- US primary listing shift on track
- FanDuel turned a profit in first half
- But Australia revenue dip disappoints investors
Paddy Power-to-Betfair brands owner Flutter Entertainment (FLTR) posted in-line first half results and said its American FanDuel business has reached an inflection point by generating a profit.
However, the shares cheapened 5.7% to £141 after the betting and gaming behemoth bemoaned softer-than-expected market conditions in Australia and failed to upgrade guidance, with management expecting full year adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to be ‘broadly in line’ with market expectations.
REVENUE FLUTTERS HIGHER
Flutter’s total revenue jumped 42% year-on-year to £4.81 billion in the half ended 30 June 2023, boosted by a strong US showing and the inclusion of results from acquired Italian gambling group Sisal.
Adjusted EBITDA soared 72% to £823 million reflecting the impact of US profitability and Flutter’s strategic growth efforts.
DISAPPOINTMENTS ‘DOWN UNDER’
Growth was primarily driven from the UK with Flutter’s international operations strengthening, although revenue was down 1% in Australia, a market in which the FTSE 100 gaming group grappled with competitive pressures, a post-Covid softening of demand in racing and increased taxes.
FANDUEL TURNS A PROFIT
A key inflection point was reached with US fantasy sports betting brand FanDuel turning profitable in the half, the business generating EBITDA of £49 million on revenues up 63% to £1.8 billion.
As Shore Capital explained, FanDuel continues to be ‘the leading player in the highly attractive US market, with a 47% share in sports betting’.
Flutter is working towards a secondary US listing which management envisage will provide strategic and capital market benefits as it pursues growth across the pond. And in time, Flutter may decide to make New York its primary listing and London its secondary listing.
The £26.3 billion cap said the first five weeks of the second half have started in line with expectations and issued full year guidance for non-US EBITDA of between £1.44 billion to £1.6 billion, consistent with Shore Capital’s £1.52 billion forecast.
EXPERT VIEWS
AJ Bell investment director Russ Mould said: ‘The company’s debt is starting to look a touch burdensome in a rising interest rate environment and now the US business is starting to make a positive contribution to the bottom line, paying down these borrowings may become more of a priority for the company.’
Edison’s Neil Shah stressed that while much of Flutter’s first half success was due to the US market, ‘operations outside of North America also remained strong, with UK and Ireland markets achieving a 13% revenue growth. Despite a 1% dip in Australia’s revenue due to the knock-on effects of Covid-19 and to changes in tax regulation, the company effectively retained a large customer base in the country, reporting a plus-7% increase in the average monthly players.’
Shah added: ‘Ultimately, it seems, the consumers of the non-US markets are still appreciating the opportunity to win-big.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Tom Sieber) own shares in AJ Bell.
