Flutter sees revenue rise despite pre-tax profit decline in H1

Flutter Entertainment has reported an 18% year-on-year increase in group revenue during the first half of 2019, but also saw profit before tax slip 24%.

Revenue for the six-month period through to June 30 amounted to £1.02bn (€1.11bn/$1.24bn) – up from £867m in the first half of the previous year.

Flutter, which owns the Paddy Power, Betfair, FanDuel and Sportsbet businesses, stated that online was its primary source of income during the first half, with revenue from this side of the business up 8% year-on-year to £497m.

Within this part of the business, sport revenue remained flat at £334m, despite being compared to a period in 2018 that included the early stages of the FIFA World Cup, while online gaming revenue was up 29% to £163m.

In contrast, retail revenue slipped 4% to £156m as Flutter felt the impact of the new regulations in the UK on fixed-odds betting terminals (FOBTs). The new £2 maximum stake on FOBTs meant machine gaming revenue slipped 21% to £43m, while sports revenue increased 5% to £113m.

Elsewhere, US revenue hiked 46% year-on-year from £61m to £160m as Flutter felt the benefits of the FanDuel acqusition it completed in February 2018. Sports revenue was up 40% to $140m – due to FanDuel going live with sports betting services in a number of states – while gaming revenue also rocketed 103% to £20m.

In addition, Australian revenue climbed 16% to £207m, boosted by a 12% jump in sportsbook stakes to £2.11bn in the period.

Aside from revenue, Flutter also reported a 19% increase in operating costs for the period, with the operator spending a total of £503m in the first half.

Sales and marketing spend was up 15% to £214m, while operations costs hiked 23% to £181m and product and technology spending increased by 23% to £81m. Flutter also saw central costs rise 5% to £26m in the period.

However, despite higher spending, revenue gains in the first half meant Flutter was able to report a gross profit of £719m, up by 9% on last year, although profit before tax slipped 24% from £106m to £81m.

Underlying operating profit fell from £174 to £147m on a pro-forma basis, as if Flutter had owned and operated both the FanDuel and Adjarabet businesses for the entire first half of last year.

Meanwhile, underlying earnings before interest, tax, depreciation and amortisation – again on a pro-forma basis – remained level at £216m.

Flutter chief executive Peter Jackson described the first half as a productive six months for the business, saying he was pleased with the progress that the group is making to build a more diversified and sustainable business

“All divisions are performing strongly on an underlying basis and have responded well to the challenges faced,” Jackson said.

“In Europe, Paddy Power's recreational focus and great marketing execution has helped deliver continued growth in customers. The build-out of functionality for Betfair continues to make good progress, with sportsbook country specific pricing launched, along with additional languages and currencies.

“In Australia, Sportsbet’s ongoing delivery of innovative products, appealing marketing and recreational focus has led to excellent performance.

“In the US, our FanDuel brand and product proposition enabled us to take 50% of the sports-betting market in New Jersey in H1. We are delighted with this performance and have been encouraged by the regulatory momentum that has seen 10 states regulate online sports betting since the repeal of PASPA.

“I am pleased with what we have achieved in the first half and we are confident we can make further good progress in H2.”

Image: Jim Makos