Full management statement here: -
Having been an active investor for over 20 years, here is my take on the management statement. Management statements always focus on the positive and you have to read a bit deeper than the headlines.
Core revenues up 11%, but no mention of non core revenues, other than ‘they are in line with expectations’. The games products are no longer working and despite being pushed in-front of all users, which personally I find very annoying; they continue to decline. I realise its a cheap source of revenue for Betfair but I feel they are an ugly fit with the business. But hell, they are still worth £13.6m to the business, I imagine this is more profitable than other parts of the business. Mobile business is up and that is pretty much in-line with changing patterns of behaviour across the industry. Because Betfair is a web only business you would expect this.
Managed risk business is up and this is a fair reflection on the effort to heavily promote the non exchange side of the business. It is nearly 10% of revenue and is now bigger than poker.
UK growth on the exchange in sanguine, Europe is flat but rest of the world is performing strongly. But RoW only accounts for roughly 10% of business.
The most interesting thing about the statement that I could see was that, even despite there being loads of racing this year versus last year, number of active accounts in the UK fell by 11%. They also slipped in Europe by 4%, but both produced ARPU up 25% and 13% respectively. Basically Betfair have less customers than last year but are getting more commission out of them, hence my headline.
The results look pretty much in-line with expectations, but the drop in customer numbers isn’t ideal from an investor viewpoint. There’s only so much margin squeezing you can do before you realise that you are not winning new customers. Both these facts will probably please competitors because chasing margin gives them more room for manoeuvre. Sometimes wafer thin margins are a big competitive advantage.
One thing that did surprise me in the statement is that there was no mention of the sports-book product. They did mention however that Gerald Corbett has been appointed chairman. That should please the city. The significance of this appointment is that the last executive founder has now stepped down which that leaves Betfair fully under the control of an appointed executive board. The transition to a shareholder run entity is now complete.
Right, must dash, I have a meeting with Betfair today. Perfectly timed!