Flutter reports Q3 growth of 30% as US and Australia divisions surge

Flutter Entertainment has reported a 30% increase in total group revenue to £1.3bn during Q3 driven by strong performance from its US and Australia divisions. The FTSE 100 operator confirmed a 33% year-on-year constant currency rise in its sports betting operations, which generated revenue of £798m during Q3, alongside a 26% jump in gaming revenue to £527m. The group’s US division, which encompasses FanDuel, TVG, Fox Bet and the US offshoot of PokerStars, reported the biggest rise during the quarter, with revenue rocketing 82% to £161m. Second in the Q3 growth charts was the operator’s Australia division, made up of Sportsbet and BetEasy, where revenue rose 76% to £320m over the period. During the quarter, Flutter completed the migration of its BetEasy customer base over to the Sportsbet platform, with the business confirming good customer retention rates following the transition.

Sky Betting and Gaming, which makes up half of Flutter’s UK & Ireland division, enjoyed a good quarter, with Q3 revenue increasing by 26% to £231m. Its UK & Ireland divisional compatriot, Paddy Power Betfair (PPB), also reported growth as Q3 revenue rose 10% to £351m. This was made up of a 14% Q3 rise in PPB Online revenue, which climbed to £278m, partially offset by a minor 2% drop in PPB retail revenue during the quarter to £74m, which the group attributed to social distancing measures deployed as part of the coronavirus pandemic response. The smallest Q3 increase in revenue was reported in the PokerStars business after a 5% rise to £262m. “Flutter’s performance in the third quarter exceeded our expectations in both sports and gaming,” said Flutter Entertainment CEO Peter Jackson. “Our strong trading continued as we grew market share in key regions while retaining our commitment to safer gambling practices. “During the quarter we continued to expand our recreational customer base while bringing our businesses together. This included the successful migration of the BetEasy customer base onto the Sportsbet platform in Australia. “We have enhanced the customer experience, secured further strategic media partnerships and acquired more new customers than anticipated. We are on track to generate more than $1.1bn of GGR in the US this year, which will mark a major ‘first’ for an online operator. “We are now a truly global business with significant scale. As such we are in a unique position to respond to the many opportunities we see across our growing markets. “Looking ahead, while the outlook with respect to Covid-19 remains uncertain, we are confident that our business is well positioned to capture further growth in a sustainable and responsible way,” Jackson concluded. In addition to providing its Q3 2020 financials, Flutter revealed the new transitional rules for prospective German operators are expected to reduce revenue contribution from that region by £50m on an annualised basis. Releasing its guidance figures for the remainder of 2020, Flutter confirmed that full-year 2020 EBITDA is expected to be between £1.27bn and £1.35bn, driven primarily by higher customer volumes across all divisions. In the US, the group revealed increased net revenue expectations of $850m (£639m) in 2020, due to what the business attributed to better-than-expected new customer volumes. Despite this, Flutter has said its EBITDA loss in the US is estimated at between £160m and £180m due to expensive marketing spend and bonusing costs. Regulus Partners analyst Paul Leyland highlighted the impact of the changed sporting calendar on Flutter’s Q3 results, citing strong sportsbook margins, very strong gaming performance and market share gains driven by operational and marketing initiatives. “Flutter has created a multi-layered business combination that mitigates most of the key risks of the components and is now driving levels operational outperformance (albeit for one quarter) that suggests positive momentum as well as scale,” Leyland said. The only dark cloud, Leyland suggested, might be the forthcoming review of the 2005 Gambling Act, which could negatively affect its UK operations. “Flutter has a key role to play in how the UK evolves from a legislative and regulatory perspective, but many of the levers are external,” he explained. “Much more encouraging is Flutter’s positioning in the US, which can enjoy the hype of sport but with a very solid multi-product and multi-state base, backed by significant organic group resources. “Over the next few years Flutter is likely to prove the value of scale and a portfolio approach to risk, with the UK legislative outcome, the rate of US adoption and broader operational momentum being keys to whether this looks like bumps in the road or a survival strategy,” Leyland concluded.