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“Lower than expected” FOBT hit lets Betfred post FY2019 profit

| By Aaron Noy
The reduction in maximum stakes for fixed odds betting terminals (FOBTs) had a "lower than expected" hit on Betfred's revenue in the year ending 29 September 2019, allowing the operator to make a £153.6m (€169.3m/$197.1m) profit despite a 14.6% revenue decline to £621.4m.
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The operator’s £621.4m in revenue came on £10.10bn worth of wagers, down 25.1%. The operator said the reduction in maximum stakes for FOBTs to £2 was the key reason for the decline in turnover. However it noted the impact of this limit was “lower than expected”.

Despite the significantly lower revenue, Betfred paid £53.3m in betting duty, down only 2.6%, as the decline in revenue was mainly due to gaming machines. However, its machine gaming duty expenses were down 26.2% to £64.3m. It paid £9.6m in statutory betting levy, down 25.1%.

In addition, it paid £19.1m in commissions, down 8.6%. This left a gross profit of £475.0m, down 14.0%.

Betfred then paid £447.2m in administrative expenses, down 2.3% and a further £13.5m in goodwill and licence amortisation, down 28.6%.

However, the operator made £57.9m in exceptional income, a vast difference from the £119.6m in exceptional costs it paid in 2018. This exceptional income was mostly due to reversal of impairment on retail stores following the reduction of FOBT stakes, after the impact of the stake limit was lower than expected.

After this income and £2.5m of other operating income, down 4.1%, Betfred made an operating profit of £74.8m, compared to a £44.5m loss the year prior.

The business then earned a further £97.7m from investments, more than 100 times what it made in this area in 2018. Its interest income came to £2.4m, up 127.7% and paid £3.7m in interest expenses, down 14.2%.

This resulted in a pre-tax profit of £171.2m, compared to a £43.8m loss in 2018.

After paying £14.5m in tax, its profit came to £156.7m, after having pade a £40.7m loss the year prior.

After paying £634,000 on the disposal of a non-controlling interest and £3.0m on the re-measurement of employee benefit liabilities, as well as making  £515,000 in tax benefits on these costs and £21,000 through foreign exchange, Betfred’s profit came to £153.6m. This compared to £21.1m in 2018 or £25.4m that year when looking only at continued operations, after Betfred lost control of Tpoolco and Tote Direct.

After accounting for non-controlling interests, the profit attributable to Betfred shareholders came to £154.2m.

As of 29 September, 2019, Betfred operated 1,578 retail betting shops, down from 1,650 a year prior.

The time since the end of the financial year has seen Betfred look to the US, rolling out online wagering in Colorado and Iowa through a partnership with Saratoga Casino Black Hawk in the former and Elite Casino Resorts’ Grand Falls Casino Resort in the latter.

The operator looks to expand further in the US, having partnered Pennsylvania’s Wind Creek Casino & Resort Bethlehem for online, retail and mobile sports betting, and will operate a sportsbook at the Mohegan Sun Casino at Virgin Hotels Las Vegas.

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