Paddy Power's decision to drop betting tax ahead of the Government's July deadline hit first-half profits at the listed bookmaker's betting shops, the company's figures show.
Turnover in the first six months of the year grew 27 per cent to €877.6 million from €690.1 million during the same period in 2005.
First-half operating profits were 11 per cent up at €19.6 million from €17.8 million in the first six months of last year. Pretax profits were up 12 per cent at €20.5 million.
However, the operating surplus earned through its betting shop chain remained flat at €6.7 million.
The company said this was partly due to the fact that it absorbed a €4 million cost that resulted from its decision to stop charging customers betting tax at the end of last year.
This was in response to a Budget 2006 change under which the original 2 per cent levy charged to customers was to be dropped from July 1st this year, and replaced with a 1 per cent charge on bookmakers' turnover.
Paddy Power dropped the 2 per cent charge across its Irish betting shops after the change was announced in December, which meant it had to absorb the cost rather than passing it on to its customers.
Davy Stockbrokers analyst David Jennings said in a note yesterday that Paddy Power's retail profits would have grown 59 per cent during the six-month period had it not opted to do this.
Operating losses at its British retail business grew 50 per cent in the first six months of 2006 to €3 million from €2 million during the same period last year.
The group pointed out that it had opened 18 new shops during the first half to bring its total British estate to 51 shops. The loss reflected this and other investment in this business.
First-half operating profits at its online business grew 19 per cent to €9.7 million from €8.1 million in 2005.
Its telephone betting returned an operating surplus of €3.2 million during the first six months, up 8 per cent on the same period last year, when it was €3 million.
Gross win margins - the difference between the amounts staked and the amounts paid out to punters - were strong. Overall this was up 30 per cent at €105 million from €80.9 million. This effectively means that the bookmaker is returning 70 cent in winnings for every €1 wagered by its customers.
Earnings per share grew 10 per cent to 34.8 cent. The board is recommending an interim dividend of 9.43 cent a share, an increase of 22 per cent on the 2005 half-year payout to shareholders. It intends increasing its full-year dividend by 40 per cent.
The group's share price dipped five cent to close at €14.25 in Dublin last night.
