Betfair FY13 Post Close Trading Update

http://corporate.betfair.com/media/press-releases/2013/07-05-2013.aspx

FY 13 Post Close Trading Update07/05/2013
“Momentum building from early success”

Betfair Group plc (LSE:BET) is today releasing an unaudited trading update following the end of its financial year ended 30 April 2013 (“FY13”) and is providing an update on progress made in delivering its strategy.

Highlights

Estimated results above the top end of our guidance range:
FY13 estimated revenue of c.£387 million1
FY13 estimated underlying EBITDA2 of c.£73 million1
Cash balance at 30 April 2013 of £168 million (2012: £118 million)1
Excellent progress made in the delivery of our plan:
Cost savings increased to c.£30m (from £20m) and full benefit now expected in FY14
Employee numbers reduced by c.500 following restructuring
Record UK customer acquisition (up 108% year on year) since sportsbook launch
Evidence of improved acquisition efficiency (Q4 cost per acquisition down 20%)
74% year on year increase in games cross sell since sportsbook launch
UK customer base up 18% year on year in the last 6 months
75% of Q4 revenue generated in sustainable jurisdictions (Q4 FY12: 66%)
Strong strategic momentum
Recent customer acquisition and retention performance indicates that product and marketing strategies are working
Planning to re-invest c.£10m of the cost savings in further product and marketing investment
Evidence that the exchange and sportsbook are complementary: 24% of football customers are already using both products
Acquisition of Blue Square helps achieve scale
Breon Corcoran, Chief Executive Officer, stated:

“We have achieved much in the five months since we set out our strategy in December.

“The business has gone through significant change. A new management team is in place and a wide ranging restructuring has been completed ahead of schedule, allowing us to increase our cost savings substantially. At the same time, the pace of product delivery has accelerated, including the development and launch of a new sportsbook within three months.

“The strategy is working. We have had early success and shown that the combination of the exchange and sportsbook can deliver a sustainable competitive advantage. In the last couple of months, our sportsbook-led acquisition focus has resulted in improved marketing efficiency and a two fold increase in the number of UK customer activations. We are confident this will enable us to accelerate revenue growth in our most important market and I believe we can grow in-line with the market in the medium term.

“While we are rightly focusing on regulated jurisdictions, primarily the UK and Ireland, I firmly believe there is a significant international opportunity. We have recently seen positive regulatory momentum in Italy, Spain and the USA. In addition, revenue from the countries where we have ceased marketing is proving relatively resilient due to the uniqueness of our exchange.

“We intend to use our strong balance sheet to pursue a strategy of targeted acquisitions to add further domestic scale, achieve geographical expansion and close product gaps.

“Our progress to date is a testament to the dedication and hard work of our people. They have performed admirably in demanding circumstances.

“This is just the beginning, however. In a few short months we have made considerable progress and demonstrated the opportunity that Betfair has ahead of it. I firmly believe that Betfair’s unique technology, customer value proposition, UK scale and strong balance sheet mean it is well placed to compete in an industry facing substantial changes. I am delighted to be leading the business at this exciting time.”

FY13 trading update

We estimate that Group revenue was approximately £387 million (FY12: £388 million), ahead of our guidance3. The outperformance was driven by stronger than expected UK sportsbook revenues, particularly via the mobile channel, and revenue resilience in countries where we have ceased marketing.

We estimate that Group underlying EBITDA was also higher than our guidance3 at approximately £73 million (FY12: £86 million). This was driven primarily by the better revenue performance.

Cost savings

In December, we stated that we needed to become a leaner organisation. At the time, we had identified opportunities to reduce costs over the next two years by approximately £20 million (on an annual run-rate basis). We now expect cost savings to total approximately £30 million and have accelerated the delivery of the savings such that the full impact is now expected to benefit the current financial year (ending 30 April 2014).

Following an extensive restructuring, we have reduced the number of employees in the business by approximately 500. This is expected to reduce costs by approximately £23 million.

Approximately £7 million of further savings are expected to result from reducing spend with suppliers. Much of this is driven by the lower number of employees, such as the consolidation of office space. We have also reviewed existing supplier relationships to achieve efficiencies and are planning to spend less on public affairs and legal resources in some jurisdictions due to our new geographical focus.

We still expect the cost to achieve these savings to be approximately £20 million. These costs will be reported separately and excluded from underlying results to reflect the exceptional nature of these items.

Strategy update

Betfair’s management team is today presenting an update on the delivery of its strategic plan (the “Trading & Strategy Update Presentation”).

Highlights of the Trading & Strategy Update Presentation include how Betfair is:

Focusing investment on regulated jurisdictions to increase sustainability of revenues and reduce the regulatory risk
Investing in product and brand to enhance our competitive position and drive growth
Introducing greater accountability and becoming a leaner and more dynamic business
Looking to accelerate growth through international opportunities and its balance sheet flexibility.
There will be a live audio stream of the Strategy Update Presentation on our corporate website (http://corporate.Betfair.com) at 10am today. The Strategy Update Presentation materials will be made available on the website at around 9.30am today.

Footnotes

Results for both FY13 and F&12 are from continuing operations excluding LMAX
Figures represent underlying results, which exclude, where relevant, separately disclosed items, including redundancy costs. EBITDA is defined as Group operating profit before impairment, depreciation and amortisation.
Revenue guidance range of £370 million to £385 million; underlying EBITDA guidance range of £65 million to £70 million