IPO cost hits Betfair first half figures
UK betting exchange pays out one-off £14.7m for London listing; share price falls on news
Betfair has seen its first half profits slide by £1m due to a one-off £14.7m total cost of listing earlier this year, the company said in a statement to the London Stock Exchange (LSE) this morning.
The betting exchange incurred one-off costs for the six month period ended 31 October of £14.7m with reported profit after tax down 12.7% to £6.8m (H1 FY10: £7.8m) after net exceptional costs of £14.7m “primarily associated with the company’s listing”, a statement read.
The decade-old company that floated in London in October, reported that underlying revenue was up 12.3% to £188.5m compared to £168m in the same period last year thanks largely to the impact of the football World Cup. Underlying adjusted EBITDA was up 24% to £31.2m (H1 FY10: £25.1m). Its cash position at the end of October was £178.2m, with no debt.
Betfair, however, generated revenue growth of just 1.6% year-on-year in the second quarter, down 6.3% quarter-on-quarter. Nick Batram, analyst at Peel Hunt advised a ‘hold’ position in a note on the company this morning calling the decline in Q2 revenues “concerning” but suggesting that Europe was a key area of growth and that he remained positive on the core business.
Liberum Capital said the company’s lower than expected revenue growth in Q2 reflected Betfair’s “weakness” in poker and horseracing.
Meanwhile, a statement from analysts Evolution Securities, said it was concerned with Betfair’s “decline” in Q2 horse racing revenue. “Where we had concerns over driving profitability in its non-core US and LMAX divisions, we find it hard to marry the group’s premium rating with myriad regulatory issues and the need to ‘address challenges’ in its core horse racing product,” it said.
Betfair did, however, cut its marketing spend to help boost profits. Investec Securities said that given the exchange’s reduction in marketing expenditure it saw no need to downgrade its full year 2011 forecasts but added that “risks are being stored up” for the following year and concluded with a “sell” option.
The company did not split out its casino and poker performance, however it said that for “Core Betfair”, that includes its betting exchange, portfolio of other sports betting, games and poker products, active customers were up 31.1% to 654,000 compared to 499,000 in the same period last year.
It said that its other investments, including Betfair’s subsidiaries, Betfair US and LMAX were “in an investment phase”. Within these brands revenue grew by 19.9% to £21.4m (H1 FY10: £17.8m), but produced an increased adjusted EBITDA loss of £4.3m, £1.2m higher than in the corresponding period last year.
The business added that it had seen “strong revenue growth” of more than 70% from its mobile channel and that the completion of the migrations of both its poker product to the Ongame platform and its casino to Playtech were intended to “improve cross-sell” to its customers within “Core Betfair”.