UK online betting exchange Betfair issued an upbeat trading update on Tuesday in an effort to reassure investors that the restructuring program instituted by new CEO Breon Corcoran is working. Corcoran says the restructuring, which included withdrawing from ‘grey’ markets such as Cyprus, Germany and Greece, plus staffing cutbacks that made as many as 500 employees redundant, will result in £30m in cost savings, 50% more than the £20m Betfair had forecast in December.
Corcoran also said that Betfair had a “stronger than expected finish” to its fiscal year 2013 (ending April 30). Betfair now expects full-year revenues to come in at £387m, essentially flat from 2012’s £388m. Earnings are expected to total £73m, down from 2012’s £87m but better than analysts had forecast.
Other positives in Tuesday’s update include a 108% boost in new signups, an 18% rise in the customer base in Betfair’s home market and a 74% rise in games cross-sell since the launch of the company’s fixed-odds sports betting division. Betfair said “sustainable jurisdictions” accounted for 75% of its Q4 revenues, vs. 66% in the same period the year before. Half of Betfair’s new customers are signing up via its mobile product.
Corcoran failed to make mention of the recent £912m takeover bid by hedge funders CVC Capital Partners, although the rush release of Betfair’s better than expected numbers has been widely interpreted as a bid to convince investors to stay the course. Betfair rejected CVC’s initial 880p per share offer last month, but CVC has until May 13 to make a formal offer. Betfair closed out Tuesday’s trading up 6p to 851p, still below CVC’s original bid price and well off the £13 of Betfair’s initial public offering.
Corcoran also steered clear of any mention of possibly returning £218m to shareholders, as had been speculated as a further inducement for investors to keep Corcoran’s plan in motion. Betfair has £168m of cash on hand, up 42.4% from last year, but Corcoran said the cash will be put toward “targeted acquisitions” like the recent addition of fixed-odds betting outfit Blue Square from Rank Group. Corcoran indicated that nearly a quarter of Betfair’s customers are actively using both its fixed-odds and exchange betting products to bet on football.