Flutter projects 2023 momentum after reaching ‘earnings transformation point’

Flutter projects 2023 momentum after reaching ‘earnings transformation point’

Flutter Entertainment has confirmed the financial results outlined in its preliminary report earlier this month, following this up with the setting of new targets for the year ahead.

The international operator published its 2022 annual report this morning, confirming group-wide revenue growth of 27% to £7.7bn (2021: £6bn), EBITDA up 4% to £1.04bn (£1bn) with a margin of 14% (16.6% and a gross profit increase of 20% to £4.5m (£3.8m).

Having detailed strong growth across various markets and brands, albeit also closing the year with gross debt of £5.4bn, the group offered some insights into its strategic outlook for 2023.

“As we look forward into 2023, the Group is at an earnings transformation point, and very well placed to deliver future growth and progress further against our strategic priorities,” Flutter CEO Peter Jackson explained.

As it stands, Flutter’s trading outlook predicts £480m-500m in annual expenditure (£403m), adjusted depreciation and amortisation changes of around $480m (£307m) and a weighted average cost debt of 5.6% – along with specific projections for multiple markets.

A new model for a tricky UK&I

The US proved to be the major growth driver for Flutter last year, with the group noting that excluding US operations, group-wide revenue grew 7% and adjusted EBITDA by 2%.

However, Flutter noted that on a pro-forma basis ‘revenue was flat year-on-year’ and adjusted EBITDA declined by 6%, whilst its UK and Ireland home markets remained stable with a 4% increase in revenues to £2.1bn (FY2021: £2.05bn).

Flutter’s UK&I CEO Ian Brown – who took leadership of the group’s activities in both markets last year after the departure of Conor Grant – provided some insight into the group’s plans for the region.

“Looking ahead, 2023 will be a year of important work as we further integrate Sky Betting & Gaming, Paddy Power and Betfair into a common operating model, with more shared back-end technology,” he said.

“We will be investing to sharpen our execution across marketing, customer engagement and reward, and product development. While we lead in the betting and gaming market, I believe there is much we can learn here from other advanced e-commerce sectors.”

With the Gambling Act review White Paper and Ireland’s Gambling Regulation Bill set to reshape the regulatory landscape of British and Irish gambling respectively, Brown noted that the future is somewhat certain – particularly in the former.

However, Brown reiterated Flutter’s long-held argument that regulation can only prove beneficial to both markets, and underscored the group’s ambition to keep track with evolving player protection and safer gambling standards.

He emphasised that Flutter is welcoming of ‘thoughtful, principle-led regulation that enhances customer safety while respecting people’s right to choose’.

“I am confident that the proactive steps we have taken on Safer Gambling, our strong recreational customer base and our focus on product innovation will help us to continue to win share and customer loyalty,” he concluded.

Italy leading international development

Of the 100 international markets Flutter is active in, the group’s 2022 annual report highlighted Italy, Spain, India, Brazil, Canada, Georgia and Armenia, which accounted for 76% of its revenue.

Overall, Flutter’s ‘International division’, which covers these markets and encompasses Sisal, PokerStars, Adjarabet, Betfair International and Junglee India, experienced growth of 24%.

The most notable development for this division last year was the acquisition of Italian firm Sisal in August, which has subsequently expanded its market reach to include Tunisia and Morocco. 

International CEO Dan Taylor said: “With leading positions in a number of the world’s largest and fastest growing regulated and regulating markets, Flutter International is uniquely placed to use its unrivalled global scale to deliver superior local player experiences and capitalise on the growth of the global online gaming market.”

Taylor further highlighted the Sisal acquisition as having brought lottery products under Flutter’s umbrella, whilst the division as a whole was also able to gain access to Germany and Canada’s Ontario province. 

Scaling up down under

Sportsbet was able to navigate some tough headwinds in 2022, with Flutter’s Australian division suffering revenue decline of 6%, attributed by the group to a COVID ‘tailwind’ during H1.

However, the firm’s Australian brand was able to maintain a leading position in the country, holding an estimated market share of 48% of the online sports betting market.

Jackson stated that Sportsbet had benefited heavily from the migration of many bettors from retail to online betting during Australia’s COVID-19 lockdown periods in 2020 and 2021, a cross-sector trend which saw a 16% point shift between the two verticals.

“We are confident that the plans we have in place for 2023 are the right strategy to drive future growth over the medium term,” he remarked.

“We will do this through continuing to deliver product innovation and personalised generosity while leveraging our growing recreational customer base, unparalleled local scale and long track record of growing through regulatory changes.”

Looking ahead, Flutter did note that there has been a minor reversal of the COViD-19 trend, with 4% of customers returning to retail from online, but remains confident it can continue to find success in the AU$8.4bn Australian sports betting market.

Big bucks for a big standing in the US

As stated above, North American proved to be the defining continent for Flutter in 2022, as the firm registered ‘exceptional results’ from the region to the tune of $2.6bn in revenue, up 67% on the year prior ($3.2bn).

In his assessment of the market, Peter Jackson pointed to a player acquisition strategy and ‘market-leading product’ as being key growth drivers, in addition to a successful launch in Maryland in November 2022.

Moving forward, the group aims to refine its ‘state playbook’, having launched in Ohio in January 2023, as it seeks to maintain ‘gold medal positions’ across the US.

He said: “We have a clear strategy to improve our iGaming performance and grow our podium position, through increasing our focus on casino direct iGaming customers and improving our product range and player experience.”

Offering leadership perspective direct from the US, FanDuel/Flutter US CEO Amy Howe highlighted how the firm has become the market-leading sportsbook in 15 states after securing access in 18. 

She also observed that FanDuel is now the first US operator to have achieved profitability, having recorded EBITDA of $22m at the close of 2022, whilst steadily growing its igaming market share to 21%. 

“As our scale and growth compounds, I can’t wait to see what we can achieve together in 2023 as we remain firmly on track to deliver profitability for the full year,” she said.

However, Flutter’s US future could also be defined by a potential separate listing of FanDuel, a  move which the firm believes could have significant long-term strategic benefits as stateside sports betting continues to grow at a rapid pace.

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