Betfair withdraws from LMAX and Kabam investments
Move comes part of new CEO Breon Corcoran's reinvigoration plan.
Betfair chief executive Breon Corcoran has set his reinvigoration plan for the business in motion, announcing that the operator will withdraw from its investment in financial betting exchange LMAX and multiplayer social gaming business Kabam.
Corcoran, who arrived in August after several years with Paddy Power, made the announcements in his first results presentation as CEO, in the light of Betfair recording year-on-year group revenue growth of 5% for the six months ended 31 October.
Betfair recorded a profit before tax of £21m for the six-month period, down 22% compared to H1 2011-12, and Corcoran has identified approximately £20m worth of savings that can be made.
The operator has entered an agreement to sell its majority stake in LMAX for £2.4m to a combination of management – including CEO David Mercer – and private investors including Betfair co-founder Ed Wray.
The financial exchange was launched in October 2010, the same month that Betfair floated on the London Stock Exchange, but recorded a loss of £13.2m in its first year of trading and saw former chief executive Robin Osmond resign in April 2011.
Meanwhile Betfair’s minority stake in Kabam – which followed a US$5.5m investment in 2009 – has been sold for $30m. Kabam’s three largest titles on Facebook, Dragons of Atlantis, Kingdoms of Camelot and Edgeworld, boast close to one million monthly active users combined, while the company also has a number of games on mobile, Google+, and its proprietary site.
Founded in 2006, Kabam has moved to reduce its reliance on the Facebook platform, and draws more revenues from its Kabam.com site, with the company expected to make $150m this year. Earlier this week it secured investment from Warner Brothers Studios and Metro-Goldwyn-Mayer Studios, with the cinema giants joining high-profile companies including Google, Intel and Canaan Partners in backing the business.
Corcoran had already begun his cost-cutting mission in an effort to reinvigorate Betfair, laying off staff in underperforming markets – including unspecified territories in Asia and Eastern Europe – and continuing the restructure with the withdrawal from Germany and Greece as the operator turns its focus towards regulated markets.
He described the first-half results as “solid,” adding: “We are now pursuing a new and more focused strategy to address the business’ challenges and exploit its market opportunities.
“Recent regulatory developments have been challenging and we are reducing our exposure to markets with an uncertain regulatory future. We will focus investment within regulated markets with sustainable revenues,” the CEO added.
Simon French, analyst with Panmure Gordon, issued a ‘Buy’ recommendation, saying: “The group’s focus will be on regulated jurisdictions going forward and will invest in product and brand in these to enhance its competitive position and drive growth.”