Flat revenues for Betfair despite fixed-odds boost
CEO says first steps have been taken to make operator "a more focused and leaner organisation".
A strong start from the newly launched fixed-odds sportsbook failed to prevent Betfair’s group revenues falling slightly, the operator has announced in its financial results for the three months ended 31 January.
Part of the 4% year-on-year revenue decline “ down to £90.5m “ came via the withdrawal from unregulated markets including Germany, Greece and Cyprus, while UK revenues rose 6% compared to Q3 2011.
Revenues from the fixed-odds sportsbook came in at £7.5m for the quarter, a 39% year-on-year increase, while group revenues for the quarter reached £90.5m.
Chief executive Breon Corcoran said in a statement: “In line with our previous guidance, international revenues declined as a result of regulatory change and our focus on sustainable jurisdictions.”
Meanwhile the operator declined to reveal specific details concerning the recent reductions in headcount which saw hundreds of redundancies last month, however Corcoran did note: “The new leadership team is in place and has started to implement the changes required to make Betfair a more focused and leaner organisation.”
In an analyst call this morning, newly appointed chief financial officer Alex Gersh said: “What we can say about our cost savings is that we remain on-track to save £20m over the next two years as we previously announced, [however] it is difficult for us to comment further until the process is complete.”
Corcoran also acknowledged the risks involved with the migration of poker players to the iPoker platform, which is currently running in tandem with the operator’s Ongame offering following the announcement of the migration earlier this year, but according to the CEO there will be “a more forced migration coming over the summer”.
“If it is widely reported in the news that you are moving to a new platform, you can imagine the new platform will give you more love than the one you are leaving “ we are trying to manage risk through a long period of migration.”
Elsewhere mobile remained strong, particularly in the UK market, with the channel accounting for 50% of new activations during the third quarter with half of UK customers now placing bets via mobile devices.
Mobile also accounts for 20% of Betfair’s core exchange business, where revenues dropped 6% year-on-year to £56.3m for the quarter.
Analyst Nick Batram of Peel Hunt issued a ‘Hold’ recommendation on Betfair’s shares, noting: “We support the strategy being implemented by the new CEO, but this will take time to come through and ultimately there is risk in execution.”
Simon French of Panmure Gordon issued a ‘Buy’ recommendation, explaining: “The group already has an impressive US footprint… and is therefore well positioned to capitalise on the more permissive US regulatory backdrop.”
The operator’s US revenues were flat year-on-year due in part to lower TV revenues, while revenues from the newly won 4NJBets.com contract in New Jersey offset by Illinois regulators opting not to renew the state’s law allowing for advance deposit wagering (ADW).
Betfair also remains alert to future developments in California, where it has hopes for the regulation of exchange betting, however Corcoran said in today’s call: “There’s no news from California, and no news is good news, but we have no greater ability to forecast if and when something happens there than we did two months ago.”