Flutter Entertainment LON:FLTR took a big leap forwards today as it broke into profit in the US. The Dublin-headquartered global gaming company published its interim results for six months to end-June this morning, reporting 38% revenue growth, mostly driven by its strong US performance and continued momentum in the UK and Ireland through its online and high street brands including Paddy Power.
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The company’s acquisition of Sisal, Italy’s largest online gambling platform, at the end of 2021 started to feed through into the group’s underlying earnings, with it seeing 24% growth, which contribute to a very respectable 72% uplift in adjusted group earnings to GBP832m. The big turnaround story for Flutter was its US performance, converting a GBP132m 1H22 loss to US adjusted earnings of GBP49m.
Higher earnings, higher profits
Higher earnings led to higher profits, with Flutter reporting GBP128m profit, following a GBP112m 1H22 loss, following a GBP314 charge for the amortisation of acquired intangibles.
Flutter’s chief executive. Peter Jackson said in a statement to the market: “The first half of 2023 marks a pivotal moment for the group, with our US business now at a profitability inflection point, helping transform the earnings profile of the group and significantly enhance our financial flexibility.”
“Group performance in the period was very strong, with delivery of our strategic objectives resulting in pro forma EBITDA growth of 37%. Our recreational player base increased to over 12 million monthly players, and importantly, more players than ever interacting with our safer gambling tools, aided by a GBP45m investment in our Play Well strategy in 1H22 […] The US delivered another exceptional performance. We acquired over two million new players in the period, cemented our leadership position in sports and grew our share in iGaming to 23%.”
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As previously reported the company was formed in 2016 following the merger of Paddy Power and Betfair, and it has quickly become one of the largest gaming companies in the world. Flutter Entertainment is listed on the London Stock Exchange and is a constituent of the FTSE100 index.
Flutter Entertainment dual listing
The strong performance in the US has emboldened the gaming company’s plans to dual-list in North America with Jackson saying: “The second half of the year has started well and we look forward to adding a US listing for Flutter shares later this year or early next year.”
EPS was up by 144% to 237.5p reflecting the Irish gambling company’s swing to profitability. Net debt stayed the same period-to-period at GBP4.6bn, but Flutter’s leverage ratio dropped to 3.3x from 3.9x in December 2022. The company anticipates significant deleveraging over the next few years, as group profits are converted into cash at a high rate, the cash-burn recedes as a result of the scalable nature of Flutter’s technology platforms and heavy investment into the platforms increasingly become a feature in the rear-view mirror, and continued positive working capital from the firm’s expanding businesses buffer the gambling company’s free cash.
Flutter’s US success has ridden on the back of its acquisition of FanDuel, the US sportsbook, fantasy team betting and online casino (originally founded in Scotland), which Flutter bought in chunks from its private equity backets; buying the final tranche of controlling shares for USD4.2bn in December 2020, two-and-a-half years earlier than expected. Today FanDuel dominates the US Sportsbook market, with a 47% share and has helped propel Flutter to become the world’s number one sports betting and iGaming operator.
UK and Ireland revenue grew by 13% and in Australia, despite revenue falling by 1%, Flutter managed to increase its average monthly customers by 7% year-on-year.
Bolt-on local heroes
Jackson explained that Flutter was always on the lookout for strategic acquisitions, “acquiring bolt-on, local-hero brands, with podium positions in high growth markets,” following the company’s tried and tested modus operandi of identifying the leading, or most progressive gaming brand in a target market, acquiring the company and then enhancing its capabilities with the group’s technology platforms.
All this sounds good news for shareholders, with “…the group’s projected profit growth and significant cash generation [driving] rapid deleveraging [providing] significant future balance sheet capacity [with] capital that cannot be effectively deployed in [highly disciplined organic investment] and [value creative M&A]…returned to shareholders.”The company opened trading today at, 14,205p, jumping to 14,516p on release of the results statement, before falling back to 14,100p by mid-morning.
The company’s shares have ranged between 8,594p and 16,755p over the last 52-weeks, offering a year-to-date return of 24.1% and a one-year return of 65%. The current market capitalisation of the company is GBP26.3bn.
Flutter Entertainment operates in more than 100 countries, and it offers a range of gaming products and services. These include sports betting, online casino games, poker, and bingo. The company has a number of well-known brands, including Paddy Power, Betfair, Sky Bet, and FanDuel.
