Flutter Entertainment’s profits are down 70% due to pandemic

The UK-based operator Flutter Entertainment has reported that its revenue grew by 49% year-on-year to £1.52bn, while its pro forma revenue grew 22% to £2.39bn.

Adjusted EBITDA was also up 59% on a reported basis, to £342m, and 35% on a pro forma basis to £684m.

However, profit before tax fell by a drastic 70% to £24m. The operator’s share price was up 2% to £127.80 after its H1 report was published.

Flutter is still awaiting the results of its US division in what it expects to be a loss of earnings of £140m to £160m for the fiscal year 2020. The rest of the group’s earnings will range between £1.175bn and £1.325bn.

Flutter attributed its H1 performance to enhanced diversification following its merger with The Stars Group, though it referenced COVID-19 disruption, which affected the company’s H1 profit.

Peter Jackson, Flutter CEO, stated:

The first half of 2020 has been defined by the outbreak of the global COVID-19 pandemic. The group's first-half financial performance exceeded expectations as we benefitted from geographic and product diversification. In the period prior to the COVID-19-related disruption, our businesses performed well with strong customer growth and favorable 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.

How has Flutter adapted to the COVID-19 pandemic?

Flutter merged with Canadian rival STARS group, owner of Pokerstars and Skybet, in May, creating the world’s biggest betting business, after shareholders in both companies voted for the deal. The STARS group is one of the leaders of the iGaming business in Cadena. A market well sought after by many European companies such as Trustly, who recently announced the launch of its online payment services in Canada.

An increase in one-off costs (stemming from the STARS merger as well as older deals such as the tie-in of Paddy Power and Betfair in 2016) has been blamed for the fall in profits.

Throughout the pandemic, Flutter continued to pay the salaries of 3,100 Paddy Power staff in Ireland and Britain from its own resources while those outlets were closed during the two-month COVID-19 pandemic. The closures left 623 shops with a £10m loss in the first half of the year.

Sports betting revenue grew across all the group’s divisions before the various countries closed due to the growing spread of COVID-19 back in March.

The brand’s average daily customers rocketed 70% in Flutter’s second quarter. The group has announced that it will spend an additional £50m on marketing to further promote PokerStars even with the expectation that this trend won’t continue.

Continuing the spending spree, the firm has also pledged investment in the US, where it is the leader in sports and gaming market share. It expects cash losses of up to £160m for the year.