Betfair shares fall despite turnover rise

Betfair shares fall despite turnover rise

Wednesday, June 17, 2015 Totally Gaming
Breon Corcoran believes Betfair's strategy is working

Betfair’s share price has fallen today (Wednesday) after reporting revenues for FY15 in line with an analyst’s sell note released earlier this month.

The betting exchange ostensibly announced an “excellent year” with a rise of 21 per cent to £476.5m (€661.8m/$745.1m) in turnover for the 12 months to April 30, with positive movement in customer base and profits.

However, Numis Securities’ Ivor Jones had predicted a 22 per cent rise in FY15 revenues at the start of June, and while noting that meant Betfair was bringing in around £70m more for the year, he expressed concern that rivals in the gambling sector such as Gala Coral were performing at least equally as well.

Betfair’s share price began the month as high as £2.698, but was £2.514 yesterday (Tuesday) and was trading as low as £2.425 on Wednesday afternoon.

“We normally reserve 'sell' recommendations for companies where we see fundamental problems and Betfair is not one of those, in our view,” said Jones. “However, we have been meekly increasing our share price target in line with the outperforming share price for some time.

“But, after further outperformance, we simply cannot make sense of a share price of more than our new target of £2.100. There are, at least, seven companies competing at the top of the UK online sports betting market. We believe that Betfair’s valuation should reflect that.”

Numis actually raised its advice on Betfair to ‘reduce’ today, as others retained a ‘sell’ rating and HSBC reiterated a ‘buy’ with a £2.500 target price.

Perhaps as a sweetener to investors, Betfair reported that dividend per share would be up 70 per cent from 20p in 2014 to 34p this year.

The betting exchange’s earnings before interest, tax, depreciation and amortisation were up 32 per cent on a year-on-year basis to £120.2m, while operating profit leapt 53 per cent to £94.3m and there was a 52 per cent rise in active customer numbers to 1.7 million.

“We are successfully executing our strategy and achieving profitable scale in sustainable markets,” Betfair chief executive Breon Corcoran said.

“Our investments are working, the business now operates at pace and our people have a strong will to win. Betfair is well positioned for further growth and we look forward to building on these results in FY16.”

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