Louis van Gaal’s stuttering start as Manchester United manager is helping the bookies strike back against the punters, the head of Paddy Power said yesterday.
Despite a stellar World Cup, Paddy’s pre-tax profits sank 13 per cent to €61.6m (£49m) in the first half of the year as a clutch of winning football favourites helped gamblers clean up on accumulator bets.
But so far in the second half, more favourable results – including the Reds’ winless beginning to the new season – have seen gamblers leave behind €11m with the bookie so far.
“Not many predicted that Man United would have had the start they’d had, that’s also helped us,” the outgoing chief executive Patrick Kennedy – a Liverpool fan – said.
Paddy added nearly 150,000 customers during a World Cup in which it took €198m in stakes, more than double 2010. It also profited from a goalless final and unfancied Colombian striker James Rodriguez claiming the golden boot.
But the bookmaker has slowed its high street advance following new restrictions, as well as a rise in the tax rate to 25 per cent from next year.
The looming point of consumption tax – a 15 per cent tax on online gaming profits – will be introduced in December and would have cost the bookie an extra €20m in tax if applied to the first half.
Paddy Power is the latest of the bookies have paid the price for a host of football favourites winning in January and March with a dent in first half profits.
But the firm - like the rest of the industry - is already on the way to making that back as results turn in favour of the layers, helped by Manchester United’s rocky start to the season.
It pays to look past the ebb and flow of results though to look ahead to the real challenges facing the industry. The political climate has long since turned sour with new rules limiting play on profitable but controversial “crack cocaine” gaming machines as well as a consultation on new planning restrictions on betting shops. Duty on machine revenues will be hiked to 25 per cent from next year.
Even if the growth is coming from online gambling, in December a 15 per cent tax hike on those takings will blow a hole in profits. Players will inevitably have to cut back on their marketing costs which - for Paddy at least - has been so successful in drawing in gamblers. For now it would take a brave punter to bet on the bookies.