Flutter moves to refine merger benefits against 2020 trading realities

Flutter Entertainment Plc has accelerated all corporate directives related to its merger integration with The Stars Group Inc (TSG), but conceded that its 2020 outlook remains ‘highly uncertain’ dependent on further COVID-19 outcomes and regulatory changes across various markets. 

This story featured in today’s SBC News 90. To view the latest round-up, watch today’s edition here.

Publishing its 2020 interim results (period ending 30 June), Flutter maintained that merger benefits are clearly evident as group revenues top £1.52 bn, up 49% on corresponding H1 2019’s £1.02 bn.

Flutter has achieved its objective of becoming online gambling’s biggest ‘blue chip’ incumbent, yet company leadership admitted that its TSG enlargement has been outdone by the coronavirus pandemic.   

Group CEO Peter Jackson stated: “The pandemic has been a highly unusual backdrop for completion of our combination with The Stars Group and I would like to take this opportunity to thank all of my colleagues across the enlarged Group for their hard work, commitment and resilience as we have combined to form one team.”

Providing a breakdown of key performance indicators by trading unit, Flutter revealed that its combined TSG wagering volume (total group stakes) had been impacted by 13% to £8.9bn (H1 2019: £10.4bn).

COVID-19 impacts were most evident on the performance of its Paddy Power Betfair (PPB) unit as the cancellation of sports saw the division record double-digit trading declines across all core metrics,  reporting a 21% decline in gross profits to £383m (H1 2019: £483m).

Despite PPB absorbing significant trading shocks, an enlarged Flutter will take confidence from the fact that newly integrated units of Sky Bet and PokerStars delivered growth under lockdown, posting gross profits of £320m and £550m respectively.

Trading under unprecedented circumstances, Flutter underscored the firm’s diversification strategy in which it will move to implement a new organisational structure. The group’s Australian unit integrations are at an advanced stage and global technology decisions are progressing well.

Jackson continued: “The Group’s first half financial performance exceeded expectations as we benefited from geographic and product diversification. In the period prior to Covid-19 related disruption, our businesses performed well with strong customer growth and favourable sports results. In the period thereafter, the cancellation of sports and closure of our shops led to reduced sports revenues in the UK and Ireland.

“However, this was more than offset by an increase in the number of recreational customers playing our poker and gaming products globally, as people sought new forms of home entertainment. In Australia and the US, the continuation of horse racing meant that overall sports revenues grew in both regions.”

An enlarged Flutter closed its combined interim statement by recording group adjusted EBITDA of £342m, up 59% on H1 2019’s £216m. However, group trading profits declined by 70% to £24m (H1 2019: £81m) as the FTSE100 operator absorbed combined operating costs of £473 million.  

Updating its trading outlook, Flutter maintained that it anticipates its pro-forma EBITDA to fall between £1.17-to-1.3bn dependent on no further cancellations to sporting events or disruptions to its retail network.

Further 2020 objectives will see Flutter look to align its regulatory structures across the group, a directive in which the FTSE group anticipates expected costs of £65m.

Mitigating 2020 circumstances, Flutter confirmed that it will deliver a strategic update on further group co-synergies when it publishes its full-year results in March 2021.

Closing the statement, Jackson stated: “The second half 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.”

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