Analyst reaction: Global diversification and scale driving Flutter's 2022 financial success
City analysts scrutinise the London-listed operator’s latest financials and give their assessment of its potential in 2023
Flutter Entertainment reported a 22% year-on-year (YoY) increase in its 2022 revenue to £7.6bn during 2022 thanks in part to an ever-expanding bolstered divisional base.
The US market leading FanDuel brand, which has been responsible for so much of Flutter’s positive performance in recent quarters, has been joined by Italian lottery operator Sisal and online bingo business Tombola during 2022, with CEO Peter Jackson lauding the “gold medal” position derived from having these businesses within the Flutter group.
With the US division delivering top-line growth of 67% YoY, and a 24% increase in international revenue compared to just 4% growth in the UK and Ireland division, the case for international diversification is clear.
Below, city analysts give their reaction to the operator’s 2022 financial results:
Edison Group’s Russell Pointon:
“Gaming company Flutter Entertainment has reported a strong increase in revenue and customer growth, while adjusted EBITDA increased by a much lower 4%. Flutter’s rapid US expansion has driven customer growth, with the number of average monthly players rising by 26%, and revenue was at the upper end of expectations while EBITDA losses was at the lower end of guidance. Acquisitions such as Italy’s Sisal and Tombola products provided further boosts in revenue, while the FIFA World Cup drove a strong betting performance in the second half of 2022.
“The group said its growing US business remained on track to be EBITDA-positive in 2023, but it remains to be seen how prolonged inflation pressures and a possible recession later this year impact consumer spending habits across markets. Continued investment in safer gambling initiatives is an important priority, especially with the UK’s gambling review white paper looming on the horizon, despite its chronic delays. Flutter will be betting on strong results in the US and further strategic acquisitions in order to weather the macroeconomic storm, and its diverse range of products will provide some resilience.”
Davy’s Paul Ruddy:
“The standout feature of Flutter’s FY22 results is the stellar performance in the highly attractive US market. Market share in online sports betting was 50% in Q4 as the group compounded its position and, encouragingly, it also increased its share in icasino. Group revenue was up strongly year on year (+22%), driven by US growth and acquisitions. Group EBITDA was within the guided range despite adverse sporting results in December. With good momentum in a number of its key divisions, the benefit of global diversification and scale and an increasingly recreational player base, the future is bright.”
Peel Hunt’s Ivor Jones:
“Flutter’s share price has been performing well recently, helped by a well-attended US CMD and the announcement that a US listing would be considered. In any event, this is the year when the US business makes a profit and continues to prove that it has achieved sustainable market leadership.
Now significantly spruced up with the addition of Italian local hero Sisal, International is well placed for growth in FY23 as it laps market exits and product upgrades start to come through. Taking the ball away – Flutter continues to pivot to North America (on track for positive FY23E EBITDA), therefore a US listing makes increasing sense. This, plus solid momentum (lapping market exits), is positive for the shares; we reiterate our Buy recommendation and 16,000p per share target price.”
Goldman Sachs’ Ben Andrews:
“Adjusted for sports results, the performances of the UK&I and International divisions in 4Q were tracking above expectations (details below), offsetting a softer-than-expected Australia (AMP growth but heightened Covid-19 reversion and higher competition).
“On the outlook, current trading is in line with management’s expectations, and the Maryland and Ohio launches have been the most successful US state launches to date (>50% sportsbook market share and >6% adult population penetration). Overall, we would expect limited changes to consensus for group EBITDA excluding the US in FY23, as the 4Q22 dynamics of softer Australia are offset by stronger UK&I and International.”