Betfair issues first FY results since flotation
Betting exchange sees profits up 54.4% year-on-year but CEO admits revenue growth of 8.1% "could have been stronger."
Betfair has recorded a 54.4% increase in profits after tax for the year ended 30 April 2011, with EBITDA up 36.9% and group revenue up 8.1%.
According to outgoing chief executive David Yu, revenue growth “could have been stronger”, a sentiment backed up by a number of analysts including James Hollins of Evolution Securities, who said “muted revenue growth failed to justify the IPO valuation.”
However, the year-on-year profit increase, from £22.7m to £35.1m, marks a less-than-impressive but satisfactory start to life as a listed company after its flotation on the London Stock Exchange was formalised last October and its share price has slumped by almost 50%.
In addition, the last three months have seen a number of high-profile departures from the betting exchange, with Yu’s impending exit the most notable, although the losses of Tim Phillips, Charlie Palmer, Mathias Entenmann and Robin Osmond are also significant.
Betfair also announced it intends to repurchase £50m of its ordinary shares over the next year, a move described by Yu as “one element of a plan in place to deliver long-term shareholder value.”
The CEO added that trading for the first eight weeks of FY 2012 was in-line with expectations with the notable exception of risk sports, where revenue is down year-on-year due to comparisons with the 2010 World Cup.
In a note issued this morning, analyst Simon French of Panmure Gordon reiterated his firm’s ‘buy’ recommendation, saying: “Today’s results contain a number of positive surprises and, in our view, only serve to underline the absurd valuation the market is placing on the core betting exchange.”
Hollins, however was less complimentary, with his firm retaining a ‘neutral’ stance due to “near-term regulatory issues and tough 1H trading.”
Following the announcement of the results, Betfair’s share price sits at 771.5p, around half the figure at which the company floated last year.