Betfair Overall Profits Down 27% in 2013 Reports
It would seem that the UK’s online sports betting industry is having a comparably bad run this year for some of its largest operators. Ladbrokes just issued a shock profit warning to its shareholders, and now Betfair is releasing its FY 2013 report, portraying flat revenue of £387 million. As to the cause of the significant decline in revenue, and how to return the company to its former, highly profitable glory, there are varying opinions on the matter.
Betfairs EBITDA (which indicates a company’s profitability by calculating income before the deduction of standard costs, such as interest, taxes and depreciation) has declined by 39%, while overall profits are down 27%, from last year’s reports. Shareholders are certainly feeling queasy about the current figures, and other companies, like the corporate vultures that some of them are, have taken quite an interest in the bookmaker’s enterprise.
CVC Capital, a private equity firm, has put in an offer of £1 billion in an attempt to acquire Betfair, but thus far the sportsbook’s Chief Exec, Breon Corcoran, is not looking to bargain. Corcoran has stated that the online bookmaker is already seeing a turnaround in player interest. The CEO attributes Betfair’s expansion of activities outside the company’s central betting exchange to the future of its returning success and increase in customer traffic.
The heads of CVC Capital, on the other hand, believe that the future of Betfair lies within its core offering; the betting exchange itself. In order to yield a profit in the coming months, the site’s online sports and race betting facilities should be the focal point of Betfair’s enhancements, according to CVC. While the private equity firm was more than happy to put in a takeover bid equivalent to 950p per share – the current value is just 830p per share – Betfair rejected the offer as Corcoran maintains that his approach will save the day for the company.
Betfair’s FY 2013 report asserts that Corcoran’s plan has already seen a significant turnaround in revenue. It claims that Betfair’s sustainable revenue has risen up to 75% of its total revenue, up from 67% in the fourth quarter of 2012. The successful launch of the sportsbook has attributed to a 65% increase in customers from the UK. The introduction of “exchange-based features” to the sportsbook gives customers a more flexible product and the company has budgeted its costs enough that they expect to spend £30 million less in future FY 2014 reports.
“This is a solid set of results in what has been a year of transition for Betfair,” said Corcoran. “Revenues lost as a result of changing regulation have been largely replaced with regulated, more sustainable revenues.” The CEO went on to explain, “Although it remains early days for many of these initiatives, we remain pleased with the operational trends we are seeing, which give us confidence that the steps we are taking will deliver a higher quality, sustainable & growing business. We have made excellent progress on all of our key strategic aims & the business is in a far stronger position to generate future growth than it was at the start of the year.”