Betfair delivers mixed first interims

BETFAIR Group, the world's largest betting exchange, has reported lower than expected earnings in its first interim results since floating on the London Stock Exchange.

Despite growing sales 11 per cent to £167.2m on the previous year and raising core earnings (Ebitda) by almost 26 per cent to £35.5m from £28.2m a year earlier, the results were below analysts’ consensus forecasts.

The company, which listed just two months ago, said trading over the period had slowed in the second quarter to just 1.6 per cent year-on-year revenue growth, as poker income weakened and bad weather caused horse races to be cancelled.

“Games growth has strengthened but poker has continued to show significant year-on-year declines following its migration to the Ongame network,” said Betfair chief executive David Yu in a statement.

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

Betfair shares, which had been sold at 1300 pence in October’s IPO, fell more than nine per cent on the news, to trade as low as 1044p .

Analysts took mixed views on the outlook, some calling the trading performance disappointing and others saying the performance was better than expected.

Ivor Jones at Numis Securities said first-half earnings had come in above his forecast of £33m.

“The long-term growth story is not supported by recent trading but nor is it undermined,” he said. “We believe Betfair's leadership in its niche markets (trading sporting odds and high value bettors) gives it good growth prospects.”

But James Hollins, an analyst at Evolution Securities, said: “Of greater concern is the decline in 2Q horse racing revenue ... 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.”

Betfair saw active customers rise by 31 per cent to 654,000 over the half-year, with strong revenue growth of 22 per cent in the first quarter driven by the football World Cup.

It has maintained its target for double-digit growth in adjusted Ebitda in 2011.