Betfair tanks after falling at first hurdle

 
Steve Dinneen
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RACING certainty Betfair yesterday dismayed punters after reporting lower than expected half-year earnings.

The online gambling firm had ridden a lucky streak since its £1.4bn flotation earlier this year.

But its pre-tax profits dipped 18.9 per cent to £7.4m after taking account of one-off items including the cost of its IPO, down from £9.2m the year before.

Underlying revenue rose 12.3 per cent to £188.5m but core revenue grew just 1.6 per cent year-on-year.

Its active customers jumped 31 per cent to 654,000, with strong revenue growth, but average customer spend dropped sharply in poker and horse racing.

Betfair floated at £13 a share in October and subsequently rose to over £15. But yesterday it closed at £9.90 – a 16 per cent fall on the day and 24 per cent below the IPO price.

Chief executive David Yu said conditions at the firm had been tough, admitting results in poker had fallen short of expectations and blaming the heavy snow for slowing growth.

He said: “Recent weather conditions in the UK and Ireland... caused a number of race meeting cancellations, moderating growth rates in the quarter to date.”

Betfair chief financial officer Stephen Morana said the group’s target of returning to 2010’s levels in poker next year is not likely to be met, with core poker revenue down 6.5 per cent after the migration of users onto a new platform in July.

Morana declined to give a new timeframe but said: “Being realistic, it’s going to take longer. We are targeting double digit growth for 2011 overall... but poker will be a challenge for us.”

The results have tarnished the halo surrounding the firm after it pressed ahead with a float despite difficult market conditions. It managed to avoid the fate of online grocer Ocado, which was forced to slash its valuation to get its flotation away earlier this year. Ocado closed yesterday at 160p after floating at 180p.

DAVID YU

BETFAIR

DAVID Yu joined the Betfair Group as chief technology officer in 2001 and has also held the position of chief operating officer prior to his appointment as chief executive in 2006.

He guided the company through its successful IPO earlier this year.

Its prospectus admitted that Yu had been “absent from work for a brief period in March 2010 with a cardiological complaint,” although it insisted he is still fit for duty.

He has taken a hard line about the possible impact on the business of the British Horseracing Authority (BHA)’s horse racing levy.

He was quoted as saying last month that Betfair is “happy to be licensed and to pay sensible tax but if we don’t see movement we’d have to consider what’s right for the business over the long term.”

He was previously vice president, engineering for Alta Vista’s e-commerce and international divisions.

He has spent almost 20 years working in technology, mainly for internet companies. He holds an MS computer science from Stanford University and a BS computer science and electrical engineering from the University of California at Berkeley.