Marketing push helps Betfair profits rise 32%

Betfair attributed investment in both marketing and product as the key drivers behind a 21% increase in full year revenues and a 32% hike in profit.

EBITDA for the 12 months ended 30 April was up 32% to £120.2m, despite a £19.2m tax bill following the onset of the UK Point of Consumption regime.

While total revenues rose 21% to to £476.5m as the firm saw healthy double-digit growth across all main product areas.

Revenues from Sports, which includes its exchange and sportsbook products, increased 17% year-on-year to £328m and continued to account for the large majority of the firm’s revenues.

The firm revealed trading volumes on the exchange increased 5% to £55.3bn and sportsbook volumes rose 140% to £1.2bn, with the fixed-odds product described as “central to new customer acquisition”.

The operator also gained good ground in gaming with revenues up 34% to £88m after doubling the number of sports customers cross-sold to into gaming throughout the year.

According to Betfair CEO Breon Corcoran, the results follow a period of sustained investment in marketing and product which has helped the firm gain “traction as a mainstream brand resonating with all customer types”.

Corcoran said the firm spent around £28m more on marketing and customer bonuses in FY15 than during the previous year, and the firm has continued to invest this year after securing slots on Sky Sports and BT Sport’s football coverage.

The marketing push saw Betfair’s active customer numbers increase 52% to £1.7m, with new customer acquisition also up 65%.

The chief exec also said Betfair had increased the headcount of its product development team by 60 during the past 12 months, with product the “key reason why customers join and stay with Betfair”.

Revenues from sustained markets outstripped total growth rising 27%, with Betfair’s sustainable revenue mix now 82% compared to 78% in FY14.

“FY15 has been an excellent year for Betfair,” Corcoran, said. “We are successfully executing our strategy and achieving profitable scale in sustainable markets.

“Important product improvements, including the extension of Price Rush to each way bets and Cash Out to in-running horseracing, helped to drive a strong performance during these key racing festivals,” he added.

Betfair’s nascent US business also saw a 29% increase in revenues to £59m, with its New Jersey online casino bringing in £5.5m.

Despite the results, analysts urged caution, with the likes of Panmure, Numis and Cenkos recommending hold, reduce or sell positions.

“We believe that Betfair is an excellent operator in a highly competitive market but that the valuation may have lost sight of quite how competitive,” Ivor Jones of Numis said in recommending a reduce.

Betfair’s share price was down 2% to 2,465p after early morning trading.