Paddy Power Betfair-owner Flutter Entertainment (FLTR) reported full year profits at the top end of guidance up 20% as revenues grew 27% to £5.26 billion.
Having initially opened higher the shares dropped 2.2% to £14.06 as investors digested tough comparatives for the current year following a strong 2020.
Flutter faces ‘numerous headwinds this year’, said Greg Johnson at Shore Capital, flagging Germany, compliance and exceptionally tough comparatives for Pokerstars and Australia, which have boomed during lockdown.
It has been a busy year for the group, integrating the acquisition of the Stars Group (TSG), buying in the minorities of US fantasy sports gaming company FanDuel and raising £0.8 billion of new equity in May 2020.
STRONG US MOMENTUM
Adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) excluding the US increased 20% to £1.40 billion compared with the third quarter guidance range of £1.27 billion-to-£1.35 billion.
Increased investment in the US (marketing spending doubled to 50% of revenues) saw increased EBITDA losses of £170 million, up from £82 million as previously guided. US revenues grew 80% to £695 million, above expectations.
Greg Johnson reckons the company is on track to ‘comfortably’ generate £1 billion of US revenues in the current financial year.
Flutter indicated that states which have been open since 2018 - New Jersey, Pennsylvania, West Virginia and Indiana contributed £70 million in profits after taxes and marketing spending, which funded the extra investment in new states.
Overall Flutter estimates the total addressable market (TAM) for its US brands to exceed £14 billion by 2025 which represents a ‘material’ upgrade on previous estimates, with room to grow further thereafter.
Outside of the US, Australia was the standout performer which saw EBITDA double to £318 million. Sky Betting and Gaming grew 55% to £391 million and Poker Stars was 4% higher at £545 million. The UK retail business represented by Paddy Power and Betfair saw EBITDA drop 30% to £271 million as shops were not allowed to open.
CURRENT TRADING
For the first seven weeks of the new financial year to 21 February growth in player volumes and favourable sports results in the UK and Ireland have resulted in year-on-year revenue growth of 36%.
Under the latest government guidelines UK shops can reopen in mid-April while in Ireland it could be a month later. Each month of closure is estimated to decrease EBITDA by £5 million in the UK and £4 million in Ireland.
