this downloadable PDF.