Betfair rides hurdle in horse racing as earnings are hit

Betfair, the world's largest betting exchange, reported lower than expected half-year earnings yesterday.

Betfair, founded 10 years ago by one-time professional gambler Andrew Black and former JP Morgan trader Edward Wray, said results in poker had fallen short of expectations while the cancellation of horse racing meetings due to bad weather had moderated growth rates in the current quarter.

James Hollins, analyst at Evolution Securities, said core earnings were below his estimate and the market consensus. "Of greater concern is the decline in 2Q horse racing revenue ...

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"We find it hard to marry the group's premium rating with myriad regulatory issues and the need to 'address challenges' in its core horse racing product," Hollins said.

"Recent weather conditions in the UK and Ireland ... caused a number of race meeting cancellations, moderating overall growth rates in the quarter to date," the company said in a statement.

Betfair chief financial officer Stephen Morana said the group's target of returning to 2010's levels in poker in 2011 was not likely to be met, with core poker revenue down 6.5 per cent after the migration of users on to a new platform in July created churn.

"Being realistic, it's going to take longer," Mr Morana said, declining to give a new timeframe.

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The group nonetheless maintained its target for double-digit growth in adjusted EBITDA in 2011.

Betfair said it would address the issues in poker and horse racing with a number of product enhancements and initiatives in the second half.

The company said its underlying adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 24 per cent to 31.2m in the six months through October.

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