THE SLOWING economy and a run of winning results for punters has prompted bookmaker Paddy Power to cut its operating profit forecast for the year to €75 million from €82 million.
In a statement issued yesterday, the group said that, since it published its 2007 results in March, consensus forecasts for this year's operating profit increased to €82 million from €74 million, largely on the back of sports results that favoured bookmakers rather than punters.
"Following the poor sporting results as well as the impact of toughening economic conditions since then, the board now expects underlying operating profit for the year of approximately €75 million, assuming a reasonable run of sporting results over the remainder of the year," the group said.
Yesterday, chief executive Patrick Kennedy pointed out that €75 million "would still represent €3 million growth on 2007", despite a foreign exchange hit of €5 million, due mainly to sterling's weakness against the euro.
The remarkable run of victories for Irish horses, particularly those trained by Aidan O'Brien, in high-class races in Britain and France, and golfer Padraig Harrington's two major victories, have helped turn the tide more in punters' favour this year.
A run of beaten favourites at meetings such as Cheltenham and Aintree, as well as favourable results in high-profile and well-backed football games, helped bolster the bookmaker's figures last year.
The company said yesterday that this trend continued for the first four months of 2008, but explained that the pendulum began swinging back more in its customers' favour at that point.
However, Mr Kennedy said that the group believes its general guidance of a gross win margin of between 11 per cent and 13 per cent is still appropriate for its bookie shops in Ireland and Britain.
Margins in its online and telephone betting channels should be 7 per cent to 8 per cent, he said.
Gross win margins are effectively what bookmakers win from their customers. They are the difference between the amounts staked and what is returned in winnings to customers. A gross win of 11 per cent to 13 per cent means that on average, punters get a return of between 87 cent and 89 cent for every €1 bet.
Results that Paddy Power released yesterday show that gross win on its sports book was 11.8 per cent in the first half of this year, compared with 12.4 per cent during the first half of 2007.
The figures show that profits before tax in the first six months of the year were up 10 per cent at €47.1 million from €42.7 million on the same period in 2007. Earnings per share grew 17 per cent to 82.3 cent.
The group is paying an interim dividend of 18.6 cent, a 16 per cent increase on last year's first-half payout.
Since the closing months of the first half of the year, Paddy Power has stepped up its efforts to win new customers and boost turnover by offering enhanced terms to punters, such as seven places on each-way bets on the British Open golf, as opposed to five.
