Analysis: bet365 speaks softly, carries a big stick
Bet365's latest set of results once again mark them out as a threat to every operator as the UK PoC tax looms
Bet365’s latest set of results were released to a decidedly muted fanfare, with only The Guardian from the mainstream press picking up on the details of a quite astonishing year for the operator. This is not overly surprising, as while others shout about their achievements, the Stoke-based firm just quietly gets on with growing its business. But the numbers posted by bet365 in its 2012 results deserve to be heard loud and clear, as they should be a concern to any of the big operators in the egaming sector.
It’s rare to get a glimpse behind the scenes at bet365, so the firm’s annual results are pored over with interest by operators and analysts alike. And this year’s make worrying reading for its competitors in the sector. Group profits of £148m, with growth of around a third, mask what was an exceptional year for the betting and gaming side of the business. While the firm’s ownership of football club Stoke City contributed a £30m loss to the balance sheet, profits from the egaming business grew by 54% to £176.8m.
Let’s compare this to arguably its biggest rival, William Hill Online. The Gibraltar-based online division of Willam Hill saw operating profits from its online business grow 36% in 2012 to £145.3m and for the comparative period its operating profit was £151.3m. Bet365 also leaves Hills trailing in mobile where the figures revealed by bet365 joint CEO Denise Coates were truly staggering. Amounts wagered on mobile grew by 158% while net revenues grew by 150% in the period. In fact everywhere you look the numbers are eye-watering. In-play wagering amounts rose by 61%, total amounts wagered rose by 57% to nearly £20bn and active sports users rose by 50%.
Perhaps the most impressive number of all was the firm posted growth in all four verticals. The firm noted overall gaming net revenue grew by 35%, driven by “strong casino performance” while maintaining yields at the same level as the previous year. This is not unique within the sector, with many rival operators showing strong growth in casino, but few can also boast growth in both poker and bingo in the same period. Bet365 grew 25% in bingo, thanks to a heavy TV marketing push, and 10% in the toughest market of all, poker.
Despite the record year, the firm’s owners only took out around £15m in dividends, leaving £100m in the business. Bet365’s cash at hand is now £432m, which is around three times the size of Betfair’s ‘war chest’ of £145m. If the firm were ever to feel the need to get acquisitive in the market, it certainly has the ammunition to make a significant raid. Based on its previous history, it’s hard to imagine bet365 suddenly entering the M&A fray, but it’s something other firms might want to note with interest.
Crucially bet365 appears to be continuing to invest in the business alongside the growth. Staff rose by 20% to 2,596 in the period on the back of significant investment in technology and marketing. It also recognises the value of regulated markets and has invested in a Spanish licence, with Greece and Germany also on its agenda. It clearly has big plans in mobile and further regulatory moves would not be a surprise.
What’s perhaps most interesting of all is that Bet365 managed all of this while operating within the UK and the firm noted in its results it “welcomes the proposed move to a point of consumption tax in the UK”. It was also smart enough to note the potential benefits of a competitive tax rate for UK-facing online businesses. “It is crucial; however, to the success of the new regime that the tax rate is set at a sensible level so as to ensure that it captures a large percentage of the market,” Coates said in the results.
Bet365 are extremely well placed to cope with any UK point of consumption tax, with the attendant effects likely to be felt far more by its rivals far more than they will be in Stoke. Rather than worrying about an increase in tax rates, it can focus on growing its business outside the UK while continuing to power on in mobile, in-play and gaming in its home market through a substantial investment in tech and infrastructure. They may not be shouting, but the rest of the UK sector should be listening very hard indeed.