Betfair looks overseas as UK intensifies

Betfair CEO Breon Corcoran turned his attention to international markets during this morning’s analysts call, following an impressive set of H1 results.

The enthusiasm over 15% revenue growth during the first six months of the firm’s financial year will have been somewhat tempered by a £26.8m PoC tax bill which meant EBITDA rose a more modest 9%.

Corcoran acknowledged that Betfair’s core UK market is becoming increasingly competitive, noting that two unnamed rivals were investing so heavily in customer acquisition it was making it “noticeably harder” for others to do so.

That market growth has remained so high for so long in Britain has come as something of a surprise, he admitted, but said that hasn’t stopped the firm being committed to growing its international profile.

A picture of exactly where that international growth comes from is beginning to emerge, with Betfair’s US operation enjoying a 38% revenue increase to £39.3m, helped by online casino growth in New Jersey – a business which he expects to break even in the near future.

Betfair’s strong emphasis on regulated markets now means 88% of revenues are sustainable, an increase from 82% for the same period last year.

That remaining 12%, which is split between a long tail of approximately 100 markets, follows the firm’s withdrawal from Portugal, meaning material risk from grey markets is now all but negated.

On Portugal, Corcoran was not optimistic about a swift re-entry. The operator pulled out of the country this summer and is currently embroiled in a lengthy licensing process which still appears to be a long way from resolution.

“When we switched-off Portugal we thought we’d have it back in six or eight months,” Corcoran said. “Now I think that has drifted considerably. The people running it would be delighted to have it back in the 2016 calendar year.”

Another of what Corcoran jokingly referred to as Betfair’s “problem children” is Italy, but here there are a few signs of promise here too.

While he admitted that both bet365 and Paddy Power offer strong products in Italy, he said Betfair is now firmly in the second tier and that the time has come to put serious marketing investment into the country.

“We wanted to make sure our product was credible before investing,” Corcoran told analysys. “Now our product is catching up and we are pleased that for the first time the number of active customers is now higher than before regulation.”

The Italian regulator’s loosening of strict product restrictions should benefit Betfair in the coming months and years, and it has already carved out a differentiated space as the only operator to offer cash out – a product which has proven to be popular in Italy with 55% of football customers using the service.

With Betfair’s sportsbook still growing strongly in the UK, the operator has not quite reached the point where it must expand internationally with great urgency.

But with a number of other global launches, including the exchange going live in Spain during the period, it is nonetheless clear Betfair is quietly laying the foundations for a greater international push.