Third quarter off to a strong start at Betfair

Betfair, the online bet-matching marketplace, says increased appetite for placing bets from mobile devices and a strong start to the football season contributed to a small increase in underlying group revenues at the half-year stage.

The group, which has had a torrid start to its life as a listed company, with a number of high-profile managerial departures, said underlying group revenues were up 1% in the half year to the end of October, compared to the same period of last year.

Underlying revenue for the period was £191.3m versus £188.5m the previous year, but this excludes income from "high rollers" achieved last year; when this figure is included Betfair's revenue is down 10%.

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Betfair claims its strong underlying performance has continued into the third quarter "with core Betfair revenue up 13% against the prior year".

Adjusted, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in 36% ahead of the previous year with profits after tax up 43% at £20.6m.

Not all is rosy in Betfair's garden, however. Its online games business has seen revenues slow due, Betfair claims, to a reduced marketing spend.

Overall, games revenues were down 5% in the second quarter compared to last year.

Betfair's poker product is up 3% year-on-year in the second quarter.

Betfair has been particularly affected by a the introduction of a licensing framework for Games and Poker in Italy where it has decided to suspend its operations.

Betfair's key product is its "Exchange" which, instead of offering bookmaker odds to punters, allows customers to bet against each other. This, it claims, offers them a better chance of winning because they receive more competitive odds, although the benefits of this for winning punters are reduced by Betfair's commission. The company said 28% of clients are in profit for the first half of the year and have received 7% better match odds on their wagers.

Total value of bets on the exchange is up 7% year-on-year on the half-year and 11% over the second quarter.

Betfair admits in today's release that the exchange "cannot fulfil all betting needs and to be a leading sports betting operator we must offer customers a full range of products". The company says it is developing its non-exchange offering.

The company has also announced the temporary appointment of its current Chief Financial Officer Stephen Morana, as the group's interim Chief Executive until August 2012, when Breon Corcoran, formerly of Paddy Power, will take up the reins.

The current Chief Executive, David Yu will step down this year, he said today: "I have thoroughly enjoyed my time at Betfair. When I started back in 2001, we were a small team of just 40 people in London generating revenues of around £400,000 and are now the largest betting exchange in the world, with 2,000 employees and revenues of nearly £400 million."

Shortly after the open in London Betfair was trading up 2.39% at 832.47p. Over the year to date Betfair's share price has fallen 16%, over the last five years the firm is down 48%.

BS