12
BETFAIR ANNUAL REVIEW 2010
BETFAIRANNUAL REVIEW 2010
02 Betfair annual review
JULy 2009• TVGannouncesheadlinesponsorshipoftheBreeders’Cup.
AUgUsT 2009• BetfairbecomesOfficialBettingPartnerofManchesterUnitedFCandFCBarcelona.
DEcEmBER 2009• Betfairnamed‘UKSportsBettingOperatoroftheYear’ateGamingReviewAwards.
JANUARy 2010• AnthonyNolanTrustbecomesBetfair’sCharityoftheYearfor2010.
FEBRUARy 2010• BetfairawardedCarbonStandardTrustcertification,highlightingitscommitmentto theenvironment.
• HitwisenamesBetfairastheUK’sbusiestonlinebettingsite.
ApRIL 2010• NumberofregisteredcustomersatBetfairpassesthreemillion.
mAy 2010• BetfairbecomesthefirstintheindustrytohaveabettingapplicationfortheiPhoneinthe Apple®AppStore℠.
JULy 2010• BetfairPokerannouncesmovetoOngamepokernetwork.
• BetfairbecomesthefirstintheindustrytohaveabettingapplicationfortheiPadinthe Apple®AppStore℠.
AUgUsT 2010• Betfair’sCash4Clubsschemeawardsits100thgranttograssrootssportsclubsinUK.
sEpTEmBER 2010• BetfairannouncesitsintentiontolistontheLondonStockExchange.
OcTOBER 2010• BetfairbecomesaPlcasitssharesbegintradingontheLondonStockExchange.
• LMAXlaunchesitsexchangeplatformforretailfinancialtradingofcontractsfordifference (CFDs)andForeignExchange.
BETFAIR HIgHLIgHTs 2009-2010
03Betfair annual review
ItiswithgreatpridethatIwrite,forthefirsttime,asthe
ChairmanofBetfairGroupplc.TherecentlistingontheLondon
StockExchangewasasignificantmilestoneinthelifeofyour
companyandonewhichsignalsourintenttobuildupona
decadeofsustainedsuccess.
Duringthelastyearwegrewgrouprevenuesby13%,to£341m,
anddeliveredanadjustedEBITDAof£54min2010,despitea
challengingeconomicenvironment.Thesuccessoftheseresults
wasdrivenbyourresilientbusinessmodelandthecompetitive
advantageofferedbythecoreofourbusiness,thebetting
exchangeproposition.
Innovationandafocusonthecustomerremainsattheheart
ofeverythingwedoandiscrucialtomaintainingourleading
positionintheonlinegamingmarketplace.Inthepastyear,
enhancementsacrossourproductrangehaveensuredthatwe
continuetoofferourcustomersaunique,richanddiversegaming
experience.Whilethediversificationofourproductrange
isimportant,itisalsosignificantthattheappealofourcore
productshowsnosignsofabating,with84%ofcustomersactive
ontheBettingExchangethisyear.
Wehaveinvestedover4.5millionmanhoursinthedevelopment
ofourplatformoverthepast10years,andasaresultwehave
astrong,stableandstate-of-the-artplatformonwhichtorun
thebusiness.However,wearenotrestingthereandcontinue
totakesignificantstepstowardsimprovingitscapabilities.
Theimplementationofatechnologyre-architectureproject,
whichbeganinthelastcalendarquarterof2009,willgiveus
theflexibilitytoreacttotheevolvingregulatorylandscapeand
deployourbusinessquicklyintonewterritoriesinthefuture.
Betfairisalreadyatrulyinternationalbusiness,andwithover
50%ofourGrouprevenuesnowcomingfromoutsideofthe
UK,theanticipatedbenefitsofthisinvestmentinourtechnology
areclear.
Weremainveryfocusedonregulatorydevelopmentsaroundthe
world.IntheUS,ourownershipoftheTVGbusinesshashelped
usbuildeffectiverelationshipswithlocalregulatoryandpolitical
stakeholdersandwebelievethatwearewellplacedtobenefit
fromanyfutureliberalisationintheregion,suchastherecent
passingoflegislationinCaliforniawhichwillallowexchange
wageringonhorseracingfrom2012.InEurope,wecontinueto
campaignforaregulatedandlicensedonlinegamblingmarket,
andhavebeenencouragedbymovestowardsregulationina
numberofcountriesonthecontinent.
DuringtheyearweappointedIanDysontotheBoardasaNon-
executiveDirectorandChairoftheAuditCommittee.Ian,who
edward wray
Chairman
iscurrentlyChiefExecutiveOfficerofPunchTavernsplcandwas
previouslyGroupFinanceandOperationsDirectoratMarks&
Spencerplc,bringsawealthofexperienceandIamdelighted
towelcomehimtotheCompany.AtourAGM,ourCo-Founder
AndrewBlack,betterknowntomanyasBert,steppeddown
fromtheBoard.WithoutBerttherewouldbenoBetfairand
hisinspiration,enthusiasmandvisionovertheyearshavebeen
centraltothesuccessofthecompany.Atthesametime,Chris
BatterhamalsosteppeddownfromtheBoardafteralmosta
decadeasaNon-executiveDirector.Chrishasbeenaninvaluable
sourceofknowledgeandexperienceforthecompanyduringhis
timeontheBoard.OnbehalfoftheBoardIwouldliketothank
thembothfortheirtremendousworkandcontributiontoBetfair.
InJune,Betfaircelebrateditstenthbirthday.Wehavean
outstandingmanagementteamandadedicatedandtalented
groupofemployees.Asweenterourseconddecade,and
beginlifeasapubliccompany,theywillensurethatweare
bestpositionedtorepeat,andimproveon,thesuccessofthelast
tenyears.
cHAIRmAN’s sTATEmENT
04 Betfair annual review
Betfair’s initial PuBlic Offering
Betfair’sadmissiontolistingontheLondonStockExchangein
Octoberthisyearwasthenaturalnextstepforacompanythat,
sinceitsinceptionadecadeago,hasshowngreatdetermination
andabilitytoevolveandgrow.
WebelievethatthelistingofBetfair’sshareswillhelpprovidea
platformforgrowth:itwillassistBetfairinthedevelopmentofits
internationaloperationsthroughtheenhancedtransparencyand
reputationalbenefitsofbeingaplc;itgivesusgreaterflexibility
toreacttoadevelopingandconsolidatingindustry;andit
strengthensourabilitytoretainkeypeopleaswellasattracttop
newtalent.Thelistinghasalsoprovidedongoingflexibilityand
liquidityforourloyalgroupofshareholders.
Asthebusinesslooksaheadtoanexcitingnewchapter,itisour
aimtoensurethatBetfair’screativeanddynamiccultureremains
thesame,sincethecompany’sfuturesuccessreliesonusstaying
truetotheethosandhighstandardswhichwehavesetfor
ourselvesinthepast.
summary
Despiteachallengingglobaleconomicbackdrop,Betfairdelivered
astrongperformanceintheyearending30thApril2010.Group
cHIEF EXEcUTIVE's REVIEW
revenueroseby13%to£341m(2009:£301m),atenthsuccessive
yearofdouble-digitrevenuegrowth.Thecompanyalsocontinues
tobecashgenerativeandattheendofAprilhadcashreservesof
£151mandnodebt.
Duringtheyearwedecidedtomakesubstantialinvestmentsinboth
ourCoreBetfairbusinessandourotherinvestments.
IntheCoreBetfairbusiness,wedecidedduring2009toembark
ona£25mthreeyearplantoenhanceourtechnologyplatformso
thatitwillbemorecostefficient,moreflexibleandmorecapable
ofsupportingfutureinternationalgrowth.Weexpectthiswork
tobecompletedbytheendoftheyearending30April2012.We
alsoinvestedsignificantlyduringtheyearinabrandandmarketing
campaignaheadofthe2010FIFAWorldCup.
OutsidetheCoreBetfairbusiness,wemadefurtherinvestmentin
ourUSbusiness,TVG,andwebelievewearewellpositionedinthe
eventofanyfutureliberalisationoftheUSonlinebettingandgaming
market.Wealsoprovidedfurthersupporttooursubsidiary,LMAX,
aheadofthelaunchofitsexchangeplatforminOctober2010.LMAX
isaplatformwhichoffersonlineretailfinancialtradingofcontracts
fordifference(CFDs)inabroadrangeofassetclassesincludingequity
indices,commoditiesandForeignExchange.LMAX’stechnology
platformhasevolvedfromBetfair’sownexchangetechnology
platformandwe’reveryexcitedaboutthepotentialforthebusiness.
ROYALASCOT
05Betfair annual review
Asplanned,theseinvestmentshadanimpactonadjustedEBITDA
whichfellto£54m(FY09£70m).Despitebeingdownyear-
on-year,thisfigurerepresentsstrongunderlyinggrowthand
profitabilitywhichhasgivenustheconfidencetoinvestinthe
businesswhenwedeemitrighttodoso.Webelievethatthis
investmentinthecompanyduringtheyearwillhelptosecure
futuregrowthforshareholders.
Wenowhavemorethanthreemillionregisteredcustomers,with
thenumberofactivecustomersrisingby26%to823,000inthe
pastyear.Thisistestamenttoourcustomers’appreciationofthe
uniquenessoftheBettingExchangeproduct.
Weareproudofoursuccesstodateandarecommittedto
maximisingallopportunitiesforfuturegrowthinordertocontinue
ourjourneyfromstart-uptoleadingglobalinternetbusiness.
PrOduct uPdate
ThistimelastyearIwroteofourintentiontoinnovateinthe
areaofmobilebettingproducts.I’mthereforedelightedtoreport
thatinMaywebecamethefirstgamingcompanytoofferiPhone
usersabettingapplicationintheApple®AppStore℠.TheApphas
beenextremelypopularandsincelaunchithasbeendownloaded
over50,000times,afeatwhichcontributedtomobilerevenues
increasingby61%thispastyear.
Wefollowedthiswiththereleaseofthefirstbettingapplication
fortheiPad,followedbytheintroductionofourAndroid
application.Thesegroundbreakingproductshighlightour
commitmenttoprovidinguserswiththemostadvancedand
convenientmethodsofplacingtheirbets.
WetookthedecisionduringtheyeartomigrateourPoker
productontotheOngameNetwork,withthemigrationtaking
placeaftertheyearendinJuly2010.Asaresult,Betfair
Pokernowoffersitsplayersenhancedgamingoptions,more
tournamentsandasignificantlylargerliquiditypooltoplayin,all
ofwhichwebelievewillbringlongtermbenefitsandstabilityto
whatisanimportantcomponentofourbusiness.
OurmovetotheOngameNetworkreiteratedourdesireto
offerourcustomersabestofbreedgamingexperienceacrossall
ofourproducts.Anotherexamplehasbeentheintroductionof
thePlaytechdownloadablecasinoproductinNovember2009.
Thisdevelopment,alongwiththemigrationofourweb-based
casinoclienttoaPlaytechplatforminAugust2010,allowsusto
provideabetterintegratedandmoreflexiblecasinoofferingto
ourcustomers.
marketing and Brand
Inthepastyearwe’veinvestedsignificantlyinmarketing
initiativesaimedprimarilyatpositioningBetfairinthehigh
growthfootballmarket.
Inthelead-uptothe2010FIFAWorldCup,ourconcerted
andtargetedeffortsonline,ontelevisionandthroughour
partnershipswithManchesterUnitedFCandFCBarcelona,
deliveredstronggrowthincustomeracquisitions.Thepartnerships
withthesetwoclubsarenowintotheirsecondyearsand
we’vebeendelightedwithhowwe’veleveragedtheselandmark
“WE NOW HAVE mORE THAN THREE mILLION REgIsTERED cUsTOmERs, WITH THE NUmBER OF AcTIVE cUsTOmERs RIsINg By 26% TO 823,000”
UKGENERALELECTION
06 Betfair annual review
operatethesenewproductslocally;quicklyintegratethirdparty
software,servicesandproducts;andpersonaliseandimproveour
customers’experience.
Maintainingandimprovingthetechnologythatourbusiness
wasbuiltuponiscentraltoourfuturesuccess.There-architecture
projectwillprovideuswithaninfrastructurecapableof
supportingfutureinternationalgrowthinwhatisanincreasingly
complexenvironment.
Itiscrucialforourbusinesstomaintainaworld-classIT
infrastructureandthisisreflectedinourtechnologyteamnow
representingmorethan600ofourtotalheadcountofjustover
2000.Wecontinuetoinvestinourtalentbasebyhiringhighly
experiencedandskilledpersonneltohelpdrivethebusinessforward.
InJuly,weannouncedthatwewillopenanewdatacentrein
Dublin,withthecityalsosettohostourTelbetoperations.The
enhancedlevelsofconnectivityandreliabilityofferedinDublin
shouldresultinlong-termimprovedperformanceforcustomers
andcostsavingsforthebusiness.Thesitewillalsogiveus
additionalflexibilityastheregulatoryenvironmentdevelops.
cHIEF EXEcUTIVE's REVIEW
dealsinordertocementourpositionastheworld’sbiggest
bettingcommunity.
OurinvestmentinUKhorseracingoverthepastyearhasbeen
substantial.Werecentlymadethecommitmenttobeasponsorat
everyUKracecourseatleastonceevery12months.Furthermore,
ourcontinuingpartnershipwithAscotRacecoursesawusonce
againsponsortheirflagshiprace,TheKingGeorgeVI&Queen
ElizabethStakes.
InJune,wedecidedtoceaseourvoluntaryLevypaymenttothe
BritishHorseracingAuthority,choosinginsteadtoinvestmore
than£1mdirectlyintoUKhorseracing.Thisfigureisinaddition
tothe£6.3mpaidlastyearthroughstatutoryLevypayments.
ThisvoluntarypaymenthighlightsourongoingsupportofUK
horseracingandourdesiretoseeitthrive.
OPeratiOnal Overview
Duringthepastyearwebeganworkonaplannedenhancement
ofourexchangeplatform.Theprojectwillfocusonallowingusto
rapidlyimplementnewproductsandservicesinnewjurisdictions;
BETFAIRIPADAPP MICHAELOWENANDBETFAIR
07Betfair annual review
david yu
ChiefExecutiveOfficer
cOrPOrate uPdate
Ourlong-standingcommitmenttotakeameasuredandprudent
approachtoregulatorycompliancehascontinuedtoguidethe
businessoverthepasttwelvemonths.
InMay2010weceasedoperatinginFranceaftertakingthe
decisionnottoapplyforoneofthenewlicencesonoffer.Inour
opinionthenewFrenchlicensingandtaxationregimeisoverly
restrictiveanddoesnotallowustoofferacommerciallyviable
product.Wewillcontinuetomonitorthesituationandareready
toreviewourpositionifthereisanychange.
ElsewhereinEurope,theDanishgovernmentpassedprimary
legislationtoregulatethesectorinJuneandwelookforwardto
applyingforaDanishlicencefortheexchangeandotherproducts
in2011.
OthercountriesinEuropearealsoreviewingtheirapproachto
regulationandwearefollowingprogresscloselyinordertoreact
quicklyifanychangescreatenewopportunitiesforBetfair.
IntheUS,Betfaircontinuestoworkconstructivelywithindividual
StatesandtheUSFederalGovernmentinordertohelpprogress
towardsalegalisedonlinegamblingmarket.Developmentsin
CaliforniaandNewJerseywithregardstoexchangebettingare
ofparticularrelevancetousandwearefollowingtheirrespective
legislativeandregulatorypathsclosely.
Maintainingcloseworkingrelationshipswithgovernmentbodies
hasbeencrucialtoestablishingourreputationasatrustworthy
andtransparentoperator,andsotooarethelinkswehavebuilt
withsportingbodies.Thisyear,wesignedlandmarkagreements
withtheBritishAthletesCommission(BAC)andtheProfessional
PlayersFederation(PPF),topromoteplayereducationand
supporttheorganisationsintheireffortstosafeguardtheintegrity
ofsport.
Ourcommitmenttowardscorporateresponsibilityremains
wholeheartedandrobustandoverthepastyearwehavetaken
astrategicapproachtointegratingsocialandenvironmental
concernsintohowwedobusiness.ABoardlevelCorporate
ResponsibilitySteeringCommitteehasbeenestablished,chaired
byNon-executiveDirectorFruHazlitt,inordertoreviewand
manageouractivities.
Wearekeentosupportthecommunitiesincountrieswhere
weoperate.InadditiontoactivitiesinRomaniaandMalta,our
flagshipCash4Clubsprogrammedistributedatotalof£90,000to
“sUsTAINED gROWTH AND pROFITABILITy THANks TO A UNIqUE, REWARDINg AND cONsTANTLy ImpROVINg EXpERIENcE”
communitysportsclubsacrosstheUKandourCharityoftheYear
partnershipwiththeAnthonyNolanTrustisoncoursetoreachits
fundraisingtargetof£150,000.
summary
Fortenyears,thebusinesshasdeliveredsustainedgrowthand
profitabilitythankstoitsabilitytoofferaunique,rewardingand
constantlyimprovingexperiencetocustomers.
Iamdelightedthatthispastyearhasprovedtobenodifferent
despiteatestingeconomicclimateandourdecisiontoinvest
heavilyinthebusiness.Thisistestamenttothehardworkof
Betfair’semployeesaroundtheworld.
Wefacethenextyearwithastrongcommitmenttobuildonwhat
wehavedeliveredoverthepastdecadeandtoproducethebest
resultsforbothourcustomersandshareholders-oldandnew.
consolidated profit and loss accountfortheyearended30April2010
2010 2009
£'000 £'000
continuing operations
Revenue 340,915 301,206
Costofsales (55,894) (48,566)
gross profit 285,021 252,640
Administrativeexpenses (266,575) (208,145)
group operating profit 18,446 44,495
Analysedas:
adjusted eBitda* (excluding exceptional items and
equity settled share-based payments) 53,484 70,288
Exceptionalitems (4,600) (892)
Equitysettledshare-basedpayments (4,192) (4,250)
eBitda* 44,692 65,146
Depreciationandamortisation (26,246) (20,651)
group operating profit 18,446 44,495
Profitondisposalofoperations - 1,805
Financeincome 2,389 4,168
Financeexpense (16) (1,344)
Netfinanceincome 2,373 2,824
Shareoflossofequityaccountedinvestments (3,041) (1,656)
Profit before tax 17,778 47,468
Taxation (2,659) (8,644)
Profit for the year 15,119 38,824
attributable to:
EquityholdersoftheParent 15,119 38,824
Minorityinterest - -
Profit for the year 15,119 38,824
Allactivitiesrelatetocontinuingoperationsinthecurrentandprioryear.
*EBITDAisEarningsBeforeInterest,Taxes,DepreciationandAmortization.
kEy FINANcIAL INFORmATION
08 Betfair annual review
consolidated balance sheetasat30April2010
2010 2009
£'000 £'000
non-current assets
Property,plantandequipment 24,463 22,578
Intangibleassets 88,980 77,285
Investments 152 6,209
Available-for-salefinancialassets 4,385 2,420
Deferredtaxasset 5,460 5,549
123,440 114,041
current assets
Derivativefinancialasset - 2,254
Tradeandotherreceivables 22,212 15,924
Cashandcashequivalents 150,947 133,367
173,159 151,545
total assets 296,599 265,586
current liabilities
Tradeandotherpayables 88,857 73,403
Taxpayable 25,930 27,374
total liabilities 114,787 100,777
net assets 181,812 164,809
equity attributable to equity holders of the Parent
Sharecapital 105 104
Sharepremium 4,078 2,128
Otherreserves (2,263) 1,975
Retainedearnings 179,892 160,602
181,812 164,809
minority interest - -
total equity 181,812 164,809
09Betfair annual review
consolidated cash flow statementfortheyearended30April2010
2010 2009
£'000 £'000
cash flows from operating activities
Profitfortheyear 15,119 38,824
Adjustmentsfor:
Depreciationandamortisation 26,246 20,651
Lossondisposalofproperty,plantandequipment 19 18
Profitondisposalofoperations - (1,805)
Taxation 2,659 8,644
Equitysettledshare-basedpayments 4,192 4,250
Netfinanceincome (2,373) (2,824)
Shareoflossofequityaccountedinvestments 3,041 1,656
Increaseintradeandotherreceivables (6,758) (1,337)
Increaseintradeandotherpayables 13,783 3,428
cash generated from operations 55,928 71,505
Taxationpaid (2,879) (5,517)
net cash from operating activities 53,049 65,988
cash flows from investing activities
Acquisitionofsubsidiarynetofcashacquired (3,261) 7,114
Disposalofsubsidiaries - (702)
Acquisitionofproperty,plantandequipment (12,472) (12,156)
Proceedsfromsaleofproperty,plantandequipment 52 47
Acquisitionofotherintangibleassets (5,460) (2,507)
Capitaliseddevelopmentexpenditure (14,659) (8,094)
Financeincomereceived 779 3,707
Cashinjectioninjointlycontrolledentities (225) -
Acquisitionofavailable-for-salefinancialassets (1,965) (150)
Proceedsfromsaleofassociates - 4,555
Dividendsfromassociates - 219
net cash used in investing activities (37,211) (7,967)
cash flows from financing activities
Settlementofliabilitiesduetorelatedpartiesofacquiredsubsidiary - (35,966)
Proceedsfromtheissueofsharecapital 1,855 710
Loannotesredeemed - (140)
net cash from / (used) in financing activities 1,855 (35,396)
Netincreaseincashandcashequivalents 17,693 22,625
Cashandcashequivalentsatthebeginningoftheyear 133,367 110,961
Foreignexchangedifferences (113) (219)
cash and cash equivalents at 30 april 150,947 133,367
kEy FINANcIAL INFORmATION
10 Betfair annual review
directOrs
EdwardWray (Non-executiveChairman&Co-Founder)
DavidYu (ChiefExecutiveOfficer)
StephenMorana (ChiefFinancialOfficer)
MikeMcTighe (SeniorIndependentDirector)
IanDyson (IndependentNon-executiveDirector)
JoshHannah (Non-executiveDirector)
FruHazlitt (IndependentNon-executiveDirector)
cOmPany secretary
MartinCruddace
DIREcTORsAND ADVIsERs
Fortheyearended30April
2010 2009 2008
£’000 £’000 £’000
restated under ifrs
Revenue 340,915 301,206 242,430
AdjustedEBITDA 53,484 70,288 53,855
Equitysettledshare-basedpaymentcharges (4,192) (4,250) (4,319)
EBITDAbeforeexceptionalitems 49,292 66,038 49,536
Exceptionalitems (4,600) (892) -
EBITDA 44,692 65,146 49,536
Profitbeforetax 17,778 47,468 43,781
Profitfortheyear 15,119 38,824 30,749
AmountsreceivedoncustomeraccountbalancesheldinthestakeholderaccountareincludedinEBITDA.
AdjustedEBITDAisEBITDAexcludingshare-basedpaymentchargesandexceptionalitems
THREE-yEAR sUmmARy
PrinciPal Place Of Business
Waterfront,HammersmithEmbankment,ChancellorsRoad(Access
onWinslowRoad),London,W69HP
auditOrs
KPMGLLP
8SalisburySquare,London,EC4Y8BB
PrinciPal Bankers
RoyalBankofScotlandplc
280Bishopsgate,London,EC2M4RB
PrinciPal sOlicitOrs
FreshfieldsBruckhausDeringer
65FleetStreet,London,EC4Y1HS
11Betfair annual review
cONTAcT UsFormoreinformationaboutBetfairpleasevisitbetfair.comorcorporate.betfair.com
ForCorporateandCommunicationsenquiries:
E-mail:[email protected]
Telephone:+44(0)2088348000
Mail:
BetfairGroupplc,WaterfrontHammersmithEmbankmentChancellorsRoad(AccessonWinslowRoad)LondonW69HP
