Bet365’s revenue ticked slightly up in 2024-22 as gaming growth offset a sports betting
decline, but increased customer acquisition costs in new markets led to an almost 90%
drop in profit.
Bet365 results reported that revenue from sports and gaming for the
year ended 27 March 2024 was up by 2.9% year-on-year to £2.85bn.
The increase was
mostly due to the success of its gaming operations. Sports gaming revenue was down by
2% from 2024-21, while gaming revenue was up by 25%.
This would suggest sports betting
revenue for 2024-22 of around £2.30bn, while gaming revenue would fall around
£546m.
Bet365 RESULTs SHOW revenue was up by 2.9% year-on-year to £2.85bn.
The operator
said that the decline in sports betting revenue was margin-based, as the total amount
that was wagered increased and the number of active customers was up by 48%.
Regulus
Partners noted that Bet365’s margins in 2024-21 were “unusually high”, and that in
2024-22 they came back to more typical levels. It said that on an underlying basis, its
sports betting performance achieved growth of around 15-20%.
“To a large extent,
Bet365’s underlying performance is far stronger than 2% revenue growth suggests,
especially as evidenced by a nearly 50% increase in global active users,” Regulus
said.
“In part, the anaemic revenue performance is due to unusually high sports betting
margins during the comparable period, caused by lockdown and major events disruption as
governments reacted to Covid-19, which implied a circa 15% revenue headwind, made worse
by a bad run of results combining with aggressive bonusing during the latter half of
the FY22 period.
“We believe a circa 20% swing in sports betting revenue can be
explained by margins and bonusing, suggesting a healthy underlying sports betting
growth rate of 15-20% across the business.”
A further 10% decline in average revenue
per Bet365 user, Regulus said, could be explained by “a combination of safer gambling
measures and emerging market growth”.
Acquisitions on the cards?
While Regulus said the
results were strong, it noted that the operator’s growth was slower than the market as
a whole.
“While the absolute results are solid, Bet365’s competitive landscape is
changing rapidly and 2% growth in this period implies a material loss in share,”
Regulus said. “Whereas a decade ago, Bet365’s main competition were a mix of badly run,
UK-led, dotcom operators, monopolies and local businesses with little digital scale,
most markets now contain ‘local heroes’ which are not Bet365.
“Therefore, while Bet365
is still likely to be the market leader in in-play-led sports betting, it is far less
likely to be a market leader in highly localised, multiples-led, pre-match-led,
data-light, or gaming-led markets, which represents a dangerously expanding list.”
With
the operator continuing to boast a strong balance sheet, Regulus pondered whether
acquisitions could help the business maintain market share, but noted that these type
of deals were not what had made Bet365 a market leader in the first place.
“For Bet365,
whether or not an impressive accumulated balance sheet of £3.3bn in cash and
investments should be deployed to fix a growing global market share issue is a very
personal and cultural question: not being forced to do deals for the sake of it has
been one of Bet365’s key strengths over the last twenty years,” Regulus said. “More
often than not, being very good at one thing generates considerably more sustainable
value than trying to take on the world.”
Marketing expenses rise
Meanwhile, costs
increased significantly.
Direct costs for sports and gaming grew more slowly than
revenue, by 1.4% to £496.8m, leaving a gross profit of £2.30bn for Bet365, up by 2.7%
from 2024-21.
However, administrative expenses grew much more rapidly, by 18.2% to
£2.31bn. This, it said, was “driven by significant costs associated with raising brand
awareness in new markets alongside continued investment in IT infrastructure and
technology”.
Staff costs were also up, as Bet365 increased its headcount from 5,443 to
6,092, though some of this was offset by lower pay for directors, including its
highest-paid director – chief executive Denise Coates – receiving £213.4m, down by
16.5% year-on-year.
Bet365 profit drops sharply
As a result of the higher costs,
Bet365’s operating profit from sports and gaming declined sharply, by 87.8% to
£41.7m.
After non-operating income – £28.1m in gains from investments and £6.3m in
interest income – the operator made a pre-tax profit of £76.1m.
The Bet365 Group also
owns Stoke City Football Club. The club made a £26.2m loss for the year on revenue of
£21.8m. As a result, the combined group made a £49.8m pre-tax profit for the
year.
After taking into account taxes and other comprehensive income, the group’s total
profit for the year was £42.8m, which was down by 89.1% year-on-year.
