Betfair and Paddy Power owner Flutter Entertainment (FLTR) said in a first-quarter update that the 46% decline in sports revenue since the lockdown was better than anticipated due to continuing racing in the US and Australia. The shares rallied 12% to £87 on the news.
ONLINE MIGRATION
Since 16 March, online revenues have declined 32% year-on-year with a 15% gain in gaming partially offsetting the 57% decline in sports revenues.
The company has seen high levels of migration to online gaming in the absence of sporting events and the closing of retail outlets. The starkest example was seen in the US where gaming revenue grew around 200%, helping to offset the 46% fall in sports revenues, resulting in US revenues only 8% lower year-on-year.
Russ Mould, investment director at AJ Bell commented, ‘the near-50% decline in sports-related revenue actually feels like something of a result given the cancellation of nearly all live sport. It suggests punters might not be too discriminating in the events they bet on with horse racing continuing in the US and Australia.’
SCENARIO INTACT
The contingency scenario set-out by Flutter’s management in a 16 March coronavirus update remains in place as does the decision to fund employee salaries without taking government financial support.
The scenario was published before the lockdown took effect, which means the company will face an incremental £30m per month of lost earnings before interest, tax, depreciation and amortisation (EBITDA) until August, the month that the company assumed a return to normal activity. This is in addition to the £90m-to-£100m originally identified.
Group net debt at 31 March 2020 was £240m while it had access to £460m of cash and undrawn banking facilities, providing headroom to weather the lockdown if the firms scenario proves accurate.
Meanwhile chief executive Peter Jackson confirmed that the acquisition of The Stars Group is expected to complete in the second-quarter assuming it receives the required remaining regulatory and shareholder approvals.
First-quarter revenues grew 16% to £547m and were growing at 29% before the lockdown, driven by online which grew 20%.
