Flutter bulks up for global dominance as TSG merger objectives are achieved

By | March 2, 2021

Flutter Entertainment Plc has exceeded 2020 corporate objectives by demonstrating its ‘unparalleled scale and diversification’ after completing the first year of its transformative merger with The Stars Group Inc (TSG).

Publishing its 2020 preliminary results, the FTSE100 group doubled its corporate revenues to £4.4 billion (FY2019: £2.1bn) which Flutter stated is a reflection of its successful incorporation of TSG assets from May 2020 onwards.

Flutter praised its operational and product teams in securing the successful integration of PokerStars, Sky Bet and TSG Australia assets against a backdrop of global COVID challenges.

“2020 was an historic year for the Group as we completed our merger with TSG, commenced the integration of our two businesses and increased our ownership of FanDuel in the US, whilst at the same time navigating the challenges presented by the COVID-19 pandemic,” stated Peter Jackson, CEO of Flutter Entertainment.

Flutter achieved a 64% increase in group sports betting revenues to £2.7 billion (FY2019: £1.6bn) despite an ‘irregular sporting calendar’, which the group noted had impacted staking levels across its Paddy Power Betfair, Sky Bet and Sportsbet brands during H1.

During 2020, Flutter stated that COVID headwinds had impacted the performance of its Paddy Power Betfair brand, which recorded a 31% adjusted EBITDA decline to £271 million (FY2019: £390m) while profits fell by 41% to £176 million (FY2019: £297m).

Flutter said in a statement: “The COVID pandemic resulted in shop closures for much of 2020 while PPB online was negatively impacted by the cancellation of sports. This was most pronounced on the betting exchange where we offered 18% fewer markets than during 2019.”

Paddy Power Betfair impacts were offset by the double-digit growth recorded by both Sky Bet and Sportsbet AUS across all core financial metrics.

Benefiting from favourable sporting results and tight cost controls on marketing, Sky Bet saw its adjusted EBITDA contribution increase by 55% to £391 million (FY2019: £253m), with Flutter’s new sportsbook asset also declaring operating profits of £364 million (FY2019: £232m).

Meanwhile, attracting +675,000 new customers during 2020, SportsBet AUS maintained its top spot as Australia’s leading bookmaker by doubling its EBITDA to £318 million and operating profits to £288 million.

However, the operator acknowledged that COVID restrictions had a substantial impact on its UK and Irish operations, reporting a monthly EBITDA loss of £9 million. This, explained Flutter, was largely due to its retail estate across both countries remaining closed throughout much of the year.

Additionally, shifts in regulations in the German market have also been addressed. A proposed tax change reduced Flutter’s contribution in the country by between £15 million and £25 million, provided the switchover is implemented from 1 July 2021.

On the other hand, the firm has reported sports results as being ‘favourable’ and ‘relative to expectations,’ particularly in the aforementioned UK and Irish markets.

Maintaining this sportsbook growth against irregular trading, Flutter’s 2020 results were turbocharged by its newly revamped igaming unit which has been significantly enlarged by the online casino and poker assets of PokerStars.

Recording an average monthly player increase of 28% (+1.5m active players) from Q2 onwards, PokerStars delivered a 15% increase in EBITDA to £545 million (FY2019: £503m), with the division securing operating profits of £498 million (FY2019: £461m).

The growth and integration of its new business units saw Flutter post a group-wide adjusted EBITDA of £889 million – up 109% on FY 2019 results of £425 million.

Completing year one of its TSG enlargement, Flutter declared corporate profits of £1 million, as the company chose to account for £432 million in non-cash acquisition items.

Looking forward to 2021, Flutter underlined that the group will maximise its new and existing segment performance as the group returns to normalised trading.

Group strategy is still guided by the FTSE firm’s ‘four-pillar strategy’: to maximise profitable growth in core markets (UK & Ireland, Australia); to grow business in the rest of the world; to attain podium positions in international regulated markets and to grow its leadership position in the US.

“The strategy within our International division to attain global scale and diversification was greatly accelerated by the merger, adding new podium positions and many more top ten markets,” Jackson stated.

“Given this significant expansion, we have now sharpened our investment focus within PokerStars, identified key target markets and tailored plans for our brands and products.

“Having attained a leadership position in the US, our strategy now is to continue to grow it through further investment and leveraging the strong set of assets that we have.

“Ultimately, we believe that the online gaming sector is similar to other large digital markets, whereby the largest player achieves superior economics through operational leverage, creating a virtuous circle for future investment in product, marketing and generosity which in turn drives further growth.”

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