Flutter revenue jumps 28% in 2020 as Stars acquisition pays dividends

Flutter Entertainment has reported a 28% increase in total group revenue to £5.2bn during 2020.

Revenue on a non-pro forma basis rose by 106%, driven by the integration of The Stars Group (TSG) business.

Adjusted EBITDA, excluding the US market, increased 23% on a pro forma constant currency basis to £1.4bn during 2020.

The FTSE 100 operator confirmed a 25% year-on-year constant currency uptick in its sports betting operations, which generated revenue of £3bn during 2020 (up 25% on 2019), alongside a 32% year-on-year jump in gaming revenue to £2.3bn.

Continuing its growth trajectory from Q3, Australia-based revenue leapt 59% last year to just over £1bn, while revenue from the US market increased by 81% on a constant currency basis to £695m.

Flutter cited the significant potential of the US market, revealing that it had acquired 350,000 new sportsbook and gaming customers during the recent Super Bowl week, which exceeded its entire 2019 customer acquisition numbers.

Sky Betting & Gaming (SBG) revenue climbed 32% in 2020 to £975m, with a 34% rise in sports betting revenue, which hit £590m and a 31% increase in gaming revenue to £385m.

However, its UK and Ireland divisional compatriot, Paddy Power Betfair (PPB), saw revenue slide 2% to £1.2bn.

This decline can be attributed to a 36% fall in revenue from the PPB retail business to £200m, largely due to the Covid-19 pandemic. It was partially offset by an 8% rise in PPB online revenue to £1.1bn.

Revenue from the PokerStars business increased by 23% during 2020, hitting £1.2bn.

Flutter Entertainment CEO Peter Jackson said: “2020 was an historic year for the group as we completed our merger with TSG, commenced the integration of our two businesses and increased our ownership of FanDuel in the US, whilst at the same time navigating the challenges presented by the Covid-19 pandemic.

“We delivered a very strong financial performance in 2020, benefiting from our scale and diversification. We continue to grow our recreational player base across all key regions, in Q4 alone the group had over 7.6 million monthly online players.

“While the global outlook remains uncertain, our momentum remains strong and we look forward to the future with confidence,” he added.

Flutter highlighted the potential for material opportunities to drive cost efficiency across its entire group, confirming a £30m rise in estimated annualised cost synergies to £170m as a result of the merger.

In addition to announcing increased estimates, Flutter has committed to a six-point multi-year strategy aimed at driving growth in its international business through a combination of product, technology and marketing, a strategy which it has said could potentially include bolt-on acquisitions.

Part of this strategy has already begun through investment in the PokerStars business, which the operator suggested was aimed at “reasserting” the brand’s leadership in the vertical.

Flutter also revealed revenue growth of 36% during the first seven weeks of 2021, and has confirmed an EBITDA loss of £9m for every month that its UK and Ireland retail betting estate of Paddy Power shops is closed due to the coronavirus pandemic.

Regulus Partners analyst Paul Leyland said: “In common with the wider industry, Flutter’s key cash flow markets are facing the biggest risks while the biggest opportunities remain in cash burn territory.

“How this balances out remains less than clear. However, a clear focus on internal capability, flexibility and sustainability mean that Flutter can at least withstand a lot of damage and come out the other end potentially stronger, without foregoing a credible independent position in the US.

“In delivering this positioning, Flutter’s M&A strategy has been among the most astute in the sector, in our view,” he added.