Centrebet FY profit hit by growth strategy
Australian online bookmaker Centrebet has warned the market it expects full-year net profit to be halved as it unveils "Project Rocket", aimed at doubling its market share down under by 2015.
Australian online bookmaker Centrebet has warned it expects full-year net profit to be cut by half to AU$8m as it unveiled a bold strategic plan aimed at doubling its share of the Australian corporate bookmaking market to 20% by 2015.
According to the 24-page document issued this morning to the Australian Stock Exchange, nicknamed Project Rocket: “Industry dynamics are favourable given recent deregulation in marketing, continued migration from land-based TABs to online and increased barriers to entry. Centrebet is very well placed to exploit these conditions.”
The Northern Territory-licensed bookmaker said in its statement that it aims to “achieve a circa 50% uplift in net profit relative to status quo by FY 15, with net profit of circa AU$32m” through “[S]ignficantly increased brand marketing investment, a change in advertising spend and mix and a step up in new product development in Australia.”
However, the increased investment needed to drive a “significant increase in new customer acquisitions” starting this year will have “a short-term earnings impacts despite revenue growth, as new clients generate a negative net contribution, on average, in their first year”, said the bookmaker.
In addition to maximising “cash flow from Europe to focus investment on [the]higher return Australian market”, racing will be a dominant growth focus over the five-year plan. “Growth in racing market share is critical to Centrebet achieving 20% or greater market share of the Australian corporate bookmaking market by 2015.” Centrebet’s 5% market share of horse racing wagering turnover among corporate bookmakers currently lags well behind its 24% share of sports wagering.
Growth will also come from what Centrebet termed “Tier 1″ bookmakers “ itself, Sportingbet and Paddy Power-owned Sportsbet and IASBet “ continuing to take market share from from “land-based TABs and Tier 2 operators,” such as Tabcorp-owned Luxbet, Betstar and Betezy, said the company.
The online bookmaker has been regularly linked with a takeover by Europe-facing operators looking to gain a foothold in the fast-growing Australian market, including Ladbrokes – down to the last three companies tendering for the Victorian wagering and gaming licence “ as well as William Hill and Bwin.
Centrebet chairman Graham Kelly however added that although the operator “will continue to explore appropriate value adding consolidation opportunities, the strategy announced today lays out our plan to realise Centrebet’s substantial opportunity to deliver shareholder value through organic growth.”