Five numbers that will dictate Betfair's future
Five stand-out figures from Betfair's FY14 results and what they mean for the operator moving forward
£124.2m “ The marketing war
This is the amount Betfair spent on sales and marketing throughout the year as it looked to increase its UK customer base. The group secured major contracts with broadcasters such as ITV and Channel 4 and a new marketing campaign for the World Cup shows no shortage of ambition as it looks to push its sportsbook product to recreational punters. But the total figure “ 10% up on 2013’s marketing expenditure “ is comparatively high and 31.5% of total revenue. Paddy Power in comparison spent 76.1m (£61.3m) on marketing during its previous financial year, at around 20% of online revnues, yet managed to maintain a higher share of voice.
£66.2m “ Gaming in decline
Gaming revenue for the full financial year was a relatively modest £66.2m. While the operator’s fixed-odds sportsbook continued to grow, its gaming business actually contracted as revenue fell 13% year-on-year. Betfair partly attributed this fall to gaming’s troubled child, poker, and the impact of withdrawing from unregulated markets. Gaming revenue from regulated markets actually grew 2% in the period, but this is a weakness in the firm’s product suite that will need to be addressed and Betfair has introduced a number of cross sell mechanics to bring gaming back to growth.
64% – Mobile power play
The mobile share of Q4 sportsbook revenues was an eye popping 64%. Having established a mobile development team in Porto and invested significantly in the platform, Betfair recorded almost two-thirds of total sportsbook revenues from mobile devices in Q4, beating the likes of William Hill and Paddy Power. With total mobile revenue up 70% year-on-year and new products having recently been released, this figure could rise even further. Additional exchange integrated features such as Cash Out+ and Price Rush allow for genuine stand-out on the major acquisition platform.
£36m “ Pain point
Betfair CEO Breon Corcoran’s estimated impact of taxation changes in the UK and Ireland this year was a whopping £36m. The introduction of the Point of Consumption tax in December is set to hit Betfair particularly hard and that figure is approximately 60% of Betfair’s bottom line. Corcoran insisted the firm is looking to mitigate such a hit by running the company in a more disciplined manner than before, but it will place increased pressure on getting international expansion right with Italy a key territory for growth.
£209.1m “ The safety blanket
Betfair’s cash balance as of 30 April 2014 sat at £209.1m. The cash has been referred to as a “PoC security blanket” by analysts, and there has been a lot of speculation has surrounding just what Betfair might spend its cash reserves on. Talking to analysts yesterday, Corcoran provided no real insight by stating that it “may be used for acquisitions or returned to shareholders”, but with nothing concrete the speculation is set to continue. An acquisition in the gaming space could be an intriguing possibility.