Tough comparatives spoil Betfair Q1
First quarter revenues suffer following record comparatives last year, however analysts positive exchange is "building a platform for recovery".
Betfair has reported flat numbers for the first quarter of its financial year, but is “building a platform for recovery”, according to analysts, with a step up in mobile betting, capital investment, ongoing product enhancements and the appointment of an experienced gaming executive as its new UK director.
Tough comparatives saw core Betfair Q1 2012 revenue decline 7% year-on-year to £80.8m, following a record performance in the same period for Q1 2011, however a number of analysts said that despite the fall the numbers were “marginally better than expected” with strong mobile growth, encouraging current trading up on last year and a share buyback underway. Mobile bets of 7.4m were 95% up on the same period last year contributing £4.2m in revenue, up 78% on Q1 2011. Casino and poker were both down 12%, reflecting lower customer activity against a stronger World Cup period.
“Our mobile products have seen particularly strong customer traction in the quarter, with around one third of sports customers using a mobile device to place a bet,” said outgoing CEO David Yu who has yet to announce a firm date for his departure. “The 7.4 million mobile bets placed in the quarter was almost double the number made in the same period last year.”
The exchange has also seen an uplift in current trading with core Betfair revenues up 12% in August, marking a change in fortunes for the company following a poor set of sports results in May that saw revenues in its risk sports division fall by more than 90% to £300,000 for the quarter.
“Trading has been encouraging in the second quarter, including a good start to the football season,” added Yu. “Consequently, core Betfair revenue in August was up 12% versus the same period last year and, while it is still early in the financial year and the economic environment remains uncertain, we remain comfortable with the outlook for FY12.”
James Hollins, analyst at Evolution Securities, was positive despite Betfair’s revenue decline calling the figures “a solid performance against difficult comparatives”, while former Betclic Everest Group and William Hill Online gaming veteran, Peter Marcus’s appointment as new UK Director, a position responsible for more than 50% of Betfair’s revenues across UK casino, poker and the exchange, has also been welcomed as a move in the right direction for the business that has struggled since its floatation late last year.
“Betfair is also continuing to augment its US wagering market share and has, we estimate, cemented its position as a top three mobile sports operator, alongside Bet365 and market leader, Paddy Power,” Hollins said. “Betfair’s mobile revenue annual run-rate is c£17m against Paddy at c£23m. For the brave, there is material upside to our unchanged 950p top price, although we retain a neutral stance ahead of short-term potentially disruptive regulatory/licensing issues in core European markets,” he added.
Uncertainty remains, however over who the next CEO will be with no further announcement today as well as potential regulatory and licensing issues in regulated and regulating markets including Italy, Spain, Greece and Germany. Shares in the company have more than halved since its IPO in October 2010 falling from £16 to below 600p last month. Its share buy-back programme, announced in late June this year is underway with 1.7m shares repurchased so far £11m.
In its maiden annual results presentation Betfair said it would look to repurchase £50m in shares over the next 12 months and pay a dividend of 5.9p per share. Outgoing CEO David Yu said in an investor call that this policy reflected how Betfair was “confident in its ability to fund future investment needs while also returning cash to customers.” The company had cash reserves of £155m as of 30 April. Betfair’s announcement came the day after Playtech commenced the first phase of its share buyback aimed at protecting long-term investors, while on 30 June bwin.party also said it would buy back up to 75m in shares and issue a dividend of 30m, as sector stocks continue to fall amid regulatory uncertainty.
Read the forthcoming issue of eGR out later this month for a comprehensive look at how uncertain regulatory and economic times have hit public gaming companies harder than ever before.