City Bet Club, the expert tipster service founded by leading industry veterans, predicts that UK operator Q4 2022 earnings reports are likely to make disappointing reading.
In a ‘triple punch’ for operator brands, the compounded issues of a steep decline in World Cup turnover compared to Russia 2018, an overhaul of the winter sporting calendar to accommodate the Qatar tournament, and “intrusive” affordability checks are expected to have a significant impact on turnover and consequentially, reported earnings.
By analysing financial performance, the World Cup is expected to have netted a strong margin-win for operators due to shock results, making it one of the most “bookie-friendly” in history.
However, early-stage punter losses in the Group Stage, which continued throughout the tournament will have heavily affected overall turnover.
In particular, City Bet Club’s analysis of January 2023’s trading and financial updates issued so far by major UK brands reflect this, noting that Bet365’s announcement this month is a key indicator of market health.
With Bet365’s operating profit down by 88% for the financial year due to significant investment in overseas jurisdictions, it is seen as a strong indication that major operators no longer view the UK as a growth market.
This view is supported further with Kindred’s trading update, owner of UK flagship brand Unibet. It highlights an unexpectedly low sports margin in the last quarter – despite the “bookie-friendly” World Cup results. This likely alludes to overstretched marketing and promotional spend, eroding gross win and margin.
The third major indicator that World Cup turnover has fallen short of expectations is via 888/William Hill’s trading update; especially with like-for-like gross win performance compared to Russia 2018.
In choosing to highlight the metric of ‘Player User Days’, by comparing customer engagement performance of the delayed Euro 2020 with Qatar 2022, City Bet Club believes that the data does not bode well.
This is especially due to the World Cup having 25% more matches as well as the lack of a heavy summer horse racing program to compete with, suggesting the like-for-like comparison indicates an uplift of only 22% to be disappointing.
Compounding the overall issue for UK-facing bookmakers further is the third punch, that of affordability checks, pointing to a far wider structural issue in the industry.
As highlighted by leading commentators in the Racing Post, major betting exchanges and high-profile professional gamblers, the issue of “intrusive” affordability checks are a major factor in reduced betting activity for UK operators.
The effect on horse racing’s income from the levy is directly related to bookmaker profits. Not only is this seen by City Bet Club as a serious issue for bookmakers, but also for UK racing.
As further confirmation of this view, Arena Racing Company has estimated that digital betting turnover on UK racing has declined by £800m in 2022, with an estimated £40m loss in income from bookmakers.
Commenting on the situation, David Brown, co-founder of City Bet Club and one of the UK’s most experienced trading directors, believes that this has created a bleak outlook for the UK. He added:
“I’ve been in the industry since 1976, and with 47 years in the game, this is by far the most pessimistic outlook for the health of the UK betting market that I’ve seen.
“While the World Cup may have seen record margins, word on the street is that turnover is significantly down compared to Russia 2018. Given that punters suffered many setbacks early in the Group Stage, the industry saw reduced recycling of customer money as bookie-friendly results continued throughout the tournament.
“Traditionally a major football tournament and robust Christmas period, with a full program of racing, would normally put the big brands in very positive territory. Currently – the silence says it all, and we’re yet to see comparisons of like-for-like turnover to the 2018 World Cup, which may infer all is not well.
“Last but not least is the uncertainty around the government white paper on gambling, which is yet to go public. This has the potential to add even more challenges to the operation of the UK betting market. It will no doubt be a key decider on how the industry proceeds from here.”
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