Underlying profits slip 27 percent at Betfair

Betfair investors will be less than pleased with the UK betting company’s FY 2013 results published Thursday, which show underlying revenues flat at GBP 387 million; EBITDA down 39 percent and a 27 percent decline in profits.

The company rejected a GBP 1 billion takeover bid last month, with CEO Breon Corcoran saying that it was attracting more customers after broadening activities beyond its core betting exchange.

Private equity firm CVC Capital, the conglomerate behind the 950p a share acquisition attempt felt that the company should refocus on its core betting exchange activities, a difference of opinion with Corcoran.

Betfair shares closed at 830p a share Wednesday as cost-cutting measures at the company continued.

The company report for FY 2013 claimed that excellent progress had been made in the delivery of the Corcoran turnaround plan:

* Sustainable revenues up to 75 percent of total revenue, from 67 percent in Q4 FY12;
* Sportsbook successfully launched, helping to drive a 65 percent increase in UK customer acquisition;

* Introduction of exchange-based features (e.g. Cash Out) to the Sportsbook providing a differentiated product;

* Increased cost savings of c.GBP 30 million to be realised in FY14; and

* New management team in place and cultural change underway.

Financial highlights included:

* Revenue and EBITDA ahead of previous guidance;
* Revenue of GBP 387 million (FY12: GBP 388.5 million): Sustainable revenue up 6 percent;
* Other revenue down 15 percent due to market exits;
* Total underlying EBITDA of GBP 73.3 million (FY12: GBP 86 million)
* Betfair US achieved positive underlying EBITDA for first time;
* Strong underlying free cash flow generation of GBP 50.2 million (FY12: GBP 43.8 million); and
* Final dividend of 9.0 pence proposed; full year dividend up 27 percent to 13 pence.

Chief executive officer Breon Corcoran, reported:

“This is a solid set of results in what has been a year of transition for Betfair. Revenues lost as a result of changing regulation have been largely replaced with regulated, more sustainable revenues.

“Following the outline of our new strategic plan at our half year results in December, the business has undergone significant change and much progress has been made in a short time. A new management team is leading the business, a wide ranging restructuring has been completed ahead of schedule, marketing investment has been focused on core markets and we have successfully launched a Sportsbook.

“While the Exchange continues to be at the heart of our business, the Sportsbook means we can now present new customers with a simpler, more familiar product and offer a wider range of promotional activity than is possible on the Exchange alone. This is helping Betfair to attract more new customers than ever before.

“Although it remains early days for many of these initiatives, we remain pleased with the operational trends we are seeing, which give us confidence that the steps we are taking will deliver a higher quality, sustainable and growing business.

“We have made excellent progress on all of our key strategic aims and the business is in a far stronger position to generate future growth than it was at the start of the year.

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