September 5, 2013 / 8:17 AM / 4 years ago

UPDATE 1-Betfair says slimming cure starting to work

* Online gambling company narrows focus on fewer markets

* Revenues down but profitability rises after bid rejection

* Simpler betting product introduced to widen appeal

By Keith Weir

LONDON, Sept 5 (Reuters) - Betfair is starting to reap the benefits of cost-cutting and its focus on attracting more punters in well regulated betting markets such as Britain and Ireland, the online gambling company said on Thursday.

Betfair has been forced to defend its strategy after rejecting a 1 billion pound ($1.5 billion) takeover by private equity firm CVC Capital Partners in May.

Revenues fell 13 percent to 90.4 million pounds in the three months to the end of July, reflecting a decision to pull out of markets including Greece, Germany, Cyprus and Spain where regulatory risks or tax hurdles were too high.

The absence of a major international soccer tournament also depressed revenues compared to last year when the Euro 2012 competition pulled in gamblers.

However, profitablity in the form of underlying EBITDA rose 16 percent to 24.9 million pounds in the quarter, helped by a cost cutting programme that has seen the company shed 500 jobs from a peak of around 2,300 workers.

“Betfair’s first quarter performance is in line with our plan and leaves us on track to meet our expectations for the full year,” Chief Executive Breon Corcoran said.


Betfair shares, which have climbed to 2-1/2 year highs in recent weeks, were little changed at 990p by 0730 GMT after a trading statement that was broadly in line with expectations.

The recent rise has pushed the shares above the 950p offer price that the company rejected, giving Corcoran some breathing space as he reshapes the company after joining from Irish bookmaker Paddy Power a year ago.

Launched in 2000 as an online exchange where gamblers could bet against each other, the company now also offers conventional fixed-odds betting on sports events to appeal to a wider audience wanting a simpler product.

The move brings Betfair into more direct competition with companies like Paddy Power and British market leader William Hill.

Betfair said an advertising campaign to coincide with the start of the soccer season last month had driven a 26 percent increase in customer numbers in Britain.

Betfair is focusing on Britain, Ireland, Denmark, Malta, Gibraltar and the United States and said revenues had grown by more than 10 percent in these markets last month.

Online gambling companies face a 300 million pound bill from December 2014 when Britain closes a loophole that has allowed companies to avoid taxes by basing themselves offshore in locations like Gibraltar.

Corcoran said Betfair could benefit if the tax meant smaller online players were unable to compete.

“There could be market share gains. We see that as an opportunity,” he told reporters. ($1 = 0.6399 British pounds)

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