Excluding the US, EBITDA fell by 9%, in line with guidance

Flutter earnings down 15% in 2019 due to tax changes and US investment

FanDuel parent company said it currently expected an earnings outcome in 2020 in the US similar to 2019 as it continues to invest and plans to launch in at least three additional states.
2020-02-27
Reading time 2:25 min
Paddy Power parent company grew revenues by 14% during 2019 to over 2 B pounds. Flutter said Thursday that 2020 has begun strongly, with good customer and revenue momentum across all divisions. The firm amassed a 44% share of the online betting market in US states where FanDuel was live during 2019.

Full-year earnings at Paddy Power Betfair parent Flutter Entertainment fell in line with the gambling group’s guidance as it prepares to close its acquisition of The Stars Group (TSG).

Flutter agreed in October to buy Toronto-listed TSG in a $6 billion share deal that is set to create the world’s largest online betting and gambling company by revenue upon its expected completion in the second or third quarter of 2020.

Flutter grew revenues by 14% during 2019 to over 2 billion pounds as it took a leadership position in the US online sports betting and gaming market, executed strongly in Australia and expanded its European presence through the acquisition of Georgian market leader, Adjarabet. Group underlying EBITDA for the year was 385 million pounds, down 15% on the prior year, reflecting incremental tax/regulatory changes of 107 million pounds and its investment in the emerging US market. Excluding the impact of the tax and regulatory changes, underlying EBITDA increased 12%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) at the Dublin-based group fell 9% to 426 million pounds, at the lower end of its guided range of 420-440 million pounds excluding its heavy investment into the United States. That was down by 9% on 465 million pounds in 2018, also excluding the U.S. unit where Flutter made a 40 million pound (USD 51.5 M) loss, a better outturn that the 55 million expected earlier last year.

Online revenue growth for the Group was 18% (up from 11% in the prior year), materially offsetting year-on-year impact of 107 million pounds in incremental taxes and regulatory changes

Flutter said on Thursday that 2020 has begun strongly, with good customer and revenue momentum across all divisions.

Earnings across betting firms have been squeezed by the imposition of betting tax increases across developed markets such as Britain, Ireland and Australia, where Flutter made most of its 2.1 billion pounds in revenue last year. The UK government also last month introduced a ban on the use of credit cards to place bets, prompting rival William Hill to warn on Wednesday of a likely impact on its results.

Flutter said enhanced responsible gambling initiatives it introduced last year limited revenue growth in its main online division to 6%, and that the annualised earnings impact of the credit card restriction would be 14 to 17 million pounds.

Bookmakers have responded to the stiffer taxes with a push into the U.S. market where sports betting rules have been relaxed and a flurry of consolidation, including the 2016 merger of betting exchange Betfair and Paddy Power, which runs high street betting shops as well as an online business.

Flutter, which also merged its U.S. unit with fantasy sports company FanDuel in 2018, said it had amassed a 44% share of the online betting market in U.S. states where FanDuel was live during 2019. 42% of its sports betting customers have come from the Daily Fantasy Sports database to date and cross-sell into the New Jersey casino has accelerated significantly since the firm embedded gaming content into its sports app. 

Flutter said it currently expected an earnings outcome in 2020 in the US similar to 2019 as it continues to invest and plans to launch in at least three additional states.

“We remain as confident as ever in the U.S. prize,” CEO Peter Jackson told reporters on a conference call, according to Reuters.

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