Record profits, maiden dividend at Betfair

The company, which allows punters to set their own odds and bet against one another, announced it would pay a maiden dividend after underlying profits increased 49 per cent to £79.7m in the year to April 30.

But it said revenues, which increased 15.4 per cent to £393.3m, “could have been stronger” after they were hit by declining bets on horseracing and poker and “outages” due to technical problems on its websites.

In the first eight weeks of its new year, core revenues were lower than a year ago when the football World Cup created a flurry of bets, although this is in line with its expectations.

It also said that its revenues from bets where it sets the odds like a traditional bookmaker were down in May after “a poor margin performance”.

Chief executive David Yu, who recently announced plans to step down, said: “Revenue growth during 2011 could have been stronger but we have delivered a significant improvement in margin resulting in profitability for the year above expectations.”

He said the company faced an important year in which it will launch new products to drive growth. He said the company will make progress this year and growth will accelerate afterwards.

The company has seen its shares halve in value since it floated on the stock market in October.

Betfair claims to be one of the world’s largest online sports betting operators, with more than three million registered users.

It plans to revamp its website this year making it faster to use and will provide more in-play sports betting. It will also develop more online games and recently introduced backgammon.

The company also plans to return £50m to shareholders.

Simon French, an analyst at Panmure Gordon, said its underlying profits exceeded City expectations by £7m and said its current share price looked low.

Analysts at Shore Capital said the “better than expected performance was driven by better than expected cost efficiencies”, particularly on lower marketing spend.

It said Betfair needs to demonstrate it can generate top-line growth from lower marketing spend and will continue to be subject to the vagaries of regulation.

The company announced on Monday this week that Mr Yu does not intend to renew his contract which runs out in October next year.

Mr Yu, who has been chief executive for six years, has presided over a difficult period since the company floated.