Betfair looks to England for World Cup betting boost

ONLINE GAMBLING exchange Betfair said it wanted England to do well at the World Cup and boost its betting revenue after its annual profit beat forecasts.
Brazil is preparing for the World Cup tournamentBrazil is preparing for the World Cup tournament
Brazil is preparing for the World Cup tournament

Betfair, which operates an exchange that allows gamblers to bet against each other, has been slimming down its operations and cutting costs under chief executive Breon Corcoran, seeking to focus on fewer markets where returns are more secure.

“Our strategy is working. The emphasis on sustainable revenues and our product and marketing investments are paying off, resulting in record revenues and profits,” Mr Corcoran said in a statement.

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Operating profit rose 24 per cent to £91m in the year to April 30, helped by more than £30m of cost savings, and coming in above the company’s previous guidance.

The going will get tougher for gambling companies from December when the Government closes a loophole that had allowed them to reduce their tax bill by basing their operations offshore in places such as Gibraltar.

Betfair estimated that tax changes in Britain, Ireland and Italy would have cost it around £36m last year.

Like rival betting companies, Betfair is looking to the World Cup which kicks off today to lift trading and help it to win new customers ahead of the tax changes in Britain.

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Mr Corcoran, an Irishman, said Betfair would be cheering on England to keep its large English customer base engaged.

“If England have a couple of losses early on, I think people will lose interest quickly,” he said. England face tough games against Italy and Uruguay in their opening group.

Betfair shares trade on a price-earnings multiple of around 22, making them expensive compared with more traditional bookmakers such as William Hill, Paddy Power and Ladbrokes.

They have risen since the company rejected a 950p per share offer from private equity firm CVC in May 2013.

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Mr Corcoran said: “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.”

Analysts at Panmure Gordon said reiterated their Buy recommendation on Betfair, highlighting the robust growth of sustainable revenues driven by the group’s fixed odds sports book, in addition to the return to growth of the exchange.

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“Furthermore, with potential upside from exchanges in Italy, Spain, California and New Jersey we believe growth could accelerate,” they added.

A note from Jefferies said: “The outlook statement says the company is progressing on all fronts and that strong trading has continued into the new financial year.

“We see upside risk to consensus forecasts and reiterate our Buy recommendation.”

Analysts at Numis Securities said: “Cash out+ is one successful new product innovation among several which are differentiating Betfair and helping it to grow mass-market share. And it is fair description of strategy too; the group is spending £200m per year on marketing and technology to secure the future of the core business.

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“However, there are some regulatory challenges which will have to be overcome.”

Mr Corcoran was chief operating officer at Paddy Power before joining Betfair in 2012. He played down speculation that he could succeed Paddy Power CEO Patrick Kennedy who is stepping down next year.

“I’m very happy here and very busy here,” he said. “I don’t think my friends in Dublin would have me back,” he joked.