Final Results

Paddy Power plc
23 February 2005


                                Paddy Power plc

                     2004 Preliminary Results Announcement

                                 Record Results



Paddy Power plc, trading as Paddy Power Bookmaker, Ireland's leading bookmaker,
today announced record turnover, operating profit and earnings per share for the
year ended 31 December 2004.

                            2004            2003
                               €               €         Change

Turnover                1,165.2m          913.6m          27.5%

Operating Profit           31.1m           19.6m          58.6%

Profit Before Tax          32.1m           20.4m          57.5%

Profit After Tax           27.5m           17.6m          56.6%

EPS                        56.61c         36.97c          53.1%

Cash Balance               47.2m           39.2m          20.5%

Final Dividend             12.52c          8.59c          45.7%

Commenting on the results, John O'Reilly, Chief Executive, Paddy Power plc said:
'While all strands of the business performed well, I am particularly pleased
that the online business has come of age.'

Ross Ivers, Finance Director, Paddy Power plc said: 'When you have a business
that's producing almost 60% profit growth in the year, you have got to be 
happy.'

23 February 2005

Issued on behalf of Paddy Power plc by Drury Communications

For reference:

  John O'Reilly                                       Ross Ivers
  Chief Executive                                     Finance Director
  Paddy Power plc                                     Paddy Power plc
  Tel: + 353 1 4045936                                Tel: + 353 1 4045912
  Mobile: + 353 87 254 1688                           Mobile: + 353 87 668 8772

  Mark Cahalane /Oonagh Daly                          Trevor Phillips
  Drury Communications Ltd                            Holborn
  Tel: + 353 1 260 5000                               Tel: + 44 207 929 5599
  Mobile: + 353 87 855 4406                           Mobile: + 44 7889 153628

Chairman's Statement


'IT'S A GAME OF TWO HALVES'

Dear Shareholder,

The old football cliche 'it's a game of two halves' could certainly be applied
to the past year in Paddy Power.

The year had its ups and downs (in that order) but was consistently exciting and
interesting. Through it all the team at Paddy Power produced yet another record
year. This is the 16th consecutive year of turnover growth and, with the
exception of one year when we had significant start-up costs associated with the
introduction of the online service, the 16th consecutive year of earnings
growth. All in all an outstanding achievement.

Turnover                     €1,165.2m (+27.5%)

Pre tax profit               €32.1m (+57.5%)

EPS                          56.61cent (+53.1%)

Dividend                     18.72cent (+45.2%)

Cash balances                €47.2m (20.5%)

We frequently comment on the impact of short term sporting results on earnings.
Favourable results (if you are a bookie) generated a bumper first half for Paddy
Power, well ahead of everybody's expectations. Then, with the pendulum swinging
back to punters, second half earnings were flat on 2003.  Proof again that,
while results often happen in 'runs', they average out over time. Unfortunately,
favourites win or lose to their own schedule not necessarily to that of any
public company's six month reporting timetable.

Earnings for the year are well ahead of both our 2004 budget and the highest
analyst forecast at the start of the year.  However, poor sporting results in
the fourth quarter, particularly December, meant we came in at the lower end of
analysts' revised year end forecasts.  This highlights once again that
re-forecasting based on interim 'sporting results' is a hazardous occupation.

Your Company enters 2005 in excellent health. Turnover growth, a key measure,
continued strongly in the second half of 2004 as organic expansion continued
across all divisions supplemented by the acquisition of two retail outlets in
the United Kingdom (UK). The pipeline of properties and licences, in both
Ireland and the UK, should deliver sustained outlet growth in 2005. Our online
division goes from strength to strength adding new products and diversifying
into non-bookmaking products such as casino, poker and peer-to-peer games.

The superior quality of Paddypower.com was acknowledged in January when it was
voted the Best Online Bookmaker in the Racing Post/Netprophet survey of
bookmakers. Our telephone business also saw significant development,
particularly in the UK, and continued to make a significant contribution to the
Group.

Strategy

2005 will see a continuation of our existing strategy across all three
divisions. Underlying this is a fixation with the customer; delivering a
superior product range and customer service while increasing our distribution
capacity. We continue to obsess about the Paddy Power brand which remains one of
our key assets. However, given our relative size and differing objectives in
each market we must carefully select our marketing opportunities ensuring that
they are cost effective and appropriate for those markets.

The past year has seen a further evolution of the business as Paddy Power
generated new non-bookmaking income. The success of Paddy Power Casino, virtual
games and peer-to-peer games in 2004 has had a significant positive impact on
the income volatility that is a feature of the traditional business. The
revenues from these activities are closely tied to turnover performance and are
not subject to the vagaries of sporting results which impact betting revenues.
We will see further growth in these revenues in 2005, together with new revenues
from both online poker and fixed odds betting terminals (FOBTs) in our expanding
UK retail estate. This overall change in revenue mix will increase absolute
earnings while reducing volatility due to 'sporting results'.

While Ireland clearly remains the heart of our business, our success in the UK
will see it become an increasingly significant part of the Group.  We enter 2005
with 31 UK retail outlets as well as significant telephone and online
businesses. The coming year will be an important year for the UK retail
business. Given the growth to date in the retail estate, and our expected future
growth through the opening of new outlets, increasing focus will be placed on
the operational aspects associated with managing the enlarged estate. Our
approach continues to be one of sensible organic growth in new outlets coupled
with opportunistic acquisition, such as the two outlets acquired this year.

2005 should see continued progress in gambling deregulation in the UK. After
much high profile progress in 2004, casino deregulation came to a surprise halt
late in the year. Bookmaking deregulation, however, has continued. Pending the
passing of the Gambling Bill, the formation of the Gambling Commission and the
issuance of their policies and guidelines it is too early to predict the exact
impact on Paddy Power. We remain optimistic that deregulation in this area will
be delivered and that it will benefit Paddy Power. Until the Gambling Commission
is established and relevant policies and guidelines are issued I do not envisage
any change in strategy.

Data rights charges have been a strategic issue facing the industry for some
time as sporting organisations sought to charge bookmakers for taking bets on
their sport based on their alleged database rights over the underlying data.
However, the outcome of the European Court of Justice ruling in the British
Horse Racing Board (BHB) V William Hill case has cast significant doubt on the
existence of these rights and the BHB's ability to charge for them. This is a
matter which is being actively reviewed by Paddy Power both in the context of
the BHB and others.

People

People are our greatest asset and 2004 has seen significant progress in
strengthening the organisation as the size and complexity of the business has
continued to grow. With almost 1,200 staff at year end, and further increases
planned for 2005, continued investment in people and management structures is
essential.

The new appointments made throughout 2004 and referred to in my previous reports
are having a positive impact on the organisation. There is also a wealth of
knowledge and experience within the existing organisation that has developed
over the past 16 years. Increasing focus on performance management and training
and development throughout the organisation will help nurture the best talent.
The increasing size of the Group will provide many opportunities for talented
staff to progress their careers while providing succession throughout the
organisation.

Board

2004 was a year of significant change for the Board as it develops to meet the
new commercial challenges facing the Group as well as meeting corporate
governance standards.  As mentioned in last year's Annual Report and announced
during the year, Messrs Ian Armitage, Edward McDaid and John Corcoran have
retired from the Board. Each has made a magnificent contribution to the Company.
On your behalf, I want to acknowledge their contribution once again and thank
them for their commitment.

The process of redeveloping the Board is in progress. During the year Patrick
Kennedy joined as a non-executive director and Breon Corcoran as an executive
director. Both have already made a significant contribution to the Board. As
announced on 16 February 2005, Brody Sweeney has joined the Board and I look
forward to his contribution in the years ahead.

The development of the Board is ongoing and further appointments are
anticipated. Our belief is that finding the best people is paramount and one for
which we are happy to suffer some time delays.

Dividends

The Board is recommending a final dividend of 12.52 cent per share payable to
shareholders on the register at 4 March 2005, bringing the total dividend for
the year to 18.72 cent per share, an increase of 45.1% on 2003 (12.9 cent). The
Board's intention is to pay approximately one third of after tax earnings by way
of annual dividend.

I look forward to the coming year with confidence as we continue to deliver on
our promises. Together with the Board and the Paddy Power team I anticipate that
2005 will be another successful year for your Company.

Operations Review

Although Paddy Power is primarily a small stake fixed odds bookmaker, 2004 has
seen a move into non-bookmaking activities through the online casino, fixed odds
betting games and peer-to-peer games. Our UK retail estate also operates fixed
odds betting terminals (FOBTs).

The past year has been a very busy one across all three divisions as we continue
to see significant expansion. This has been driven by the growth in the two key
economies in which we operate, together with an increase in brand awareness,
distribution capacity and new product launches. The quality of our core
bookmaking product continues to lead the market, driven by both our investment
in product development and ongoing focus on our customers. Volume growth in bets
layed continued in all divisions which in turn drives turnover, operational
complexity, costs and ultimately profit.

Customer service is, as always, central to our philosophy. We continue to lead
the market in generosity, be it via contracted money back specials or just
refunding money when it was fair to do so, and we remain the benchmark that
others must attempt to follow.

The Retail Division - Betting Offices

The retail estate finished the year with 174 outlets (2003:149), with 143 (2003:
137) in Ireland and 31 (2003:12) in the UK.

It was a year of significant activity in the Irish and UK retail divisions with
both finishing the year with record numbers of outlets. However, just as
important as the expansion of the estate, is the continued commitment to the
existing estate through an ongoing programme of refurbishments, extensions and
relocations.  This continuous improvement in the quality of our retail space,
together with the increasing investment in screens/broadcasting technology, is
key to driving the excellent like-for-like sales growth that we have enjoyed.
Investment in capital across the retail estate totalled a record €23.1m in 2004.

Six (2003:eight) new outlets were opened in Ireland during the year. 2005 is
expected to see approximately eight new outlets opened. In addition to new
openings, four (2003:10) relocations, four extensions (2003:three) and 27 (2003:
10) refits were undertaken during 2004. The total number of premises developed
totalled 41 (2003:31), a new record for the Irish business. This process will
continue through 2005 and at the time of writing we have already completed one
relocation, two extensions and seven refits. We also continue to operate four
racecourse shops as well as the stadium shops at Lansdowne Road. There were five
(2003:five) surplus property leases at year end.

Expansion in the UK continues apace with the retail estate increasing to 31
outlets (2003:12) as at the year end. In addition, successful licence
applications mean that a further five licences are held at the year end and
these outlets will be opened during 2005. We expect to have between 45 and 50
outlets opened by the end of 2005. Our 31 outlets in the UK include two outlets
purchased during 2004.

Having now established over 30 outlets in the UK, 2005 will see a requirement to
focus on the additional operational aspects of running the enlarged UK estate as
well as continuing to open new outlets in line with our stated objectives. The
UK team is now in situ in our new office in London and the divisional management
structure is in place.

The Group commenced testing an EPOS solution in late 2004. Having completed head
office trials this is now in place in a small number of outlets where it is
undergoing field testing and modification. Subject to satisfactory performance a
more extensive test will be undertaken in mid 2005 before a final decision is
made on a full estate roll-out. The cost of installing EPOS in the current
estate would be approximately €8 million.

While there are many potential benefits of EPOS to both our customers and to
Paddy Power, our intention would be to use it to improve the quality of customer
service by increasing the speed and accuracy of payout and expanding the product
range. The improved availability of risk information from the retail estate
should also help manage the gross win percentage over time. The technology
infrastructure to support EPOS should also allow other benefits as it would
provide an intranet communications infrastructure within the estate allowing
e-mail communication and local printing of marketing material and coupons. It
would also provide an infrastructure for customer facing information terminals
or even internet access.

Investment in technology has also continued with the installation of the new
screens system throughout the retail estate. The system, which allows for a 24
screen display, is now installed in all of our UK estate and has been refitted
into 75 outlets in Ireland. It is expected that, by end of 2005, all of the
estate that can be refitted will be. This is expected to be approximately 110 of
the Irish outlets.

In conjunction with these improvements in our outlets, the head office screens
technology is also changing with a new version of our current software being
implemented. This will allow us to tailor screen content for different
geographies.

Non Retail

Non retail comprises the online division (internet betting, casino, and
interactive TV) and the telephone division.

Active Customers                    Online                     Telephone
                               2004        2003           2004           2003

Ireland and rest of world    16,721      14,026         10,207          9,601
UK                           29,982      22,174          8,326          8,361

(Active customers are defined as those who have bet on the sportsbook in the
last three months)

The Online Division

The online division has seen significant development in 2004 as it has moved
from being a bookmaking business to an increasingly 'leisure betting and gaming
business'. There have been significant ongoing improvements to the product
offering over the course of the year. These range from relatively simple
activities such as relaying out a web page and reskinning the website through to
the introduction of new functionality and products.

The online division remains the fastest moving part of the business and 2004 has
seen the introduction of a significant number of gaming products. The most
prominent of these is the Paddy Power Casino which was launched in the UK in
early 2004. We have seen continued growth in this business over the course of
the year and it has generated a significant gross win contribution in 2004, as
discussed in the financial review. In addition to the casino there have been a
host of smaller product launches. These include Paddy Park, Hi-Lo, Penalty Shoot
Out, and Spin 2 Win, the first two of which are available as mobile games. All
of these activities are algorithm based, thereby reducing our reliance on
sporting activity and consequently reducing the volatility of earnings over
time.

In addition to the gaming products noted above, 2004 also saw the addition of a
suite of peer-to-peer games where Paddy Power takes no risk position in the game
but earns its income by way of a commission on betting between two third
parties. Early 2005 saw the launch of our poker product from which we earn
commission and which will further insulate us from the short term impact of
sporting results.

Notwithstanding the increased emphasis on non-bookmaking products, we have also
seen considerable investment in the core bookmaking product as we continue to
improve the range of events covered and the depth of markets offered on each
event. This is discussed further in the trading and risk management section of
this review.

The Telephone Division

The telephone business has continued to develop in Ireland and the UK reflecting
our market leading position in Ireland and relative newcomer status in the UK.
As discussed below and in the 2004 interim statement, our UK business has been
slightly repositioned over the course of the year given the different
characteristics of the telephone business and our different position in the UK
market as compared to Ireland.

The telephone business is characterised by a high variable cost structure. Cost
is primarily driven by the volume of bets processed, not their value. This is
compounded by the need to flex the call center staffing to handle the varying
call volume levels experienced over the course of any given week. Consequently
there is a need to have a higher average bet value than the other channels.

Our telephone customer base continues to develop. Given our leading position in
the Irish market, the telephone business plays several roles. As well as
servicing our core telephone customers, it provides an alternative means of
access for customers who cannot get to an outlet or the internet. It also
provides access outside outlet opening hours.

In the UK, the emphasis differs as there is a smaller retail estate to support.
Following the repositioning of the telephone business in 2004, we expect that as
the UK retail estate and online businesses grow they will provide additional
support to the UK telephone business.

In 2004, product development, driven by the trading and risk management group,
has also been a key feature of the telephone business particularly in the area
of betting-in-running. While betting-in-running is predominantly a football and
golf activity, the US presidential elections also saw significant betting taking
place throughout the night of the results.

Trading and Risk Management

One of the core skills of a bookmaking business is the compilation of odds and
the trading of the 'book'. Together with a significant product development role
this activity is undertaken through our trading and risk management group.

This group has been busy in 2004 under its new head. The increasing size of the
business creates many new opportunities and therefore warrants continued
investment in this function.  Secondary markets which were previously too small
to justify investment have reached critical mass e.g. financial betting.
Investment in sophisticated mathematical models and processes that were
previously uneconomic have become viable. Furthermore, opportunities in the
online division create a demand for new products that can also be marketed
through the telephone and retail channels. In addition, the increasing size of
the UK retail division is changing the overall risk profile of the business due
to a different product mix in our UK estate i.e. increased football business.

The increasing size and complexity of these activities demands increasingly
structured internal processes. 2004 has seen changes to staff roles together
with more detailed trading rules and limits. Rather than restrict the activities
of the division, these processes have improved its operation and are reflected
in our market leading product range.

The number of events and associated markets that Paddy Power now offers
continues to increase with over 118,000 events bet on in 2004. While the amount
of money taken on each event varies, there remains a number of very popular high
turnover betting events during the year. However, the gross win percentage
continues to be determined by the overall mix rather than a few key events. For
instance in the non retail business, the top 1,100 events only account for 10%
of turnover.

Marketing

The Paddy Power brand has been built over 16 years thanks to a constant focus on
fun (sometimes irreverent) and innovation and we are committed to maintaining
our position as the punter friendly bookmaker. Irrespective of the size and type
of marketing activity undertaken it all contributes to our punter friendly image
and overall brand recognition. Our brand remains a key point of differentiation.

Some of the highlights of 2004 include our ongoing sponsorship of all live horse
racing coverage on RTE, our sponsorship of the Football Association of Ireland
and the Irish Rugby Football Union. Our racing sponsorships include the very
successful Paddy Power Gold Cup in Cheltenham and the Paddy Power Chase in
Leopardstown. Our more fun sponsorships, such as Brock the Jack Russell, who
added so much to this year's Australian/Gaelic Compromise Rules match between
Ireland and Australia, continue to be a strong feature of our marketing
activity.

Much of this activity is opportunistic. Coverage of our market leading customer
friendly pursuits generates significant exposure through betting related media
and, most importantly, word of mouth. From the payment of €427,220 in January
2004 to Catherine Egan as Ireland's largest single winning bet with a bookmaker,
refunding money recently for the Tottenham goal that was, but was not, given
against Manchester United to the plethora of other events throughout the year,
Paddy Power continues to lead the way. We continue to be the most frequently
mentioned bookmaker in the Irish media and have clearly broken into the top
echelon of UK bookmakers on the basis of media mentions. This success is driven
by hard work together with the quality of the underlying product, accessibility
and the customer friendly nature of the brand.

People

I talked at length last year about the importance of people to the organisation
and referred to a number of senior appointments that were made or were in the
process of being made. Now, a year on, I am more convinced than ever of the need
to continue to invest in quality people throughout the organisation.

Having put in place a very capable senior management team, attention must now
turn to succession planning and development of talent throughout the
organisation. We are putting in place plans to develop the next layer of talent
to ensure that we will have the best cashiers in the shops, the best shop
managers and the best telephone operators in the call center.

Paddy Power is a fast growing company and our people needs are evolving. We need
more of our existing skill sets as well as new ones. This opens opportunities
for both internal promotions and for attracting new talent. This growth brings
challenges to the Paddy Power culture. As we bring new people into the
organisation it is imperative that the training and induction process ensures
that the values of the organisation are made clear and that people subscribe to
these values. This is particularly important in the UK retail business where the
organisation is relatively new and staff numbers are growing. It is essential
that they are fully integrated into the distinctive Paddy Power culture.

Looking Forward

2005 promises to be another exciting year for all in Paddy Power as we continue
with our successful organic growth based strategy. This will deliver expansion
of both the Irish and UK retail estates while the non retail business will see
the development of its existing business channels and products supplemented by
the addition of new products such as the new poker business.

Financial Review

The Group has no discontinued operations and all activities are considered core.

Turnover

Bookmaking turnover is recorded as the amount staked by the customer with
customer winnings recorded as a cost. However, given the high predictability and
low inherent gross win percentage in the casino and FOBT products, their
turnover is recorded as net customer losses i.e. amount staked less customer
winnings ('the drop').  The impact of this is that the relevance of turnover
growth in the online division as a measure of business growth is reduced.

As always the sporting calendar will vary from year to year with regard to high
profile sporting tournaments. In 2003 the Rugby World Cup took place, while in
2004 we had the benefit of the European Football Championships. While these
types of events can have a small impact on year-to-year comparisons, they do not
impact trends in any material way.

Turnover for the year to 31 December 2004 was €1,165.2m (2003: €913.6m) an
increase of 27.5% on 2003. Turnover growth has been strong across all three
channels ranging from 25.0% to 33.3%.

Retail turnover grew by 25.0% in 2004 from €551.1m to €688.7m.  The Irish estate
grew by 18.4% to €628.1m from €530.6m in 2003. Like-for-like growth rates within
Ireland were 14.1% in 2004 reflecting the continued strength of the market and
Paddy Power's strong position within it. Like-for-like growth includes the
impact of our continuing refurbishment programme referred to in the operations
review, but excludes the impact of the six new outlets opened during the year.
We continue to invest in new in-shop display systems which, through the display
of additional product, will continue to drive turnover growth.

The UK retail estate saw turnover growth of 198.3% to reach €60.6m (2003:
€20.5m) as the rollout of the estate continued with eight of the 31 (2003: 12)
outlets opened in December 2004.  We are pleased with the turnover growth in the
UK which has been driven by growth in the number of outlets, improving brand
recognition and continued product development. Customers now have the ability to
take advantage of our larger estate by placing and collecting bets in different
outlets.

The online division continued to see strong growth with turnover increasing by
29.7% to €240.0m (2003: €185.1m). Growth in the sportsbook was 22.4% which was
driven by continued improvement in the online product offering. The quality of
the product was recognised during the year when Paddypower.com was voted the
best online bookmaker by the Racing Post readers in 2004.

Also included in online turnover is the turnover from gaming products of €13.4m
(2003:nil) driven by the casino, fixed odds games and peer-to-peer games, all
introduced in 2004.

The telephone business continued to develop in both markets, growing by a total
of 33.3% to €236.5m (2003: €177.4m). The UK now accounts for 46.67% of this
turnover increasing from 37% in 2003, as we continue to expand in this
relatively new market for Paddy Power.

Average slip/bet values by Channel

                         2004             2003             Change
                            €                €                  %

Retail                  18.21            16.98                7.2
Telephone               83.45            67.64               23.4
Online                  27.09            27.18               (0.3)

(Note: Retail slips can contain more than one bet per slip, while other channels
have a single bet per slip. Online comprises the sportsbook only).

Average bet size continues to develop in the retail estate. Average bet size in
the UK estate is larger than in the Irish estate due to the different age
profiles of the estates. However, it is similar to the average of our equivalent
new Irish shops.  Given the different cost dynamics of handling bets through
each channel, we continue to seek a higher average bet size in the telephone
channel where the cost of delivery is higher. The overall stake patterns are
consistent with the previous year and with our expectations.

Gaming machine income continues to grow in our UK estate with 97 machines
installed at year end.  Average gross drop per machine per month was €2.5k
although this is improving in the latter part of the year due to a change in
machine suppliers and a changing mix between FOBTs and AWP machines.  Gaming
machines are not generally permitted in Ireland.

Bet volumes
                         2004             2003             Change
                         '000             '000                  %

Retail                 37,811           32,464               16.5
Telephone               2,835            2,623                8.1
Online                  8,363            6,808               22.8

(Note: Retail volumes refer to the number of slips processed while other
channels refer to the number of bets processed. Online comprises the sportsbook
only).

Gross Win and Gross Profit

Gross win is measured as the amounts staked (excluding betting tax and levies)
less the amount returned to customers as winnings. Gross profit is measured as
gross win less discount on bets and gross win taxes. Customer drop from the
casino, FOBTs and most other gaming products are included in gross win at 100%
margin.

Gross win percentages by channel are set out in the table below.


Gross Win %                           2004             2004             2003
                                 12 months         6 months        12 months
                                 to 31 Dec        to 31 Dec        to 31 Dec
                                         %                %                %

Retail                               12.88            11.61            12.32
Telephone                             8.31             6.66             7.43
Online                               10.73             9.69             7.31

Gross win percentages in the sportsbook are driven by a number of factors
including the underlying margin in the odds, the mix of events, the mix of bet
types, customer behaviour, the accuracy of the odds offered and the run of
results. In particular the run of results has a significant impact on margin,
with winning favourites giving poor results for the bookmaker and vice versa. In
contrast, the gross win percentage from gaming activities is lower, but less
volatile given the inherent mathematics and different customer betting patterns.

The first half of the year saw strong gross win driven by continued turnover
growth, a good run of sporting results together with the new gaming revenues
from the online casino and peer-to-peer games. The second half of the year saw
continued growth in turnover and improvement in the performance of the casino
while sporting results in the fourth quarter, particularly in the busy December
period, were poor. The benefits of the increased gaming revenues can be clearly
seen in the second half where its predictability mitigated the impact of poor
sporting results. As the casino and other non bookmaking income grows, overall
gross win volatility should reduce.

We continue to expect the sportsbook gross win percentage to fall within annual
ranges for each channel as follows:

Retail           12% -14%
Telephone        8.5% - 9.5%
Online           7.5 - 8.5%

Gross win increased by 41.8% compared to an increase in turnover of 27.5% as set
out below. This reflects improved gross win across the sportsbook together with
€7.9m (2003: nil) of online gaming drop.

Gross Win by Channel               2004             2003             Change
                                  €'000            €'000                  %

Retail                           88,701           67,907               30.6
Telephone                        19,664           13,179               49.2
Online                           25,745           13,524               90.4
Total                           134,110           94,610               41.8

Gross win in the UK shops is developing and we have seen continued improvement
as the estate develops and the volume of bets increases. We expect margin to
continue to improve over time as the shops increase their bet volume and enhance
their product mix.

Gross profit reflects the application of UK/Isle of Man betting taxes to the
gross win and discounting of bets in Ireland. For business conducted under a UK
betting licence, 15% of the bookmaker's gross win is paid in betting tax while
for business conducted under an Isle of Man betting licence, 1.5% of gross win
is paid in betting tax.

Gross profit in the year grew by 39.7% to €123.2m. This reflects the increased
gross win above offset by an increased level of discounted bets in Ireland and a
change in mix of gross win based betting taxes. There was no change in the gross
win tax rates in the period.

Operating Profit

2004 operating profit was €31.1m, an increase of 58.6% over 2003. This excellent
performance was driven by the 39.7% increase in gross profit referred to above
offset by a 34.3% increase in operating costs.


Operating Profit by Channel            2004             2003             Change
                                      €'000            €'000              €'000

Retail                               17,752           17,402                350
Telephone                             4,552              861              3,691
Online                                8,830            1,369              7,461
Total                                31,134           19,632             11,502

The retail division was almost flat for the year as the 13.55% increase in the
operating profit for the Irish estate was offset by expected start up losses in
the UK estate. We believe that losses in the UK have now peaked and expect the
core estate of UK shops to trade profitably in 2005 and beyond. Continued
investment in both management and new outlets means that we do not expect an
overall profit from the UK until 2006 and we remain confident that the UK retail
estate will be a significant profit contributor over time. We expect the Irish
estate to show continued earnings growth and cash generation.

The telephone business had an excellent operating profit of €4.6m (2003: €0.9m)
driven by strong turnover, an improvement in the average stake size, improved
gross win percentage and good cost containment. As noted above, the cost
dynamics of this channel differ from the other channels given the capacity
constraints of a call center and the high costs per transaction. Good earnings
growth is dependent on increasing the average contribution per call, tight cost
control as well as absolute turnover growth.

The online business had an outstanding year as its profit contribution rose to
€8.8m from €1.4m. This reflects the combination of strong gross profit growth
within the core business and new gaming revenues. The relatively fixed cost
nature of the business allowed approximately 60% of the gross profit increase to
fall to operating profit.

While overall costs have increased by 34.3% this must be looked at in the
context of a 27.5% increase in turnover and a 39.7% increase in gross profit.
Costs are driven by both turnover and by gross profit (i.e. commissions, BHB
levies, etc.) as well as the need for investment in marketing new products,
development of the brand and investment in the new UK retail division. We remain
confident that the cost base is correctly sized for the business.

Tax Rate

The corporation tax charge for the year was €4.6m (2003: €2.9m) representing an
effective tax rate of 14.5% (2003: 14%). This compares with the statutory rate
in Ireland of 12.5% and the UK statutory rate of 30%. No corporation tax is
payable in the UK in respect of 2004 due to tax losses. The Group's effective
tax rate remains above the statutory rate due to the disallowance of certain
expenses and this is likely to continue going forward.

Cash Flow, Cash Balances and Foreign Exchange Risk

Cash balances at 31 December 2004 were €47.2m (2003: €39.2m), an increase of
€8.0m. This includes cash held in customer accounts of €6.5m (2003: €4.8m).

Cash from operating activities totalled €45.0m, an increase of €12.9m from 2003.
Cash from operating activities included net cash inflow from customer accounts
of €1.7m. Interest income was €1.0m, an increase of €0.2m, reflecting higher
average cash balances offset by lower average interest rates. Capital
expenditure increased by 27.5% to €27.2m from €21.4m in 2003.

The significant capital expenditure reflects the high levels of property
activity in both Ireland and the UK due to the expansion and refurbishment of
the retail estate. We expect this to continue as we expand at similar rates in
the future.

Cash balances are invested in accordance with defined treasury policies approved
by the Board. These policies limit the risk rating of institutions that can be
used, the concentration of risk with any one institution or within any category
of institutions and the term of deposits. Cash balances are substantially
invested in short-term bank deposits with maturities of 120 days or less. At the
year end all deposits were available at twenty four hour notice.

The Group has no borrowings. Interest rate exposure is thereby limited to
interest income on deposits and the impact of the economy in general. The Group
remains highly cash-generative and this, together with existing cash balances,
will be used to fund expansion. As has been previously stated, only on
determination of the scale of expansion in the UK, which is partly dependent on
the timing of deregulation, can the Board clearly identify potential surplus
cash. Should the Group not require any of its cash reserves, the Board will
determine the best method of returning it to shareholders. The Company has the
ability to buy back its own shares, which was granted by shareholders during
2004.

Foreign exchange risk in the business is small. As the Group expands in the UK
it will require sterling to fund its capital expenditure. Much of this can be
naturally hedged from the sterling gross profit generated in sterling from the
online and telephone divisions, as these divisions primarily have a euro cost
base and so generate surplus sterling. Group policy allows the Group to hedge
the foreign exchange exposure for up to six months. At the year end, no foreign
exchange contracts were open. The Group's functional currency is the euro and
translation risk exists with its sterling subsidiaries.

Employees

The average number of employees of the Group during 2004 was 1,076 (2003: 913).
At the year end, the total number of employees was 1,199 (2003: 1,032).

Share Price

The Group's share price traded in the range of €7.15 to €11.00 in 2004 with the
year's high reached on 25 November 2004. The share price at 31 December 2004 was
€10.85 (2003: €7.15) giving a market capitalisation of €543m (2003: €342m). The
year end free float (shares not held by the Directors or related parties) was
88.03% (2003: 78.8%).

Following a change implemented by the London Stock Exchange on 20 December 2004,
the shares are now quoted only in euro.

Trading and Risk Management

The Group manages its betting risk through a central risk management and trading
team whose role is to compile the initial odds and, subsequently, manage the
odds and risk exposures through the life of the event. Risk limits are in place
within the trading room and compliance with limits is reported daily to senior
management and internal audit. Internal audit also carries out reviews of the
risk function.

A betting risk management sub-committee of the Board was established in 2003
under the chairmanship of David Power, a non-executive director. This Committee
sets overall policy for betting risk.  Limits are agreed with the Committee and
set annually but are subject to review by the Committee at any time.

The Group does not offer credit betting.

Dividend

The 2004 interim and proposed final dividend total 18.72 cent per share, (2003:
12.89 cent per share), amounting to €9.3m (2003: €6.2m) an increase of 45.2% on
2003. This represents dividend cover of 2.94 times (2003: 2.85). It is the
Board's intention to pay approximately one third of after tax earnings in annual
dividends on average.

International Financial Reporting Standards (IFRS)

The Group is preparing for the implementation of IFRS in 2005. A review has been
completed on the differences between current standards and IFRS. With the
exception of accounting for share based payment schemes the impact of the
changeover will be limited to a small number of areas of disclosure. The
different accounting treatment for both share option schemes and the long-term
incentive plan will give rise to small balance sheet and profit and loss account
adjustments. Our estimate is that the impact on the 2004 EPS of accounting under
IFRS would have resulted in a reduction in EPS of less than one cent.

Outlook

Trading for the year to date is satisfactory.

While the pendulum of sporting results will continue to swing between Paddy
Power and the punters, we look forward to continued growth across all channels
in line with our stated objectives.

Fintan Drury
Chairman
23 February 2005


CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2004
                                                                        Year ended                  Year ended
                                                                  31 December 2004            31 December 2003
                                                                             €'000                       €'000

Turnover                                                                 1,165,165                     913,624

Cost of sales                                                          (1,041,960)                   (825,429)

Gross profit                                                               123,205                      88,195

Operating expenses                                                        (92,071)                    (68,563)

Operating profit                                                            31,134                      19,632

Interest receivable and similar income                                       1,060                         883
Interest payable and similar charges                                          (54)                       (105)

Profit on ordinary activities before                                                                    
taxation                                                                    32,140                      20,410

Tax on profit on ordinary activities                                       (4,662)                     (2,859)

Profit on ordinary activities after                                                                     
taxation                                                                    27,478                      17,551

Dividends on equity shares
- paid                                                                     (3,105)                     (2,053)
- proposed                                                                 (6,235)                     (4,107)
                                                                           (9,340)                     (6,160)

Retained profit for the year                                                18,138                      11,391

Profit & Loss account, start of year                                        42,596                      31,205

Transfer in respect of long-term incentive                                     754                           -
plan

Profit & Loss account, end of year                                          61,488                      42,596

Earnings per Share
Basic                                                                      €0.5661                     €0.3697
Diluted                                                                    €0.5431                     €0.3502


CONSOLIDATED BALANCE SHEET
As at 31 December 2004

                                                                         31 December        31 December
                                                                                2004               2003
                                                                               €'000              €'000
Fixed assets
Intangible fixed assets - goodwill                                             1,759                904

Tangible fixed assets                                                         60,651             41,571

                                                                              62,410             42,475

Current assets
Debtors                                                                        2,290              2,188

Cash at bank and in hand                                                      47,206             39,173

                                                                              49,496             41,361

Creditors (amounts falling due within one year)                             (39,241)           (30,585)

Net current assets                                                            10,255            10,776

Total assets less current liabilities                                         72,665             53,251

Provision for liabilities and charges                                          (876)              (977)

Net assets                                                                    71,789             52,274

Capital and reserves
Called up share capital                                                        5,005              4,781

Share premium                                                                  6,680              3,975

Capital redemption reserve fund                                                  662                662

Capital conversion reserve fund                                                  260                260

Shares held by long-term incentive plan trust                                (2,306)                  -

Profit and loss account                                                       61,488            42,596

Shareholders' funds - all equity interests                                    71,789             52,274


CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2004
                                                                                Year Ended          Year Ended
                                                                               31 December         31 December
                                                                                      2004                2003
                                                                                     €'000               €'000


Net cash inflow from operating activities                                           45,021              32,144

Returns on investments and servicing of finance

Interest received                                                                    1,086                 865

Interest element of finance lease payments                                            (54)               (106)

                                                                                     1,032                 759
Taxation

Corporation tax paid                                                               (3,800)             (3,923)


Capital expenditure and financial investments

Acquisition of tangible fixed assets                                              (26,262)            (21,439)

Sale proceeds on disposal of tangible fixed assets                                      69                  96

                                                                                
Acquisitions                                                                      (26,193)            (21,343)

Purchase of business                                                               (1,017)                   -

Equity dividends paid                                                              (7,212)             (5,262)

Net cash inflow before financing                                                     7,831               2,375

Financing

Capital element of finance lease payments                                            (421)               (312)


Proceeds from the issue of new shares                                                2,929                 737

Purchase of shares held by long-term incentive plan                                (2,306)                   -
trust
                                                                                       202                 425


Net cash inflow                                                                      8,033               2,800



ACCOUNTING POLICIES
Year ended 31 December 2004

The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Group's financial
statements.

Basis of Preparation

The financial statements have been prepared in euro in accordance with generally
accepted accountancy principles under the historical cost convention and comply
with financial reporting standards of the Accounting Standards Board, as
promulgated by the Institute of Chartered Accountants in Ireland.

Basis of Consolidation

The Group financial statements consolidate the financial statements of the
Company and all its subsidiary undertakings based on financial statements at the
year end date.

Turnover

Turnover comprises proceeds from sports betting and gaming activities.  Sports
betting turnover, which is exclusive of betting tax and levies, represents
amounts received in respect of bets placed on events that occurred during the
year.  In accordance with industry practice, gaming turnover represents '
customer drop' which comprises amounts staked net of customer winnings.

Pensions

The Group operates a number of defined contribution schemes for certain
employees and executive directors. Contributions are charged to the profit and
loss account as incurred.

Foreign Currency

Transactions denominated in foreign currencies are translated at the exchange
rates ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into euro at the rates of
exchange ruling at the balance sheet date. The resulting profits and losses are
dealt with in the profit and loss account. For the purposes of consolidation of
subsidiaries, the closing rate method is used, under which translation gains or
loses are shown as movements in reserves. Profit and loss accounts of overseas
subsidiaries are translated at average exchange rates.

Financial Fixed Assets

Interests in subsidiary undertakings are stated in the Company balance sheet at
cost less, where necessary, provisions for impairment.

Intangible Fixed Assets - Goodwill

Goodwill arising on the acquisition of a subsidiary or business, representing
the excess of cost over the fair value of the identifiable assets and
liabilities acquired, is capitalised and amortised by equal annual installments
against profit over its expected useful life, currently 20 years. Provision is
made for any impairment.

Tangible Fixed Assets and Depreciation

Tangible fixed assets are stated at historical cost less accumulated
depreciation. Depreciation is calculated so as to write off the cost less
estimated residual value of tangible fixed assets on a straight line basis over
their estimated useful lives, as follows:
          
•    Freehold property - 50 years
•    Leasehold property and improvements - unexpired term of the lease, except 
     for leases with an initial term of ten or less years, which are depreciated 
     over the unexpired term of the lease plus the renewal length of the lease, 
     if there is a right of renewal.
•    Fixtures, fittings and equipment - 5/7 years
•    Computer equipment - 3 years
•    Equipment screens - 5 years
•    Leased equipment screens - 3 years
•    Motor vehicles - 5 years

Leases

Assets held under finance leases are included in the balance sheet at their
capital value and are depreciated over the term of the lease. The corresponding
liabilities are recorded as a creditor and the interest element of the finance
lease rentals is charged to the profit and loss account over the term of the
lease to produce a constant rate of charge on the balance of capital repayment
outstanding. Operating lease rentals are charged to the profit and loss account
on a straight-line basis over the lease term.

Taxation

Current tax, including Irish corporation tax and foreign tax, is provided on the
Group's taxable profits, at amounts expected to be paid using the tax rates and
laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date.  Provision is made at the
rates expected to apply when the timing differences reverse.  Timing differences
are differences between the Group's taxable profits and its results as stated in
the financial statements that arise from the inclusion of gains and losses in
taxable profits in periods different from those in which they are recognised in
the financial statements.

A deferred tax asset is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as more likely
than not that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted.

Long-term Incentive Plan

In accordance with UITF Abstract 17 (revised) 'Employee Share Schemes', the
excess of the fair market value of the related shares over the exercise price of
the share award on the grant date, is charged as employees' remuneration over
the period to which employee performance relates. A corresponding amount is
credited to the profit and loss account reserve.

Payments to the Plan's Trustees to acquire Company shares which have been
conditionally allocated to executives under the terms of the long-term incentive
plan are shown as a deduction from shareholders' funds in the consolidated
balance sheet.

NOTES TO THE FINANCIAL STATEMENTS

Year ended 31 December 2004
     
1.   Turnover and Segmental Information

     The turnover, operating profit and net assets of the Group relate to the
     provision of betting and gaming activities, substantially all of which are
     conducted in the Republic of Ireland and the UK.


Turnover by Delivery Channel                                             Year Ended            Year Ended
                                                                   31 December 2004      31 December 2003
                                                                              €'000                 €'000

Retail                                                                      688,651               551,136

Telephone                                                                   236,546               177,418

Online                                                                      239,968               185,070


                                                                          1,165,165               913,624


Turnover by Region                                                       Year Ended            Year Ended
                                                                   31 December 2004      31 December 2003
                                                                              €'000                 €'000

Ireland & other                                                             829,541               702,240

United Kingdom                                                              335,624               211,384

                                                                          1,165,165               913,624


Gross Win by Delivery Channel                                             Year Ended             Year Ended
                                                                    31 December 2004       31 December 2003
                                                                               €'000                  €'000

Retail                                                                        88,701                 67,907

Telephone                                                                     19,664                 13,179

Online                                                                        25,745                 13,524

                                                                             134,110                 94,610

Gross win is measured as being amounts staked (excluding betting tax and levies)
less the amount returned to customers as winnings.


Gross Profit by Delivery Channel                                    Year Ended          Year Ended
                                                              31 December 2004    31 December 2003
                                                                         €'000               €'000

Retail                                                                  81,196              65,676

Telephone                                                               18,381              11,096

Online                                                                  23,628              11,423

                                                                       123,205              88,195

Gross profit is measured as gross win less discount on bets and gross win taxes.


Operating Profit by Delivery Channel                                 Year Ended          Year Ended
                                                               31 December 2004    31 December 2003
                                                                          €'000               €'000

Retail                                                                   17,752              17,402

Telephone                                                                 4,552                 861

Online                                                                    8,830               1,369

                                                                         31,134              19,632

Net assets by delivery channel, and operating profit and net assets by
geographic segment are not disclosed as, in the opinion of the Directors, this
disclosure would be seriously prejudicial to the interests of the Group.
     
2.   Cost of Sales


Cost of Sales comprises:                                                  Year Ended           Year Ended
                                                                    31 December 2004     31 December 2003
                                                                               €'000                €'000

Cost of winning bets paid                                                  1,031,055              819,014

Other cost of sales                                                           10,905                6,415

                                                                           1,041,960              825,429

Other cost of sales comprises discounts on bets and taxes paid in relation to
Gross Win.
     
3.   Earnings per Share
                                                                           Year ended          Year ended
                                                                     31 December 2004    31 December 2003
                                                                                €'000               €'000

Profit for the financial year                                                  27,478              17,551

Weighted average number of shares in issue                                     48,536              47,479
Dilutive effect of share options outstanding                                    2,054               2,638

Diluted weighted average number of shares                                     50,590               50,117

Basic earnings per share                                                      €0.5661             €0.3697
Diluted earnings per share                                                    €0.5431             €0.3502
     
4.   Cash Flows
          
     (a)  Reconciliation of Operating Profit to Net Cash Inflow from Operating 
          Activities
                                                                Year ended              Year ended
                                                          31 December 2004        31 December 2003
                                                                     €'000                   €'000

Operating profit                                                    31,134                  19,632
Charge for long-term incentive plan                                    754                       -
Depreciation                                                         8,624                   6,405
Amortisation of goodwill                                               121                     121
Increase in debtors and prepayments                                  (129)                   (597)
Increase in creditors                                                4,548                   6,549
(Gain)/loss on disposal of tangible fixed assets                      (31)                      34
Net cash inflow from operating activities                           45,021                  32,144
     
(b)  Analysis of Changes in Cash During the Year
                                                                    Year ended          Year ended
                                                              31 December 2004    31 December 2003
                                                                         €'000               €'000

Balance at 1 January 2004                                               39,173              36,373

Net cash inflow                                                          8,033               2,800
Balance at 31 December 2004                                             47,206              39,173
     
(c)  Analysis of Net Funds
                                                                   Cashflows
                                              31 December 2003         €'000     31 December 2004
                                                         €'000                              €'000

Cash at bank and in hand                                39,173         8,033               47,206

Finance leases                                           (421)           421                    -
Total                                                   38,752         8,454               47,206



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