bet365 and the truth behind the figures1st October 2015 6:41 am GMT
bet365’s annual report revealed the increasing value of a well-oiled machine rather than the super-stellar year hailed by some.
Financial reports are not the most thrilling documents in the world. They can be misleading. It would help if they all adhered to the same format rather than relentlessly accentuating the positive even in the hardest of years.
Yes, they can be confusing too but give them a bit of time and ask a few questions of the people who wrote them and their secrets are revealing. For better or worse, they are the best means we have of assessing the health of the companies we are interested in.
And most people are interested in bet365. Well, most people should be interested in bet365. The UK market leader in online gaming dwarves the likes of William Hill, Paddy Power and Betfair. Net revenue is almost three times that of William Hill. Paddy Power and Betfair’s combined revenue is just over two-thirds of bet365’s figure of £1.47bn. Even PokerStars doesn’t reach 50 per cent… but that is not really like-for-like yet.
Net revenue is just one figure in which bet365 dominates the competition. The figure most of the market has focused on thus far is profit.
Gaming Intelligence is not in the habit of correcting lesser-informed journalists but given the fact that most of the headlines we have read over the past 24 hours hailed profit “soaring” as much as 92 per cent (according to the Financial Times), it is worth explaining some context.
Last year, bet365 donated £105m to the bet365 Foundation to set up the charity. This year it donated £10m to the Foundation. When the FT looks at profit soaring 92 per cent it is forgetting to take into consideration the £105m taken from last year’s accounts.
So here are the crucial figures: operating profit at bet365 rose a fairly commendable (this was said with a dollop of understatement) 27 per cent to £406.4m.
To be fair, one could call that “soaring”, even if it is not as high as the imagined 92 per cent.
“But how did bet365 do this?” we hear you ask. “Was it not hit with Point of Consumption Tax and so forth?”
Well yes, it was. But bet365 was one of the few supporters of the UK introducing a point of consumption tax. It used to pay UK tax from income derived from all its sports betting customers no matter where in the world they lived. After moving its operations team to Gibraltar and winning a licence from the UK Gambling Commission, it now pays only about a quarter of that amount to the UK authorities.
This is called good husbandry. The best-run companies benefit from doing things right. And bet365 almost always does things right – even if it occasionally gets bashed for doing things that everyone else does even after admitting and correcting such wrongdoing.
This is part of the reason why bet365 is unlikely to be too bothered by Paddy Power merging with Betfair or Ladbrokes merging with Coral or even William Hill merging with whoever it comes up with in the coming months.
According to its own figures, William Hill believes it has a slightly higher share of the UK online market than bet365 with 15 per cent compared to bet 365’s 14 per cent. But only about a quarter of bet365’s revenue comes from the UK. Eighty-two per cent of Hills’ revenue derives from the UK.
For the record, according to Hills’ figures, Paddy Power Betfair will have 16 per cent of the market before synergies. Ladbrokes Coral will have 10 per cent and PokerStars has 5 per cent.
On the subject of poker, it is worth noting that bet365 even managed to boost this much-maligned vertical – albeit only by 3 per cent. However, that is some achievement considering its supplier Playtech saw revenue fall 6 per cent over the nearest comparable period.
How does it outperform its iPoker bretheren? One of the reasons was introducing mobile poker but possibly the biggest explanation was introducing exclusive bet365 tables. If sports betting-focussed fish are playing other sports betting-focussed fish then they are less likely to swim off.
Such sensible decisions are what drives profit and revenue ever upwards. These are the figures that Amaya aspires to emulate as it pushes PokerStars into new products.
The business made £406m profit during the last financial year. Chief executive Denise Coates received £37.69m in dividends, brother John received £18.75m and Denise’s father Peter Coates was awarded £5m. The fourth director, ex-finance director Will Roseff received £5m. Nice work if you can get it. And several million reasons why bet365 won’t be worrying too much about the competition just yet.