Betfair recently announced its results for the year to 30 April 2013 and it revealed a number of elements that encapsulate the changing nature of the e-gaming sector.
Not least of these was the fact that Betfair’s ‘effective underlying tax rate’ had risen from 10.5% in 2012 to 16.4% last year. The company states that “we continue to expect the long-term sustainable tax rate to remain around 16%.”
E-gaming tax bills have been rising as the shift to local licences takes place. Gaming and corporate taxes are higher in the local markets than they were in the purely offshore corporate set up.
Perhaps as a way of mitigating these increasing costs Betfair stated that in May 2013 “we changed the base level of commission from the standard 5% to between 4% and 7.5% in five countries and have recently extended these trials to a further 18 countries.”
Betfair has also increased the percentage of marketing spend that is focused on the UK from less than 50% to more than 75%. The nature of the UK e-gaming market is due to change in 2014 when the point of consumption tax (at an assumed rate of 15%) is introduced. Again, this will increase underlying costs for companies like Betfair.
“Betfair has a number of high value customers using third party applications and automatic trading programs, which utilise our Application Program Interface (API) to directly access the Exchange. We have recently launched a new API to allow these vendors to build out more sophisticated trading tools to provide an improved user experience for this important customer segment.”
Betfair posted an operating loss of GB£ 69 million in 2013, a large part of which was caused by GB£ 120 million in impairment of goodwill and depreciation. But there was also a sum of GB£ 19 million in restructuring costs and “professional services fees of £2.7m resulting from the rejected takeover approach by CVC and partners.”