Betfair Profits High Despite New UK Tax Hit

Posted on: June 18, 2015, 02:38h. 

Last updated on: June 18, 2015, 02:52h.

Breon Corcoran Betfair CEO
Betfair CEO Breon Corcoran says the market remains competitive despite the new UK point of consumption tax. (Image:

Global betting exchange Betfair has reported that its robust increase in revenue over the last fiscal year has been driven largely by accelerated investments in marketing and mobile sports betting, which now accounts for around 70 percent of all sports betting turnover.

Revenue was up 21 percent to £476.5 million ($757 million) for the London-listed company, which said that an increase in marketing spend had led to an encouraging 52 percent rise in active customers to a record 1.7 million.

The World Cup early in the financial period enabled the company to engage with new customers and renew relationships with existing ones, according to Betfair CEO Breon Corcoran. This created a trading momentum which resulted in record customer numbers and betting volumes at UK horseracing meetings, the Cheltenham Festival, and Grand National. The number of active customers in these markets increased by 70 percent to 1,456,000, the company reported.

Heavy Investment

“Product is a key reason why customers join and stay with Betfair,” Corcoran noted. “Important product improvements, including the extension of Price Rush to each way bets and Cash Out to in-running horseracing, helped to drive a strong performance during these key racing festivals.

“We continue to invest heavily in the business,” said Corcoran. “This year we spent [around] £28m more on marketing and customer bonuses and added more than 60 people to our product development teams.”

Revenue growth helped Betfair record an operating profit of £94.3 million, up 53 percent year-on-year, with profit for the year climbing 69 percent to £86.4 million. This, despite the introduction of a UK point of consumption tax which threatened to swallow up profit margins for online gambling companies. Betfair said it expects a similar tax regime to be established in Ireland by August, and will seek to obtain a license.

Mulls B2B Solution

“The market remains highly competitive and, despite the introduction of the UK point of consumption tax, operators are still spending heavily on marketing and promotions,” said Corcoran.

“We continue to believe that scale is critical and we have opportunities to invest for profitable growth. We have momentum, current trading is good and we are confident we can deliver our expectations for the coming financial year.”

Corcoran also said that the company was mulling the idea of franchising out its betting exchange as a B2B offering. Betfair’s relationship with Crown Resorts in Australia would serve as the prototype for such a venture, he said.

Last year, the company sold its 50 percent stake in Betfair Australia to Crown, but will continue to supply its product in return for revenue share. This would be the model for its B2B solution, Corcoran said.