Live blog recap: Flutter Entertainment full-year financial results

This live blog has ended We’ll leave you with one last quote from Peter Jackson He said: “We delivered a very strong financial performance in 2020, benefiting from our scale and diversification. We continue to grow our recreational player base across all key regions, in Q4 alone the group had over 7.6 million monthly online players. “Nowhere has our growth been more evident than in the US where we have consolidated our number 1 position in this crucial market, with customer economics that continue to exceed our expectations, finishing the year as the first US online operator to reach over $1.1bn in gross gaming revenue,” he added. Average monthly player info

Analyst reaction Regulus Partners analyst Paul Leyland said: “In common with the wider industry, Flutter’s key cash flow markets are facing the biggest risks while the biggest opportunities remain in cash burn territory. How this balances out remains less than clear. However, a clear focus on internal capability, flexibility and sustainability mean that Flutter can at least withstand a lot of damage and come out the other end potentially stronger, without foregoing a credible independent position in the US. “In delivering this positioning, Flutter’s M&A strategy has been among the most astute in the sector, in our view,” he added. US update The FanDuel sportsbook is now live in 10 states following recent launches in Michigan and Virginia. Flutter estimates Q4 market share of 40% in online sports betting and 20% in igaming. Flutter now expects the total addressable market in the US to exceed £14bn ($20bn) in 2025. This is a material upgrade on previous estimates due to an increase in estimated value of sportsbook and gaming spending patterns, combined with an increase in the number of states expected to regulate. Flutter predicts online sports betting will be available to 65% of the US adult population by 2025, falling to 16% for igaming. Flutter made an EBITDA loss of £170m in the US in 2020 on customer acquisition costs. Investment in PokerStars continues “While PokerStars remains the global leader in poker, its share of the online poker market has reduced in recent years. While desktop is, and will remain, an important channel for many online poker players, improving the customer experience on mobile is also essential. We launched a new PokerStars app in Q3, replacing the existing app originally developed in 2011. We have also significantly increased marketing and customer generosity to promote the brand and product.” Flutter has also committed to invest in direct casino marketing for PokerStars, rather than relying on cross-sell from poker. An in-depth look at the numbers Our man Rob Simmons has written up a numbers news story which you can now read via the link below:

Flutter revenue jumps 28% in 2020 as Stars acquisition pays dividends

Contrasting fortunes for UK brands Sky Betting & Gaming (SBG) revenue climbed 32% in 2020 to £975m, with a 34% rise in sports betting revenue, which hit £590m and a 31% increase in gaming revenue to £385m. However, its UK and Ireland divisional compatriot, Paddy Power Betfair (PPB), saw revenue slide 2% to £1.2bn. This decline can be attributed to a 36% fall in revenue from the PPB retail business to £200m, largely due to the Covid-19 pandemic. It was partially offset by an 8% rise in PPB online revenue of £1.1bn. Recreational focus can soften regulatory change Flutter estimates it has a 28% share of the UK online market, with a 42% share in sports and a 19% share in gaming. “We are encouraged by the increased engagement we are seeing amongst recreational customers in particular. We estimate that more than 55% of all online sports bettors engaged with our brands during Q4. This was up eight percentage points on the comparable period in 2019 and illustrates why we believe we are well positioned ahead of prospective regulatory change.” Flutter’s UK brands to “complement and compete” “We are sharing the best of our technology and insights across brands while allowing for differentiated marketing approaches. The 2020 performance of Paddy Power and Sky Betting & Gaming, where average monthly customers grew 36% and 12% in H2 respectively, clearly demonstrates how two recreational brands can compete effectively side-by-side, while Betfair’s unique offering continues to appeal to more value conscious customers.” Germany could become “commercially unviable” for regulated operators, Flutter warns “In Germany, there are proposals to introduce a 5.3% turnover tax on online poker and slots from 1 July 2021. While the tax is yet to be ratified, if it does come into force, we believe it would effectively make the German online gaming market commercially unviable for regulated operators, with the taxes being equivalent to significantly greater than 100% of gross revenue. “The financial impact of such a change would depend on how it is implemented and what, if anything, we could to do to mitigate the charge, but our initial estimate is that the contribution impact could be between £15m and £25m in 2021 if it comes into effect on July 1.” PokerStars likely to suffer the worst of the impact. What is social media saying?

PokerStars grew pro forma revenue by 23% during the year, driven by 28% growth in average monthly players. Around 30% of players acquired or reactivated in Q2 continued to play in Q4. pic.twitter.com/TWljgA7KtW

— Flutter Entertainment (@FlutterEnt) March 2, 2021

In case you missed it… Flutter yesterday rewarded staff with £14m worth of shares in the business for their hard work and commitment during a difficult year.

Flutter rewards staff with £14m pandemic bonus

Growth metrics by division Strong start to 2021 Group revenue is up 36% annually for the first seven weeks of this year to 21 February as favourable sporting results have continued in UK and Ireland. Integration progressing well Australian integration is complete with PokerStars next up. Annualised cost synergies are now expected to be £170m, up from £140m previously. Flutter CFO Jonathan Hill on benefits of The Stars Group acquisition TSG acquisition bolstered our revenues the day we completed the acquisition. There are two reasons for doing the deal. Enhanced scale and diversification. We never expected to stress test the diversification like we have done in a difficult 2020 but we saw those benefits in Q2 when people were looking for other forms of entertainment. We have also seen benefits of scale where we have grown revenue in Sky Betting & Gaming and in Australia. The combined group has really stepped up investment in customer investment. In PokerStars we have significantly stepped up our spend because it was underinvested in before our acquisition. We have improved the customer proposition to get the business moving. Jackson on affordability We’ve talked about how important it is to get on top of this. We have our triple-step approach and we want to assess customers when they join us and put restrictions on at the outset if necessary. We have strict monitoring in place when they are playing with us, and those tools together with the interventions we make do an awful lot to make sure customers are within their ability to afford it. At Sky Bet, 40% of customers have a deposit limit in place on their accounts. We are seeing a real sea change in the way customers are engaging with this. Our business is well set and under the government’s review, I hope the evidence-led approach sets things up in a good way to find appropriate measures to protect the vulnerable. Covid impact on retail Covid restrictions are impacting the retail business in UK and Ireland with estimated monthly EBITDA loss of £9m for each month that both UK and Irish retail estates remain shut. Jackson on future of retail after Covid There is definitely going to be a change in people’s shopping habits as a result of the pandemic. I don’t believe retail is dead, we are pack creatures and enjoy each other’s company. People will return to shops but I think there will be less of them then there are today. Online in context Pro forma online revenue broke the £5bn barrier after a 34% rise on last year. Online now accounts for 96% of total group revenue. Jackson on online shift as a result of Covid trends We have Paddy Power shops in the UK and we think we’ve captured around 40% of the customers that have gone online. Peter Jackson on US customer acquisition Around 40% of our US customers have come from our DFS business and have been fans of the brand (FanDuel) for a while. Profit dip Profit before tax dropped 99% year-on-year to £1m, due to a deduction of £432m in non-cash acquisition accounting adjustments. Topline numbers The results are in… Flutter’s 2020 group revenue increased by 28% on a constant currency basis to £5.26bn, driven by a double digit rise in both gaming (32%) and sports (25%). Adjusted EBITDA rose by 16% to £1.23bn.