SBC News Flutter finds its ‘global edge’ amid regulatory and business changes

Flutter finds its ‘global edge’ amid regulatory and business changes

Flutter Entertainment has ‘got its mojo back’ in the UK and Ireland, according to Group CEO Peter Jackson, who addressed investors alongside the firm’s newly appointed Chief Financial Officer (CFO) this morning.

Following the group’s Q1 2023 trading update, Jackson, along with Paul Edgecliffe-Johnson, provided a breakdown of the group’s market performance across a range of international jurisdictions.

A leading podium in established long-standing sectors

SBC News Flutter finds its ‘global edge’ amid regulatory and business changes
Peter Jackson, Flutter CEO

As the Gambling Act review White Paper was published just last week, investors were understandably interested in Flutter’s performance in its home markets of the UK and Ireland, with revenue in the former rising 17% to £608m.

Jackson explained: “We’re really pleased with how the UK and I businesses are performing. I think we have our mojo back and you can see why I was talking about the business side positively. I’m really pleased with what the team is doing – a terrific job, up 17% in the first quarter.

“I think the market will be flat and probably have gone backwards, so we’re taking share and are feeling really vindicated about the practical approach we’re taking to safer gambling and our strong focus on recreational customers.”

Responding to one investor’s query as to whether product innovation or better keeping track with safer gambling requirements were behind Flutter ‘meaningfully outperforming’ its competitors, Jackson stated that the reality is that it is ‘half and half’.

He explained that it is ‘hard to say’ whether it is the product or Flutter’s competitors hitting hurdles on safer gambling, the company is continuing to ‘race head’ and it will be difficult for its competitors to keep track.

Reflecting on Flutter’s experience of the UK and US markets during the World Cup, later on in the call, Jackson added: “When I look at the World Cup and think about it from a soccer point of view, it’s been very successful for us in the UK business. We’ve seen a very high level of projection because of the quality of products and engagement we’ve had. 

“And actually in the US we saw really good results with the World Cup, much better engagement than we’d anticipated, and that has contributed to the momentum and carried on into this year.”

On the other side of the world, Flutter expects continued momentum in AUstralia, where it is active via its Sportsbet holding – competing against the likes of established local firm Tabcorp and fellow LSE group Entain.

In the face of a tightening regulatory environment down under, with a ban on credit card use for gambling incoming as well as a generally enhanced political spotlight on the sector, Jackson remained optimistic.

He said: “The thing I’d say in general, is that as and when regulatory changes happen we grow through those typically to reinforce the market leading position. Specifically around credit cards, only a small percentage of our customers use credit cards only. 

“When we look at what happened in the UK when credit cards were banned here, we got into a 2% revenue headwind and I think it’s probably a reasonable estimate in Australia.”

Big bucks in the US growth market

Outside of the reshaping UK market, the US was also an unsurprising focus of Fluter’s investors queries, as the country continues to serve as a major growth driver of revenue – although profitability has not yet been reached.

Jackson remained confident in the ability of Flutter’s FanDuel brand to achieve profitability, however, with the operator registering a 92% increase in revenue in Q1 to £908m (Q1 2022: £429m), driven by a 46% uptick in active monthly players (AMPs).

He said: “There’s a lot of confidence we have in our ability to make a profit this year and the question really isn’t specifically how much we make – it’s about the trajectory of the business over the next subsequent years when we keep adding in layers of new customers, who will of course flip from costing us money to generating very significant contribution.”

“I think what we’ve seen over the course of this year, we’ve been really pleased with the shift in our acquisition strategy to acquire customers of higher value. 

“And then the insights the team had around acquiring customers in the run-up to the playoffs in football rather than trying to acquire customers in the second half of the Super Bowl vindicated the good work that the team is doing.”

With the launch of sports betting in Massachusetts earlier this year – a wealthy state home to several prominent sports teams – Jackson stated that confidence had been further bolstered by this development.

His outlook was particularly strengthened by the fact that only three weeks of Flutter’s operations in Massachusetts to date took place within the NFL season, with expectations for the onset of next season to further drive revenue in Q3.

FanDuel ‘clearly’ has the ‘best products on the market’, Jackson doubled down, projecting that investors can expect high-levels of customer retention as a result.

“Retention rates have continued to be a little bit better than we anticipated in the US market,” he continued. “That’s what’s contributing to some of the higher life-time values that we’ve seen over the years.”

Of course, another big topic on the agenda was Flutter’s planned US listing, which was approved by 99.99% of shareholders last week. Jackson outlined that the listing will likely be achieved at the end of the year, complementing its existing trading on the LSE.

Mediterranean M&A

Back on the other side of the Atlantic, M&A was the big talking point, with Jackson and Edgecliffe-Johnson pointing to a ‘strong performance’ for current Italian trading.

Flutter secured a stronger position in the Italian market last year via an acquisition of local firm Sisal, and since then has leveraged the unit for a standing in the Tunisian and Moroccan lottery and betting markets.

From Jackson’s perspective, Italian dynamics suggest that large numbers of retail customers who converted to online during the pandemic have remained on the latter, allowing Sisal to capitalise on by expanding its range of products.

“We’ve also continued to retain the levels of retail engagement that we had pre-COVID as the year the markets reopen,” he said.

“The combination of those things is really what’s driving the Italian business. I think Sisal is doing a pretty unique job of actually driving great product innovation to get customers online and capture them and there’s really interesting innovations.”

On international operations, Edgecliffe-Johnson placed a heavy emphasis on the ‘Flutter Edge’ as playing a role in an accelerated group performance.

Commenting on his new role, the CFO detailed: “It’s been great over the last couple of months getting around to various locations in the Fluter group. clearly seeing how the Flutter Edge is providing the group’s many brands with lots of global scale and enabling those brands to deliver a more meaningful and powerful proposition in their local markets.”

Rounding off his assessment of his new employer’s strategy to one interested investor, Edgecliffe-Johnson explained the group’s future approach to M&A.

“In terms of M&A, I think we will look at what’s out there,” he remarked. “We like to buy excellent businesses that we can grow in great markets, but there’s lots that feature runway for growth.”

Looking ahead, Flutter’s leading executives detailed a determination to retain a ‘gold medal’ position, including acquisitions of ‘gold medal brands’ such as Sisal if opportunities arise.

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