* Pulls back from markets accounting for 24 pct of revenue
* Online betting exchange seeks growth from smaller base
* Cost savings of 20 million pounds identified
By Keith Weir
LONDON, Dec 13 (Reuters) - Betfair is pulling back from markets providing almost a quarter of its revenues to focus on areas where gambling regulations are clearly defined in a bid to reduce uncertainty and volatility for its investors.
The move came as new chief executive Breon Corcoran said he would also make 20 million pounds ($32 million) of annual cost savings and invest in the group’s product and brand to revive a business which he said had “lost its way somewhat”.
Shares in Betfair, which operates an exchange that allows gamblers to bet against each other, have lagged the UK travel and leisure sector by 22 percent this year, partly due to uncertainty about regulations in some of its markets.
The firm recently said it would pull out of Germany and Greece because of problems over licences and punitive tax rates.
“We’re focusing our attention on markets where we know there will be betting in 10 years’ time,” Corcoran, in the job only four months, told reporters on Thursday.
“We’ll grow from that base, albeit smaller,” he said, adding Betfair was halting marketing and other investments in countries that contributed 24 percent of its first-half revenues.
Beyond Germany and Greece, Corcoran listed Cyprus, Russia, Norway and some Asian countries as markets from which Betfair was effectively withdrawing.
He also set a medium-term target of boosting dividends to 40 percent of profit after tax.
The changes made by Corcoran, previously chief operating officer at Irish bookmaker Paddy Power, overshadowed a 2 percent decline in first-half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to 42.3 million pounds as marketing spend outweighed revenue growth.
Betfair forecast underlying EBITDA of 65-70 million pounds in the financial year ending in April 2013, against 85.7 million pounds last year. The decline reflects the new strategy and also changes to the way the company accounts for share based payments and development spend.
It forecast group revenues of 370-385 million pounds for the current financial year.
Betfair shares were up 0.9 percent to 771 pence by 1050 GMT. They floated at 13 pounds in October 2010 and jumped initially on excitement about the growth prospects of a company founded only 12 years ago.
Analysts were generally positive about the changes Corcoran plans to make.
“We believe the review ticks all the boxes that shareholders were hoping to see and leaves a higher quality income stream with superior growth prospects,” Morgan Stanley said in a research note.
Betfair has lost market share in Britain where the online gambling sector is highly competitive. Analysts also say the company has suffered from failing to identify clearly if it regarded itself as a gambling or a technology company.
Emphasising its focus on gambling, Betfair said on Thursday it had sold its minority stake in social gaming company Kabam for $30 million and agreed to sell a majority stake in the LMAX financial exchange for 2.4 million pounds.