Betfair to buy back £50m shares months after its flotation

Betfair, the struggling betting group, has unveiled one of the swiftest share buybacks in City memory as it disclosed its first full-year results as a public company.

The betting exchange said it planned to re-purchase £50m shares from investors just nine months after its flotation, which has subsequently seen the company shed 41% of its value after a series of underwhelming announcements, regulatory concerns and management departures.

Share buybacks are a popular tactic for mature businesses and are typically employed when companies cannot think of efficient ways of deploying spare cash. However, Betfair was sold to investors in October as a company that had strong growth opportunities. When asked if the management had run out of ideas about how to grow, finance director Stephen Morana insisted: "Not at all. We are investing huge amounts in this business. We announced this at our initial public offering. This was published in the prospectus. It complies exactly with that."

The move to buoy the share price comes after Betfair confirmed that David Yu, its embattled chief executive, would be leaving the company following the group's troubled introduction to the public markets. It also follows a string of unscheduled departures, including those of Mathias Entenmann, chief product and services officer; Robin Osmond, chief executive of financial betting exchange LMAX; and Matt Carter, director of architecture, research and prototyping. Betfair's own polling of employees revealed that staff believed its management was lacking direction.

Morana, who many employees say trumps Yu for knowledge of the betting industry, has now ruled himself out as a potential successor – although most watchers had already expected the company to make an external appointment, possibly a high-profile City figure, in attempt to halt the share price slide.

The latest intrigue came as the company announced its full-year figures, which showed pre-tax profits up 49% to £26.6m on revenues up 15% at £393.3m. However, the numbers were flattered by last year's football World Cup and the company conceded: "Revenue growth during [the financial year] could have been stronger but we have delivered a significant improvement in margin resulting in profitability for the year above expectations."

James Hollins, a leisure analyst at Evolution Securities, added: "Bears will focus on fourth-quarter revenue growth of just 3% and [first-quarter] revenues declining year on year, reflecting [a] tough comparison against the World Cup. We expect continued difficult first-half trading, although superior returns on marketing spend and product development should support both future top-line growth."

Espirito Santo analyst Geetanjali Sharma, who advises clients to sell Betfair shares, added: "We are disappointed by the revenue trends. We also anticipate a period of uncertainty as the search for a CEO begins."

The company added that it would invest in its LMAX financial share trading platform for another 12 months, putting in no more than £10m on top of the £20m already spent. The venture, which many had warned would struggle to compete with existing spreadbetting platforms, has failed to catch on, despite the backing of investment bank Goldman Sachs.

 

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