Mixed results in Q3-2013 from Betfair

The UK online gambling group Betfair plc posted its Q3-2013 results to end January Thursday, reporting that:

* Exchange NGR declined 6 percent to GBP 56.3 million (Q3-2012: GBP 59.7 million)

* Sports betting operations performed well – up 39 percent to GBP 7.5 million (Q3-2012: GBP 5.4 million)

* Gaming declined 8 percent to GBP 18 million (Q3-2012: GBP 19.6 million)

* Mobile revenues doubled in the quarter, accounting for over 50 percent of player activations in February.

* Core Betfair NGR was down 3 percent to GBP 81.8 million (Q3-2012: GBP 84.7 million)

Chief executive officer Breon Corcoran opined that the company had performed well and was on track to meet full year expectations.

“UK revenue was up 6 percent driven by the continued strength of mobile betting as well as favourable sporting outcomes. In line with our previous guidance, international revenues declined as a result of regulatory change and our focus on sustainable jurisdictions.

“Mobile revenues doubled in the quarter and the channel accounted for over 50 percent of activations last month,” he said.

“We are focused on delivering the plan we set out in December. The new leadership team is in place and has started to implement the changes required to make Betfair a more focused and leaner organisation.”

Corcoran said he was confident that the results for the current financial year will be in line with previous guidance, with group revenues of between GBP 370 million and GBP 385 million and group underlying EBITDA of between GBP 65 million and GBP 70 million.

“Revenue from the Exchange was affected by the continuing impact of previous regulatory developments in Greece, Germany, Cyprus and Spain, and was down 6 percent to GBP 56.3 million, he said.

“In the UK, football revenue growth was strong, helped by more fixtures falling in the period. This was offset by the large number of racing cancellations (69 compared with 8 in the prior year) following the poor weather conditions.”

Corcoran singled out mobile betting for special mention, noting:

“Over 50 percent of our customers in the UK and Ireland placed a mobile bet in the period and the channel accounted for approximately 20 percent of exchange commissions. Our mobile products have been enhanced through the introduction of integrated content and a notification service that keeps customers updated when goals are scored in their selected matches.”

The quality of Betfair Mobile apps continues to be recognised by industry observers, he claimed..

Sports revenue increased by 39 percent to GBP 7.5 million, primarily as a result of very strong margins following favourable football results, Corcoran revealed.

“The launch of our Sportsbook will provide a simpler product experience, which should enable us to address a greater proportion of the recreational segment of the online market while offering our existing Exchange customers more betting opportunities,” he said. “A limited number of customers are currently trialling the new Sportsbook website before it is rolled out on a wider basis.

“During the period, we also launched our new sportsbook-specific iPhone app to complement the existing exchange app. Take up has been encouraging and mobile accounted for over 40 percent of sportsbook revenue in January.

In the company’s Gaming operations, Corcoran said that the UK business performed well with strong casino growth off-setting weak poker revenues. Overall games revenue, however, was affected by the impact of international regulation and was down 8 percent to GBP18 million.

“In January, we launched the iPoker network on our ‘.com’ site, which includes our UK business,” he said. “We will initially offer both the iPoker and Ongame networks before migrating all customers to iPoker from July.”

Despite slightly higher average customer balances in the period, revenue from the management of customer funds was down 54 percent to GBP 300,000 due to lower interest rates.

The US Betfair subsidiaries were performing to expectation, with handle up 7 percent and wagering revenue up 8 percent, although revenue was flat due to lower TV revenues and an adverse impact from foreign exchange.

In Betfair Australia, the company reported revenue up 13 percent, driven by the increase in commission rates for domestic racing in April 2012 which partially covers higher race field fees.

Finally, Corcoran reported on the disposal of much of Betfair’s interest in LMAX, saying: “The disposal of 67 percent of our shareholding in LMAX was completed in January following approval from the Financial Services Authority.

“Following this transaction, our stake has reduced to 33 percent and we will not have significant influence over management of the company. Accordingly, the holding will be accounted for as an investment classified as available for sale and will not be consolidated.”

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