Betfred Generates More Revenue but Taxation Cuts Profits

Betfred profits drop after tax hit.

UK gamblers are spending more but Betfred’s profits have taken a tumble thanks to new taxation. (Image: thedrum.com)

Betfred’s annual profits have been negatively impacted by the UK Gambling Commission’s (UKGC) new taxation policy.

Assessing its financial performance from September 2014 to September 2015, Betfred found that its gross earnings increased from £170 million per week to £200 million per week.

However, the combination of taxation and the closure of its Australian operations have caused the operator’s Earnings before interest, tax, depreciation and amortisation (EBITDA) to fall from £101 million to £56 million.

Taxes Slash Profit Margin

In a statement to the press, Betfred acknowledged that the closure of its assets in Australia contributed to its profit drop, but stressed that the UKGC’s Point of Consumption Tax was also to blame.

“Despite the significant increase in annualised turnover, the group’s results have been impacted by increased UK gaming taxes and lower margins as a result of a series of unfavourable results,” read the company’s press release.

Since the UK adopted a new system of regulation and licensing at the close of 2014, operators have been outspoken about the way their operations are taxed.

Under the UKGC’s licensing conditions, operators must pay a 15 percent levy on gross gambling profits.

Although the Gibraltar Betting and Gaming Association (GBGA) fought the proposed levy in court before it kicked into life, the appeal was unsuccessful and that, according to Betfred, is affecting profits.

Brits Are Gambling More

In other UK gambling news this week, gamblers in Britain wagered more between October 2014 and September 2015 than they did in the previous accounting period (April 2014 to March 2015).

Despite the change in accounting dates (due in part to the introduction of the UK’s new gaming regulations in November 2014), gamblers wagered £12.6 billion, which is an increase of £1.4 billion.

According to the UKGC’s annual report, revenue from the much maligned Fixed Odds Betting Terminals (FOBTs) increased by 2 percent to £1.7 billion, while online gambling accounted for 29 percent of the industry’s overall revenue.

Overall the report should be seen as a positive for the industry. However, as Betfred’s bosses have pointed out, things aren’t quite as rosy on an individual level.

While more people are spending more money on gambling activities in the UK, it seems that operators now have to pay more to offer their service; something which is hurting their bottom lines.

Of course, any increases should be seen as a positive, but if operators continue to experience significant profit drops then there could be more calls for change in the coming months.

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