Profits falling in Australia for Sportsbet and Ladbrokes and Neds owner Entain

Higher taxes and a softening in consumer spending mean bookmakers are making less money and they say the situation will not improve this year.

Sportsbet’s Australian revenue fell from $2.25bn to $2.18bn. Picture: Getty Images

Profits for Australia’s biggest online bookmakers are plunging as higher taxes and big marketing spends combine with softening consumer spending to hit their bottom lines.

Financial accounts for the foreign owners of the popular Sportsbet, Ladbrokes and Neds brands show the cost of doing business for bookies in Australia has increased dramatically in just two years.

The accounts, recently lodged with the corporate regulator and obtained by The Australian, show Entain, the owner of Ladbrokes and Neds, sliding to a statutory loss of almost $40m in the year to December 2023 after a $106m expense for winning the right to run the TAB in New Zealand was ­included.

While that loss was due to upfront costs in New Zealand, Entain’s Australian result was still down from the previous year amid a general softening in market conditions.

Entain’s net gaming revenue in Australia, the amount it won from its customers, fell from $831m in 2022 to $763m. It had net gaming revenue of $168m in New Zealand.

Meanwhile, Sportsbet parent Paddy Power Australia made a net profit of $186m in the same period, down 41 per cent from $316m in the previous 12 months. Sportsbet’s Australian revenue fell from $2.25bn in 2022 to $2.18bn.

Sportsbet’s net profit has now almost halved from the $369m result it recorded two years ago in the full 2021 financial year as tax increases and falling revenue bite.

Its global parent company, Flutter Entertainment, which is set to move its primary listing from London to the New York Stock Exchange, expects its Australian earnings to decline further in 2024.

In an earnings presentation in March, Flutter said its “further adjusted EBITDA” result in Australia was $US356m ($540m) and forecast that dropping to “approximately $US250m” in 2024 – which was “reflective of the current market softness and increased taxes”.

“We believe that the challenging market, along with increased regulatory and compliance costs, will reduce Australian profitability further in fiscal 2024,” Flutter’s annual report lodged in London said.

Flutter separately said increased taxes and product fees had added $US150m to its cost base in Australia from 2019 to 2023.

Sportsbet is Australia’s biggest online bookmaker with a claimed 45 per cent market share, which accounts for about 12 per cent of Flutter’s global business.

“We’re very confident on it in the long term,” Flutter global chief executive Peter Jackson said about Australia in March. “But with a market that is facing regulatory restrictions, additional taxes, (and) the air has really sort of come out of the Covid balloon that inflated the market there.”

The results come as concerns mount among corporate bookmaker executives – who run primarily digital-only betting firms in competition with Tabcorp, which holds most exclusive retail betting licences – that NSW could soon raise its point of consumption tax rates it levies on wagering firms.

Meetings involving NSW Treasurer Daniel Mookhey, the state government and bookmaker officials have taken place in the past two weeks.

The bookmakers are concerned NSW could raise its betting point of consumption tax rate from 15 per cent to 20 per cent, bringing it in line with Queensland, though Mr Mookhey is understood to have played down the prospect for now.

The accounts of LB Holdings Australia, the local parent of Ladbrokes, and Neds owner Entain show the effect rising taxes and product fees are having on its bottom line.

Entain’s point of consumption tax expenses rose from $153m in 2022 to $172m and product fees rose about $15m to $205m.

Marketing costs for Entain, which includes advertising, rose to $166m from $132m, while Sportsbet’s advertising and marketing expense reached $222m – a slight increase from the almost $218m it spent in 2022.