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Flutter Entertainment shares up despite 20% fall in earnings

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Flutter Entertainments LON:FLTR Friday announcement of its interim results for six months ended 30th  June 2022 seemed to go down well with investors as its shares rallied almost 10% intraday (12th August). The Republic of Ireland-based bookmaking group saw an 11% revenue growth to GBP 3.3m in 1H22 compared to GBP 3m the year before, and a 14% rise in average monthly players, however it did suffer a 23% fall in pre-tax earnings.

The news comes following a tough few months for the sports betting market, but it appears as though Flutter Entertainment has managed to overcome the economic headwinds which have plagued the industry and worldwide economy.

Flutter Entertainment is an Irish bookmaking holding company created by the merger of Paddy Power and Betfair in February 2016. The company is a constituent of the FTSE 100 but publicly operates under a multitude of well-known sports betting brands including Betfair, Paddy Power, FanDuel and Sky Bet. Serving over 18 million customers worldwide, the group has become a global business in recent years.

Flutter Entertainment has a long track record of robust financial performance with a compound annual growth rate in total shareholder returns of 6.2% for the five years to 31st December 2021. The group is split into four key divisions: UK and Ireland, US, Australia and International. These four divisions give Flutter Entertainment access to over 100 international markets, which together average approximately 7.6 million monthly customers.

Revenue rise but earnings suffer

For the six months ended on 30th June 2022, Flutter Entertainment reported an adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of GBP 476m, falling 20% from the GBP 597m reported last year. The company claimed that increased investment in its fast-growing U.S. FanDuel unit, tighter gambling regulations elsewhere and greater spending on initiatives to curb gambling addiction accounted for the expected dip in earnings.

Flutter Entertainment did however see revenue growth of 11% to GBP3.3m in 1H22 compared to GBP3m the year before. Chief executive, Peter Jackson, cited a 14% rise in average monthly players as the main driver of this revenue rise and claimed that the “expansion in its recreational customer base by over one million players” played a major role. The business, through its access to a wide variety of markets worldwide, remains well positioned to continue increasing its customer base in the coming months, especially as the football season kicks off around Europe.

Exceeding market expectations

Flutter Entertainment’s share price rose by almost 10% on Friday amid the company’s latest financials, highlighting the fact that the announcement exceeded market expectations. The share price at the end of Friday stood at 10,720p and has ranged between 5,732p and 16,275p over the last 52 weeks, offering a year-to-date return of -8.33% and a one-year return of -24.45%. The current market capitalisation of the company is just over GBP18.8bn.

Looking ahead, Flutter Entertainment has said the second half of the year has started in line with expectations, and there are “no discernible signs of a consumer slow down currently”. The Paddy Power, Betfair and FanDuel owner said it expected full-year core earnings of between GBP1.29bn and GBP1.39bn, excluding a U.S loss of GBP225m to GBP275m. The company’s success over the next few months will be principally dictated by how many new customers it can attract.

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