Betfair Reports Record Profits of £61.1M
The world’s largest
betting exchange Betfair has announced record profits for the year ending April 30, 2014 following an extensive cost-cutting exercise.
London Stock Exchange listed Betfair published their annual fiscal report that shows the British company made a record £61.1 million in pre-tax profits, quite a turnaround from 2013’s figures that saw the group report a loss of some £49.4 million.
The group’s revenue increased by a mere 2% £393.6 million, but thanks to reducing expenses and overheads of £33 million following its withdrawal from so-called “grey markets,” earning soared to £91.1 million, an increase of 24%.
Withdrawing from these grey markets allowed Betfair to focus its efforts in sustainable, or regulated markets, and the results were extremely positive indeed. The overall number of customers from sustainable markets rose by 27% including a substantial increase of 54% for customers from the United Kingdom and Ireland.
In a statement to the London Stock Exchange, Betfair’s CEO Breon Corcoran said:
“Our strategy is working. The emphasis on sustainable revenues and our product and marketing investments are paying off, resulting in record revenues and profits.
The focus in FY14 was on creating a competitive Sportsbook and we are now entering an exciting phase of product development to leverage both our Exchange and Sportsbook to stand out in a crowded marketplace. Betfair has always been a unique betting company and our innovative sports betting products such as Cash Out and Price Rush are redefining the ways customers bet.
Cash Out+ builds on the success of our Cash Out feature which allows customers to lock in profits before the conclusion of an event and has been used over 30 million times. This enhancement allows customers to partially cash out their bets and further differentiates our product.
Price Rush is the first step of integrating our Exchange and Sportsbook and allows the odds on certain Sportsbook bets to be boosted by using the superior value available on the Exchange. Over 500,000 bets have been ‘Rushed’ so far and on average the odds on these bets were boosted by 24%.
The introduction of the Sportsbook, increased television advertising spend and the strengthening of our online marketing capability have broadened our customer reach and led to a 54% increase in the number of customers acquired in the UK and Ireland. As a result, we have seen three consecutive quarters of double digit revenue growth in sustainable markets.
Our focus on efficiency has allowed operating margin expansion at the same time as increasing marketing and technology investment to approximately £200m.
Breon Corcoran: Betfair CEO
The flexibility we retain through our strong balance sheet provides a competitive advantage during uncertain times for the gaming sector. We will continue to review our balance sheet on a regular basis.
We believe the differentiation of our products and uniqueness of our model give us a real competitive advantage. Our strong trading has continued into the new financial year and we look forward to building on this positive momentum during the World Cup that kicks off tomorrow and which will be an excellent showcase for our market leading products.”
One area that saw huge increases was Betfair’s mobile division whose revenue soared skywards by some 70% and now accounts for 64% of all sportsbook revenue. Betfaiir has invested heavily in Android and iOS based applications and looks to be reaping dividends.
Betfair’s share price rose to 1,041.00 (0.87%) following the financial results becoming public knowledge, but investors are still wary as to how much of an impact the new 15% point of consumption tax will have on the company when it comes into force on December 1, 2014. One thing in Betfair’s favour is the fact it has cash reserves of almost £210 million, which could be used to soften the inevitable blow.
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