According to the Telegraph (http://www.telegraph.co.uk/finance/news ... loats.html):
'In the year to April 30 2010 ... revenues rose 13pc to £341m. Pre-tax profits fell from £47.5m to £17.8m'.
But the New York Times (http://dealbook.blogs.nytimes.com/2010/ ... her-ocado/) says that:
'[Betfair] reported underlying earnings of £62 million in the year to April 2010.'
Which is the correct figure for Betfair's profits - £17.8 million or £62 million?
Jeff
Betfair profits
Jeff
They are comparing different metrics. They are both correct in their own right ..
See annual report :-
http://corporate.betfair.com/investors/ ... rview.aspx
Regards
Peter
They are comparing different metrics. They are both correct in their own right ..
See annual report :-
http://corporate.betfair.com/investors/ ... rview.aspx
Regards
Peter
Hi Peter
I've had a look at the report.
It appears that underlying earnings are the same as 'Earnings before interest, taxes, depreciation and amortization' (http://en.wikipedia.org/wiki/Earnings_b ... ortization).
So I'm guessing that the difference between the two figures can be explained by amortization, which appears to refer in this context to debt repayments.
But I'm probably wrong!
Jeff
I've had a look at the report.
It appears that underlying earnings are the same as 'Earnings before interest, taxes, depreciation and amortization' (http://en.wikipedia.org/wiki/Earnings_b ... ortization).
So I'm guessing that the difference between the two figures can be explained by amortization, which appears to refer in this context to debt repayments.
But I'm probably wrong!
Jeff
PeterLe wrote:Jeff
They are comparing different metrics. They are both correct in their own right ..
See annual report :-
http://corporate.betfair.com/investors/ ... rview.aspx
Regards
Peter
I always think its a bit of a folly to post figures excluding selected items, OK they can give you guide but costs are costs. It's like they don't matter and of course they do.
I noticed in the report that Betfair seem to be captialising developments costs. So the true cost of a project is being spread out over a number of years. Nothing unusual about that but as there is a lot of development costs incurred immediately and in such a dynamic industry that is only ten years old I would imagine its almost impossible to amortise these costs accurately. I would rather take the charge immediately and benefit from higher profits in later years.
I think it's interesting that despite introduce a huge range of new products the turnover isn't growing that fast. It would be really interesting to see YOY figures for certain categories. It feels to me for some time that they have taken profits from one sport to invest in other areas but it doesn't seem to be a fully accretive process.
I noticed in the report that Betfair seem to be captialising developments costs. So the true cost of a project is being spread out over a number of years. Nothing unusual about that but as there is a lot of development costs incurred immediately and in such a dynamic industry that is only ten years old I would imagine its almost impossible to amortise these costs accurately. I would rather take the charge immediately and benefit from higher profits in later years.
I think it's interesting that despite introduce a huge range of new products the turnover isn't growing that fast. It would be really interesting to see YOY figures for certain categories. It feels to me for some time that they have taken profits from one sport to invest in other areas but it doesn't seem to be a fully accretive process.
The two figures are different because £17.8 measures Profit Before Tax (PBT) whereas c. £62m figures accounts for the Earning Before Interest, Taxes and Amortization (EBITDA) on Core BF activities (excluding LMAX & BF USA).
Private equity and venture capitalists like to use EBITDA as its tells you how cash the business is generating but does not take into account depreciation on building and equipment, research and development, interest, tax expense etc. When looking at a listed company then you need to use PBT as this is the net amount that will be increase shareholder value and which will eventually pay either for dividends or capital appreciation through share buy backs.
Betfair has comparatively insignificant debt and therefore negligable interest and they haven't made anormous profit so tax expense is lower. They don't have much goodwill either. So the biggest differences between the two figures come from depreciation on building & equipment, research & development (R&D) & a third yet unknown (at least to me). Betfair invests heavily on technology and therefore has higher depreciation. They also spend a lot on R&D and therefore has high amortization of R&D. Despite their revenue and gross profit (GP) going up in 2010, their both PBT and EBITDA have decreased and this is due to their operating expenses going up. Their UK filled accounts for 2010 are not yet available, as they are not yet listed so do not have stringent reporting requirement, and therefore unable to tell what really driving this increase but may paint a bit truer picture once we have detail of that.
As with regards to whether the c. £1.5bn valuation is justified or not is another question.
Don't forget that the share from Initial Public Offering (IPO) will only be available to financial institutions so there doesn't to be much to offer reward to loyal customers like yourselves.
Private equity and venture capitalists like to use EBITDA as its tells you how cash the business is generating but does not take into account depreciation on building and equipment, research and development, interest, tax expense etc. When looking at a listed company then you need to use PBT as this is the net amount that will be increase shareholder value and which will eventually pay either for dividends or capital appreciation through share buy backs.
Betfair has comparatively insignificant debt and therefore negligable interest and they haven't made anormous profit so tax expense is lower. They don't have much goodwill either. So the biggest differences between the two figures come from depreciation on building & equipment, research & development (R&D) & a third yet unknown (at least to me). Betfair invests heavily on technology and therefore has higher depreciation. They also spend a lot on R&D and therefore has high amortization of R&D. Despite their revenue and gross profit (GP) going up in 2010, their both PBT and EBITDA have decreased and this is due to their operating expenses going up. Their UK filled accounts for 2010 are not yet available, as they are not yet listed so do not have stringent reporting requirement, and therefore unable to tell what really driving this increase but may paint a bit truer picture once we have detail of that.
As with regards to whether the c. £1.5bn valuation is justified or not is another question.
Don't forget that the share from Initial Public Offering (IPO) will only be available to financial institutions so there doesn't to be much to offer reward to loyal customers like yourselves.
Thanks Npatel
Given that the difference between the two figures comes to more than £40 million, it would be interesting to have a breakdown of the costs. I can't see R&D or depreciation costing all that much relative to £40 million.
Are marketing costs included in the EBITDA?
Jeff
Given that the difference between the two figures comes to more than £40 million, it would be interesting to have a breakdown of the costs. I can't see R&D or depreciation costing all that much relative to £40 million.
Are marketing costs included in the EBITDA?
Jeff
npatel999 wrote:The two figures are different because £17.8 measures Profit Before Tax (PBT) whereas c. £62m figures accounts for the Earning Before Interest, Taxes and Amortization (EBITDA) on Core BF activities (excluding LMAX & BF USA).
Private equity and venture capitalists like to use EBITDA as its tells you how cash the business is generating but does not take into account depreciation on building and equipment, research and development, interest, tax expense etc. When looking at a listed company then you need to use PBT as this is the net amount that will be increase shareholder value and which will eventually pay either for dividends or capital appreciation through share buy backs.
Betfair has comparatively insignificant debt and therefore negligable interest and they haven't made anormous profit so tax expense is lower. They don't have much goodwill either. So the biggest differences between the two figures come from depreciation on building & equipment, research & development (R&D) & a third yet unknown (at least to me). Betfair invests heavily on technology and therefore has higher depreciation. They also spend a lot on R&D and therefore has high amortization of R&D. Despite their revenue and gross profit (GP) going up in 2010, their both PBT and EBITDA have decreased and this is due to their operating expenses going up. Their UK filled accounts for 2010 are not yet available, as they are not yet listed so do not have stringent reporting requirement, and therefore unable to tell what really driving this increase but may paint a bit truer picture once we have detail of that.
As with regards to whether the c. £1.5bn valuation is justified or not is another question.
Don't forget that the share from Initial Public Offering (IPO) will only be available to financial institutions so there doesn't to be much to offer reward to loyal customers like yourselves.