- CFO steps down with immediate effect
- Internal replacement appointed
- Primary listing moves to the US
Global sports betting and gaming company Flutter Entertainment (FLTR) saw its shares drop 6% after the Paddy Power and Betfair operator said chief financial officer Paul Edgecliffe-Johnson was stepping down with immediate effect.
The primary listing of Flutter’s shares shifts to the US from today (31 May), a move the company warned would require ‘extensive executive management time’ to be spent across the pond.
Given Edgecliffe-Johnson’s family commitments in the UK, the board has concluded it is in the best interests of the company for him to step down.
Rob Coldrake, who has been chief financial officer of Flutter International since 2020, will take on the group chief financial officer role.
CEO Peter Jackson commented: ‘I am delighted that Rob will become our next Group CFO.
‘During his four years at Flutter, he has shown himself to be a CFO of exceptional calibre and his skills and experience will help us to take advantage of the significant opportunities before us’.
WHY DID THE SHARES DROP?
Investors do not usually respond kindly to sudden changes in senior management roles. There is some irony in the fact Edgeciffe-Johnson was instrumental in pushing through the group’s primary listing to the US.
The need to spend more time stateside should not have come as a surprise.
As recently as 14 May, the day of Flutter’s first quarter results, Jackson commented; ‘With a greater proportion of the group’s future profits expected to be generated in the US, we have moved our operational headquarters to New York reflecting the importance of the US sports betting and iGaming market to our business’.
The primary listing move also impacts demand for the shares from passive funds as they no longer qualify for inclusion in the FTSE 100 index.
Lastly, there is the ‘better to travel than arrive’ effect which saw the shares perform strongly ahead of the listing move, gaining as much as 26% for the year by the middle of May.
TAXING ISSUES
Flutter’s shares have also been impacted by a ruling (28 May) that will see the state of Illinois introduce a progressive tax from 1 July, expected to increase the burden to between 20% and 40% from the current rate of 15%.
Analysts at Berenberg estimate this could result in an incremental hit to EBITDA (earnings before interest, tax, depreciation, and amortisation) of $50 million in 2024 and $102 million in 2025.
‘We remain relaxed on the contagion risk - particularly given the lack of contagion we saw from other states when the New York sports-betting market opened at a 51% tax rate - although we can understand this becoming a focus for investors over the coming months’, Berenberg said.
Despite recent weakness the shares are up 5% so far in 2024, slightly lagging the FTSE 100 return of 7%.
