Flutter Entertainment reported higher revenues for the six months to the end of June despite the "challenging" conditions created by the outbreak of Covid-19 but posted a big drop in its pre-tax profits.
Half-year earnings at Paddy Power, Betfair, and Poker Stars owner rose 35% year-on-year as a jump in poker and gaming players more than offset a global sports shutdown at the world's largest online betting group, RTE reports.
The Covid-19 pandemic called a near-total halt to global sports occasions for two months from mid-March. Big events popular with gamblers like the English Premier League were put on hold and the 2020 European Championships were postponed by a year.
The company said its outlook remains highly uncertain, due to potential further Covid-19 related disruption and possible regulatory change across various markets.
Flutter said its half-yearly reported revenues jumped by 49% to £1.522 billion from £1.020 billion the same time last year, but its pre-tax profits sank by 70% to £24m from £81m.
Its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) rose to £684m, including 2019 and 2020 Stars Group revenues, with whom it completed a $6 billion merger in May.
The company said that from the middle of March onwards, the impact of Covid-19 disruption was felt across its businesses in different ways.
The widespread disruption to the sporting calendar materially impacted its sports and retail businesses, it added.
It said this was most acute in Europe where as well as all mainstream sports being postponed, UK and Irish horse racing was suspended for over two months.
In Australia, and to a lesser degree the US, horse racing continued behind closed doors, experiencing a higher level of prominence on mainstream television in the absence of competing sports.
"This higher exposure, coupled with the closure of retail betting, led to an accelerated migration of customers from retail to online. It remains to be seen whether these customers will continue to bet online as retail outlets re-open," Flutter said.
But in contrast to its sports betting operations, Flutter's poker and casino businesses experienced a major uplift in player numbers as people sought new ways to entertain themselves while staying at home.
It said that PokerStars' average daily gaming customers increased 70% year-on-year in Q2, despite relatively low levels of marketing investment.
"This pattern was similar to that seen at PPB and SBG where average daily gaming actives were up 65% in the second quarter," the company added.
Flutter said that customer activity has been encouraging since the resumption of sports.
The first half of 2020 also saw the completion of Flutter's merger with The Stars Group.
The company said the deal increased its scale and enhanced the diversification of its revenue streams, both on a product and geographical basis.
Peter Jackson, Flutter's chief executive, said that the second half of the year has started well, with good sports betting performance following the return of major sport events, whilst gaming performance has remained resilient.
"Looking ahead, we have identified promising opportunities to increase investment across the group and, while the outlook with respect to Covid-19 remains highly uncertain, the diversification of our group means we approach the future with confidence," the CEO added.
Assuming no material further disruption to sporting events, Flutter said it was expected full year EBITDA of between £1.175m to £1.325m.
That excluded its heavy investment into the US, where an EBITDA loss of £140-160m loss is expected throughout 2020.
The US remains a key focus of investment for the Group. At full-year results in February, the company outlined how it expected to offer FanDuel’s online sportsbook to 21% of the US population in 2021 (across 9 legislated states). Since then legislation has also been passed in Virginia (c. 2.5% of US population), with planned referenda in Maryland and Louisiana in H2 to potentially approve sports betting there also. The company's planned investment in Michigan and Illinois may now occur earlier than we previously anticipated. Michigan could possibly “go live” date in Q4 2020, subject to regulatory approvals. In Illinois, the requirement for inproperty mobile account registration has been temporarily removed in response to the Covid-19 outbreak.
It remains uncertain as to how long the easing of this restriction will remain in place. Along with new state launches, investment in technology has been a priority and the company is pleased to now have its own proprietary account and wallet live across all states. The company expect to begin migration of FanDuel’s existing third-party online betting platform to in-house technology before the end of 2020.
In the US, FanDuel launched its online casino in Pennsylvania in January as well as retail operations in Mississippi and Michigan.
FanDuel online sportsbook now has over half a million customers and is operating across 6 states, following the launch in Colorado in May and Iowa in August.
Gaming revenue grew 380%, with continued strong growth in New Jersey boosted by the launch in Pennsylvania of the FanDuel Casino in January and PokerStars in November 2019.
The US segment comprising the FanDuel, TVG, Betfair, Pokerstars and FoxBet brands earns its revenues from sports betting, daily fantasy sports and gaming services provided to US customers using primarily the internet with a proportion of US sports betting services also provided through a small number of retail outlets.
See the company's full interim results here.
See the company's interim presentation here.