Flutter Entertainment Q3 revenue climbs 12% to £1.4bn

Flutter Entertainment has reported a 12% year-on-year increase in Q3 revenue to £1.4bn on a constant currency (CC) basis for 2021. Delivering a trading update for the quarter, the London-listed operator revealed 17% annual growth in sports betting revenue to £906m and more modest 5% growth in gaming to £534m for the period. Flutter has confirmed that unfavourable sports results in the first 24 days of October have caused an EBITDA hit of £60m. These included Liverpool’s 5-0 demolition of Manchester United and Tyson Fury’s victory over Deontay Wilder on 10 October. [infogram id=”_/XjRkCvtO8SCVtA3NqFwg” prefix=”Jcr” format=”interactive” title=”EGR Intel- Flutter Entertainment Q3 2021- Key Numbers”] The big winner of the quarter was Flutter’s US division, which includes US sports betting market leader FanDuel. The overall US business generated year-on-year growth of 85% to £280m. Driving this growth spike was a 97% increase in sports revenue and a 65% increase in gaming revenue for Q3. The quarter’s silver medal went to the Australian division, encompassing the SportsBet brand, which grew by 20% during the quarter to generate revenue of £370m. [infogram id=”_/vZdITpZwt6SSE6isUe7v” prefix=”ttz” format=”interactive” title=”EGR Intel- Flutter Entertainment- Q3 2021 revenue by division”] In the UK, revenue from the Paddy Power Betfair online and retail business fell 5% on a constant currency basis to £491m. This was punctuated by declines in sports revenue from both the online and retail businesses, which were offset by growth in gaming during the quarter. Flutter attributed the dip to an annual staking decline of 5% resulting from the condensed Q3 2020 sporting calendar and a 10-basis point reduction in net revenue margin to 9.8%. International operational revenue fell by 3% to £299m, despite a 14% rise in sports betting revenue from the division. The firm attributed this decline to the impact of German regulatory restrictions, which caused a 6% drop in gaming revenue during the quarter. Excluding Germany, International division revenue grew by 6%, with casino up 21%, poker down 16% and sports up 25%. Flutter Entertainment CEO Peter Jackson hailed Q3 as a “strong” quarter for the firm, despite challenging comparatives arising from a concentration of key sporting events in 2020. “Across our business we continue to lead on customer protection and we recently announced measures to enhance the protection of younger customers in the UK and Ireland as part of our risk-based “Triple Step” approach to affordability,” Jackson explained. Peter Jackson “While a run of customer-friendly results in October have resulted in win margins being below expected levels in the quarter to date, the underlying strength of our business is clear; we have grown our online recreational player base by 46% in just two years. “With more international jurisdictions and US states on the path to regulation, we look forward to sustainably growing our global player base further in 2022,” he added. In addition to confirming its Q3 results, Flutter confirmed a £10m 2021 EBITDA hit from the recent suspension of its operations in the Netherlands as part of its preparations to enter the market, which could rise to £40m in 2022. However, the group has revealed its expectation to resume operations in Q3 2022, with an ambition to break even during the second half of 2022 as customer re-engagement strategies are placed into force. At a group level excluding the US, Flutter has revised its adjusted EBITDA expectations for 2021 to between £1.24bn-£1.28bn, down from a previous guidance estimate of £1.27bn-£1.37bn, due to the impact of the Netherlands changes and unfavourable sports results occurring after the end of the quarter. While Flutter’s US net revenue guidance has not been changed at between £1.29bn-£1.43bn, the firm’s adjusted EBITDA loss estimate has been increased to between £250m-£275m, reflective of a further £15m EBITDA hit arising from adverse sporting results. Regulus Partners analyst Paul Leyland said: “After the [reporting] period, Flutter has lost £40m in annualised EBITDA from Netherlands transition and another £60m from unfavourable sports results in the first few weeks of October. “The latter is just bad luck, but the former is a reminder of the risks run in grey markets – the cash flow is nice but capitalising the value is dangerous. “Flutter continues to demonstrate that where it has mass market betting-led strength it is a sustainable sector leader. “What happens where these characteristics do not apply, either because of the nature of the market or Flutter’s own offer, remains an open question currently delivering lacklustre performance,” he added.