Betfred paid its billionaire owners a £10.2m dividend after reporting bumper operating profits, as the impact of curbs on fixed-odds betting terminals (FOBTs) proved far milder than the industry had predicted.
Fred Done, who owns the business with his brother Peter, warned in November last year that bookmakers were “fighting for our lives”, after the government cut the maximum wager on FOBTs from £100 to £2.
Figures for the year to the end of September 2019 showed that the bookmaker did lose income as a result of the policy but still managed to post an operating profit of nearly £75m. The performance meant that the Done brothers, who are worth £1.2bn between them according to the Sunday Times Rich List, were still able to collect their regular £10m annual dividend.
Nearly £58m of the rise in operating profit came thanks to an upwards revaluation of its 1,578 high street bookmaking shops. This reversed about half of the £119m “impairment” that Betfred took on the value of the bricks-and-mortar estate last year due to lost FOBT income.
Betfred also expects a further £107m FOBT-related boost in its 2020 results, after winning a landmark case against HM Revenue & Customs, which was found to have overcharged bookmakers VAT on the machines. While Betfred has suffered less than it predicted, curbs on FOBTs – described as a “social blight” by ministers due to their links to gambling addiction – did damp its underlying profitability.
Fixed-odds betting terminals (FOBTs) are gaming machines found usually in bookmakers’ shops. They allow gamblers to play a variety of games, including roulette, bingo and simulated horse and greyhound racing. The machines promise the potential of large wins of up to £500.
In the past, gamblers were able to bet up to £100 on games, but in April 2019 the UK government introduced a reduction in the maximum stake to £2 following a long-running campaign highlighting fears over the huge losses racked up by users.
High street bookmakers have said they will have to close many stores due to loss of revenues.
The annual accounts, which include a period of six months before the FOBT stake cut, show the amount that punters wagered with Betfred fell from £13.5bn in 2018 to £10bn in 2019, with turnover down from £728m to £621m.
On another measure of operating profit that strips out one-off “exceptional” items, such as the positive revaluation of its high street shops, earnings were significantly lower than in previous years, at £48.5m. Earnings were £119m last year and more than £80m in each of the two years before that.
Betfred also closed some of its high street shops most affected by the loss of FOBT revenues, although not nearly as many as it had predicted. It shut 72 during the financial year, on top of 16 the year before that. Betfred had predicted 500 shops, a third of its bookmaking shops, would close due to the FOBT cuts.
Betfred is just part of a sprawling business empire built up by the Done brothers, who opened their first bookmaker in 1967, funded by a winning bet on England’s World Cup victory the year before.
The brothers are amassing a property empire in their home city of Manchester and control Peninsula Business Services, a highly profitable group which has more than 10 companies involved in areas including employment law, workplace health and human resources.
Earlier this year, the Guardian revealed that the brothers were investors in a business that provides advice to gambling addicts and that Fred Done was an investor in a debt advice firm.
The Dones also make significant philanthropic contributions and have given £375,000 to the Conservative party.
