Flutter Entertainment (FLUT) Q4 2019 earnings summary

Executive summary

• Revenue rose 14% to £2,140m; underlying EBITDA fell 15% to £385m, reflecting higher taxes and regulation plus investment in the US. Excluding tax/regulatory changes, underlying EBITDA increased 12%.

• 2019 included the acquisition of a 51% stake in Georgian online operator Adjarabet and an agreed transformational combination with The Stars Group, subject to approvals.

• Responsible gambling remained a strategic priority; monthly awareness interactions across Paddy Power and Betfair reached 130,000, versus 70,000 in 2018.

Financial highlights

• Revenue was £2,140m, up 14% reported and 9% on a pro forma, constant-currency basis; sports revenue was £1,667m and gaming revenue £473m.

• Underlying EBITDA was £385m, down 15%; underlying operating profit was £277m, down 23%, and reported profit before tax was £136m versus £219m.

• Profit for the year was £111.9m versus £180.7m; profit attributable to equity holders was £144.0m versus £201.4m.

• Underlying EPS was 303p versus 379p; adjusted diluted EPS was 301.7p versus 377.2p, while reported diluted EPS was 182.2p versus 240.4p.

• £107m of incremental tax and regulatory costs and a £26m incremental US EBITDA loss weighed on underlying EBITDA; excluding tax/regulatory changes, underlying EBITDA excluding the US was 19% higher.

Outlook and guidance

• 2020 started with good customer and revenue momentum across divisions; US EBITDA was expected to be similar to 2019 despite launches and investment in at least three additional states.

• PPB Online sales and marketing was expected at ~25% of net revenue in 2020 versus 23.9% in 2019, with Euro 2020 expected to support customer engagement and acquisition.

• The UK credit-card deposit restriction was expected to reduce annual revenue by £20–25m; exiting selected B2B partners was expected to reduce 2020 Exchange revenue by less than 1% of total revenue.

• The Stars Group combination was expected to complete in Q2 or Q3 2020, subject to shareholder and regulatory approvals; pro forma leverage was expected at ~3.5x, above the 1–2x medium-term target.