Quoted bookmaker Paddy Power announced a cracking set of full-year 2007 results this week.

Three years after he was first appointed chief executive at the age of just 35 it is clear that Patrick Kennedy has justified the faith placed in him by the company's board.

With the largest chain of retail bookie's shops in the country and a stock market capitalisation of almost €1.1bn, Paddy Power is now very much part of the Irish corporate establishment. This week it reported a 59pc increase in operating profits to €72m on a turnover up 13pc to over €2bn.

It wasn't always like that. In fact, the company was founded as recently as 1988 when Stewart Kenny, who sold his chain of shops to UK bookie Coral two years previously, teamed up with John Corcoran.

Coral was one of a number of UK bookies which paid inflated prices for Irish retail betting shops in the mid-1980s. They then discovered to their cost that, unlike in the UK, there are virtually no obstacles to opening new bookie's shops in this country.

Over the following 12 years Paddy Power, which specialised in offering novelty bets, grew rapidly. On one occasion it famously offered odds on the Pope signing for Glasgow Rangers. While some of these bets might have been in dubious taste they provided an supply of cheap publicity to the rapidly growing firm.

By the end of 2000, Paddy Power had 118 retail betting shops in Ireland. During that year, its turnover reached €360m and it recorded pre-tax profits of €11m. In December of that year, the company floated its shares on the Stock Exchange.

Paddy Power was very much the creation of Kenny, who was the company's first chief executive; and Corcoran, who was the first chairman.

However, Kenny stepped down as chief executive in 2002 at the age of just 51. He briefly replaced Corcoran, who retired as chairman at the same time, before cutting his ties with the company the following year.

Successfully replacing the founders is one of the biggest challenges any company ever has to face. John O'Reilly, who had served as Paddy Power's finance director for 14 years, took over the reins from Kenny before retiring in 2005.

However, it was almost certainly the appointment of former RTE journalist-turned- sports-agent Fintan Drury to succeed Kenny as chairman which was to prove most significant for Paddy Power's future.

Although a surprise appointment as chairman, Drury has helped Paddy Power retain the hard-edged focus on the main chance which many feared would be lost with the departure of the founders.

O'Reilly's retirement had been well flagged in advance and his successor as finance director Ross Ivers was the red-hot favourite to move across the corridor into the chief executive's office.

Drury it seems had other ideas. Firstly, the then 34-year old Patrick Kennedy was appointed a non-executive director of Paddy Power in March 2004. Then just over a year later, Paddy Power stunned the market when it announced that Kennedy not Ivers would be O'Reilly's successor.

If there is such a thing as an Irish business aristocracy, then Kennedy was born into it. He is the son of David Kennedy who was chief executive of Aer Lingus in the 1980s.

Lucrative

Kennedy snr moved on to lucrative career as a professional director serving on the boards of several blue-chip quoted companies, including CRH, Bank of Ireland and Jurys Doyle. He was highly regarded as a company doctor serving spells as acting chief executive of both Bank of Ireland and US airline TWA when the previous incumbents made unscheduled departures.

Kennedy jnr was educated at the elite Jesuit-run Clongowes Wood, the school which also produced Ryanair chief executive Michael O'Leary and former Taoiseach John Bruton.

He then progressed to UCD from which he graduated with a commerce degree. During his time at both Clongowes and UCD he was a keen rugby player and is still remembered as having been a handy number eight. From there it was on to KPMG and qualification as a chartered accountant.

After KPMG, Kennedy joined management consultants McKinsey before being recruited by Greencore as head of corporate development in 1998. The highlight of his seven-year stint at Greencore was the Stg£348m acquisition of Hazlewood Foods in 2000. With the writing on the wall for its legacy sugar business, Greencore badly needed a new stream of earnings. Hazlewood, a sprawling food conglomerate which had been built up by former Manchester City and England player Francis Lee, seemed to be the answer to its problems. Over the next three years, Greencore either sold off or closed Hazlewood's non-core operations.

Kennedy, as the executive in charge of this sometimes brutal pruning process, was generally regarded as having done a good job and he was promoted to finance director in 2002. The promotion was interpreted as anointing Kennedy as the likely successor to Greencore chief executive David Dilger.

Except that it didn't happen. In January 2005, Dilger gave a now notorious interview to the 'Financial Times' which was widely interpreted as advertising his availability for another senior corporate vacancy. Many analysts reckoned that Dilger entertained hopes of succeeding Michael Buckley as AIB boss. However, the job went to Eugene Sheehy, instead.

With his career path at Greencore apparently blocked (Dilger has since announced his intention to quit Greencore at the end of this month), Kennedy didn't linger long at Greencore. A keen punter since his university days and already a non-executive director of Paddy Power, Kennedy didn't hesitate when offered the chance to lead the company.

While most of us associate gambling with high street retail betting shops and racecourse betting rings, the reality is very different. An increasing proportion of gambling is now being done online.

Paddy Power was one of the pioneers of internet gambling. In 2007 it made operating profits of €32m from its online gambling operations, 45pc of its total profits of €72m.

Online gambling has made it much easier for bookies to expand into overseas markets. With the exception of the US, which for the time being has turned its back on online gambling, the internet seems to be the future of gambling.

This has major implications for national exchequers such as our own which have traditionally relied on heavily regulated retail bookie's shops to collect betting duty. At one stage in the 1980s, betting duty was at 20pc and was still at 10pc as recently as 1999.

Fleeced

Such utterly penal rates of betting duty are no longer feasible in the internet age. Why get fleeced at the bookie's when you can go online and gamble tax-free? Governments, including our own, had no choice but to slash rates of betting duty with the Irish rate of betting duty cut to just 1pc in 2006.

The growing importance of internet gambling has opened up a huge gap between traditional bookies who are largely reliant on on-course and betting shop business and bigger players such as Paddy Power with growing internet operations.

Tensions came to a head in October 2007 when Kennedy pulled Paddy Power out of the Irish Bookmakers Association. Ostensibly about the contents of the IBA's pre-budget submission and TV rights, the row highlighted a growing disparity of interests between the off-line and on-line bookies.

Despite its large and growing internet business, Paddy Power, with 178 shops at the end of last year, remains the largest retail betting chain in Ireland. It also has 58 shops in the UK as well as a telephone gambling business. Although the Irish retail business is highly profitable, with 2007 operating profits of €34.6m, the UK shops have never made a profit and lost €900,000 last year.

So, will Paddy Power stick with its bookie's shops or migrate its entire business online? Getting that bet right will be Patrick Kennedy's biggest challenge over the next few years.