Betfair targets further acquisitions
Operator intends to focus on domestic and geographical expansion, and closing product gaps
Betfair is primed to make further acquisitions following last month’s takeover of Blue Square, the operator’s chief executive Breon Corcoran said in today’s post-close update.
Corcoran (pictured) pledged to make “targeted acquisitions”, which he said will “add further domestic scale, achieve geographical expansion and close product gaps”. The operator intends to fund any such deals through its balance sheet with the firm sitting on a cash balance of £168m, which is up 42.4% year-on-year.
Revenues for the 2013 financial year are projected to come in at £387m, compared to £389.1m in FY 2012, which is slightly ahead of its guidance estimates thanks to strong growth in mobile and “resilience” in revenues from territories where Betfair has stopped marketing. The operator added it has seen “sustainable jurisdictions” contribute more to group revenues, accounting for 75% of fourth-quarter revenues compared to 66% in Q4 2012.
While the chief executive noted the continued focus on regulated jurisdictions, particularly the UK and Ireland, he expressed his belief that “there is a significant international opportunity”.
“We have recently seen positive regulatory momentum in Italy, Spain and the USA. In addition, revenue from the countries where we have ceased marketing is proving relatively resilient due to the uniqueness of our exchange,” Corcoran added.
Italy’s finance ministry approved exchange betting in March following a lengthy consultation process, while Spain’s regulatory authority regulated the product the following month. Betfair is also waiting to discover whether it has been successful in its application for a German fixed-odds sports betting licence, having withdrawn its exchange offering from the market in November.
The trading update follows Betfair’s rejection of a takeover bid from private investment group CVC, which valued the operator at more than £910m but which Betfair claimed “fundamentally undervalues the Company and its attractive prospects”.
Corcoran spoke of the “significant change” to affect the company since it set out its new strategy in December, four months after the former Paddy Power COO arrived at the London-listed business.
Following the appointment of chief financial officer Alex Gersh in November, the operator brought in Paul LaFontaine as managing director of games, John McElligot as MD of the exchange product and Mark Ody as brand director. As part of the same reshuffle, Mark Brooker was given the new title of managing director of sports.
Betfair acquired selected assets of Blue Square for £5m in early April, and the CEO noted evidence is beginning to emerge that its fixed-odds and exchange offering are complementary with 24% of football customers using both.
The firm was also keen to draw attention to its fixed-odds sportsbook product, noting UK acquisitions were at record levels and up 108% on last year while cross-sell was up 74% since the launch of the sportsbook. The firm also noted that around 50% of all activations are now coming via mobile.
Corcoran also commented on its restructuring process, which has seen it lay off around 500 staff and reduce its exposure to unregulated markets, saying it had “allowed us to increase our cost savings substantially”. The operator plans to reinvest as much as £10m of these cost savings in “further product and marketing investment”.
“I firmly believe that Betfair’s unique technology, customer value proposition, UK scale and strong balance sheet mean it is well placed to compete in an industry facing substantial changes”, Corcoran said. “I am delighted to be leading the business at this exciting time”.