€253m boost for Betfair shareholders as earnings rise

Online gambling company, Betfair plans a cash return of £200 million (€253m) to shareholders and higher dividend payouts after posting a 51% rise in first-half earnings.

The firm, which operates an exchange that allows gamblers to bet against each other, said yesterday it made core earnings (EBITDA) of £73.9m in the first six months to the end of October on revenues up 26% to £237.6m. The revenue growth was driven by strong customer base growth, the World Cup and favourable sports results.

Betfair, which ended the period with £271.4m of cash, increased its interim dividend by 50% to 9p per share and raised its medium-term dividend payout target to approximately 50% of earnings. It upped its forecast of core profit in the 2014-2015 year to £97m-£103m to reflect the first half performance and “the momentum we take into the second half”.

The share price was up by around 8% yesterday, at nearly £14.80, which seemed to take some analysts by surprise.

“Thirty-one days ago we set a 12-month price target for Betfair of £14.50. Following the first half results announcement what we thought would take 12 months is likely to have taken just one,” commented Davy Stockbrokers’ David Jennings in a research note.

“The scale of the capital return is greater than expected, while the signal that further capital returns are likely via a buy-back programme will, undoubtedly, be well received by the market. It is, however, the underlying performance of the business that is ultimately what is facilitating these returns,” he added.

According to Betfair’s chief executive, Breon Corcoran, the company has invested considerably in products “that differentiate us and innovative features...have allowed us to acquire and retain more customers than ever before. Over one million customers bet with us in the first half of the year, a 50% increase on last year”.

That trend also spread to Ireland, where a 40% customer increase was noted. Irish punters placed half a million bets on the World Cup, via Betfair, with the All Ireland Hurling final and the Punchestown racing festival also popular draws.