Betfair and Paddy Power owner Flutter (FLTR) disappointed after reporting full-year profit excluding the US at the lower end of prior guidance.
In addition, trading in the first seven weeks of the new financial year was impacted by tough comparatives, restricting growth to 2%. Flutter expects growth to accelerate as 2022 progresses.
The shares traded down 13% to £93.28 and have lost around a quarter over the last three months. By comparison the FTSE 100 index is up around 5% over the same period.
Group EBITDA (earnings before interest, tax, depreciation, and amortisation) dropped 10% to £1.24 billion, at the lower end of guidance which was revised down after the third quarter results.
HEADWINDS
Profitability was impacted by Covid-19 related comparatives, regulatory headwinds and unfavorable sporting results. Revenues adjusted for acquisitions grew 17% to £6.04 billion.
Adjusted pre-tax profit dropped 22% to £620 million while the company made a pre-tax loss of £288 million on a reported basis.
The company ended the period with net debt of £2.65 billion, representing a net debt to EBITDA ratio of 2.6 times including US losses.
This is a measure of financial leverage, and a number below three times is considered conservative.
US SILVER LINING
US revenues doubled to £1.39 billion, towards the top end of expectations after reporting an EBITDA loss of £243 million compared with guidance of £250-to-£275 million.
The jewel in the crown, fantasy sports betting franchise FanDuel maintained its leading position after growing revenues by nearly 50% more than the nearest rival.
The FanDuel sportsbook and gaming business delivered a positive profit contribution of $14 million. Flutter said it was on track to deliver a positive overall EBITDA contribution form the US in 2023.
EXPERT VIEW
Leisure analyst Greg Johnson at Shore Capital commented:
‘With new state launches we would expect further strong revenue progress in the current financial year. Encouragingly, the contribution margin increased four-fold to £115m, demonstrating the potential to realise a robust contribution margin as the market matures.’
