Bet365 Profit Decline by 88% Due to Increased Marketing Expenditures Despite Revenue Growth

Although Bet365 has experienced an increase in revenue, the company has also seen a significant profit decline due to higher advertisement expenses. While revenue has grown, the increased investment in marketing has resulted in a drop in profits for the company.

In 2021-22, Bet365 saw a slight increase in revenue due to gaming growth, offsetting a decline in sports betting. However, the company experienced a significant drop in profit due to higher costs for acquiring new customers in new markets.

In the year ending March 27, 2022, Bet365's revenue from sports and gaming rose by 2.9% year-on-year to £2.85bn. This increase was largely driven by the strong performance of its gaming operations, which saw revenue increase by 25%. However, sports betting revenue declined by 2% from the previous year. These figures show that sports betting revenue for 2021-22 were around £2.30bn, while gaming revenue was approximately £546m.

Bet365 stated that the decrease in sports betting revenue was due to lower margins, despite an increase in the total amount wagered and a 48% increase in active customers. Regulus Partners pointed out that Bet365's margins in 2020-21 were unusually high and returned to more typical levels in 2021-22. On an underlying basis, the company's sports betting performance reportedly experienced growth of around 15-20%.

Regulus commented, "Bet365's underlying performance is much stronger than the 2% revenue growth suggests, especially given the nearly 50% increase in global active users."

Although Regulus considered the results vital, it pointed out that Bet365's growth was slower than the overall market. Regulus stated, "While the absolute results are solid, Bet365's competitive landscape is changing rapidly and 2% growth in this period implies a significant loss in market share. Bet365's main competition in the past came from poorly run, UK-based dot com operators, monopolies, and local businesses with little digital presence. However, most markets now have 'local heroes' that are not Bet365. As a result, while Bet365 is still likely to be the market leader in in-play sports betting, it is less likely to be a market leader in highly localized, multiples-led, pre-match-led, data-light, or gaming-led markets, which is an expanding list."

Despite the increase in revenue, costs also rose significantly. Direct costs for sports and gaming grew at a slower rate of 1.4% to £496.8m, leading to a gross profit of £2.30bn for Bet365, which was a 2.7% increase from the previous year. However, administrative expenses increased, rising 18.2% to £2.31bn. The company attributed this increase to the costs associated with raising brand awareness in new markets and continued investments in IT infrastructure and technology. Additionally, staff costs increased as Bet365 expanded its headcount from 5,443 to 6,092. However, some of this was offset by lower pay for directors, including a 16.5% decrease in the salary of CEO Denise Coates to £213.4m.

Bottom line

The higher costs caused Bet365's operating profit from sports and gaming decreased considerably, by 87.8% to £41.7m. Including non-operating income of £28.1m from investments and £6.3m in interest income, the company had a pre-tax profit of £76.1m. Additionally, the Bet365 Group owns Stoke City Football Club, which had a loss of £26.2m on revenue of £21.8m for the year. As a result, the combined group had pre-tax earnings of £49.8m for the year. After accounting for taxes and other comprehensive income, the group's total profit for the year was £42.8m, a decrease of 89.1% compared to the last year.