UK-listed gambling giant Flutter Entertainment’s revenue topped £2b in 2019 thanks in part to its FanDuel’s brand US online sports betting market dominance.
Preliminary annual results released Thursday show Flutter (formerly Paddy Power Betfair) generated revenue of £2.14b in 2019, up 14% from 2018’s result. Sports betting revenue was up 113% to £1.67b while gaming rose 19% to £473m, but soaring costs pushed underlying earnings down 15% to £385m and pre-tax profits slumped 38% to £136m.
The Paddy Power Betfair online unit (aka European operations) reported revenue rising 6% to just over £1b but earnings slipped 3% to £307m and operating profit dipped 4% to £263m as the cost of sales rose nearly one-quarter on tax hikes in the UK and Ireland. Gaming revenue performed well, rising 26% to £340m, but sports was down 2% to a demonic £666m.
Flutter’s Paddy Power brand and the Adjarabet business in the Republic of Georgia did their bit, while the Betfair betting exchange revenue fell 5% due in part to “market switch offs.”
In Australia, the Sportsbet business saw revenue rise 11% to £446m as margins improved one point to 10.4%. But higher taxes dragged gross profit down 6% to £264m and earnings fell 9% to £125m, although Flutter said the situation would have been much worse had it not gone on a bonus offer binge in 2018.
Flutter’s 2018 acquisition of FanDuel has “transformed” its US division, with 2019 revenue up 60% to £376m. However, the rapid rollout of FanDuel’s operations in newly regulated betting states came with steep costs, which resulted in an underlying operating loss of £60m, more than twice 2018’s £25m loss.
Costs aside, Flutter celebrated FanDuel’s claim of a 44% market share in the four states in which the brand is taking wagers. Sports betting revenue was up 51% to £325m as margins rose nearly two points to 4.4% while cross-selling bettors boosted online casino revenue by 160% to £51m, with nearly 54% of December’s casino revenue coming from sports bettors.
FanDuel had around 350k sports betting customers at the end of 2019, around 42% of whom came from the company’s daily fantasy sports database.
Paddy Power Betfair’s retail unit reported revenue falling 6% to £312m while earnings were down one-quarter to £53m thanks to the UK government’s reduction of maximum stakes on fixed-odds betting terminals (FOBT) from £100 to £2 last April. Machine gaming revenue was down 25% to £82m while OTC wagering rose 4% to £230m.
The FOBT reduction and increased Irish betting duties reduced Flutter’s 2019 earnings by £34m, but the retail gaming revenue picture improved as its UK competitors “reduced the size of their retail estates.” Gaming revenue was down 34% from April 1 but this decline slowed to 21% by Q4. Competitors’ shop closures were also credited with boosting Q4’s OTC stakes.
Flutter said the UK’s planned prohibition on credit card gambling will likely trim 2020’s revenue by £20m-£25m, while the costs of launching FanDuel in three new US states – Colorado, Iowa and Tennessee – mean FanDuel will likely lose another £60m or so this year.
Flutter said little about its pending acquisition of/merger with The Stars Group, only that it expects to complete the deal in Q2 or Q3, assuming it receives the necessary regulatory okays and shareholders approve the plan in April.
Flutter’s shares are currently down 8% on the London Stock Exchange, although the entire gambling sector appears to be taking it on the chin on Thursday as markets react to the European spread of the coronavirus.
