Betfair, Britain's biggest betting exchange, recorded an eightfold increase in profits last year, according to accounts just filed at Companies House.

The performance makes it one of Britain's fastest-growing - and most controversial - companies and underlines why traditional bookmakers are so concerned by the rise of betting exchanges.

Betfair is the trading name of The Sporting Exchange Ltd, which saw pre-tax profits rise from £1.07m to £8.45m in the 12 months to April 2003. Its revenues - simply its commission on winning bets - leapt from £6.09m to £32.3m, the equivalent of £625,000 a week.

Although Betfair is still a fraction of the size of the major bookmakers - William Hill, for example, made pre-tax profits of £171m last year - the most striking aspect of the performance is the 26% pre-tax profit margin. Betfair effectively turns around £1 in every £4 of revenue into profit, a ratio that any consumer business would regard as impressive.

Betfair's spokesman Mark Davies denied that there is a conflict between the company's high profit margins and its marketing of itself as a low-cost consumer champion. "The important thing is that the customer gets the best price by some distance, even when you take commission into account," he said. "For our customers, we are just a much cheaper proposition than traditional bookmakers. We don't have costs beyond a head office and technology."

Sporting Exchange filed to Companies House on almost the last day of a 13-month period given to private companies with overseas subsidiaries to submit audited accounts.