LMAX Volumes up 850%, but Revenues only up 14%. (Why??!!).
Betfair, which bills itself as the world's biggest betting community, announced its results for fiscal 2012 (April 30 year end) late last week, which the markets apparently liked, sending Betfair shares up 2.7% on Friday.
Included in the details was the first real peek into financial trading subsidiary LMAX's numbers and volumes. LMAX was established in late 2010, but struggled to build any significant trading volume using LMAX's proprietary Betfair-based technology, despite a large budget following investments by both Betfair and Goldman Sachs. Following the buyout of Goldman's holdings in the company by Betfair, and the installation of a new management team, LMAX has finally begun to find its stride, hitting $25 billion in monthly volume for the first time in April 2012, as per the following chart provided by Betfair in its analyst presentation:
One (major) curiosity in the numbers was the discrepancy between LMAX's volume growth (850% in '12 over '11, as per the chart above) and revenue growth of only 14%, from £3.5 to £4.0 million. (On the bottom line, LMAX continues to lose money at the EBITDA level, £6.0 million loss in '12 versus £5.8 million loss in '11). Typically volume and revenue move relatively in lockstep at FX brokerage firms.
The explanation apparently lies with the results of Tradefair, LMAX's separately-branded financial spreadbetting company. Most of the revenue reported for LMAX are actually Tradefair spreadbetting revenues, although LMAX itself is quickly catching up.
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