Sports betting continued to make up most of Flutter’s revenue, growing 58.1% to £1.89bn, thanks mostly to a full sporting calendar after widespread suspensions for much of H1 2020.
Gaming revenue, however, ticked down by 2.7% to £1.16bn.
Flutter chief executive Peter Jackson said he was impressed the business had shown particularly strong betting growth while holding steady in gaming.
“The first half of 2021 exceeded our expectations as we made substantial progress against our operational and strategic objectives while maintaining excellent momentum in growing our player base,” he said. “Our global sports businesses benefited from further enhancements to our products and the return to more normalised sporting calendars while we sustained our strong performance in gaming despite the challenging comparatives set last year.”
Breaking revenue down by territory, the UK and Ireland remained on top with £1.14bn, a 94.2% increase. Both sport and gaming in the UK grew rapidly, with sport up 106.7% to £738m and gaming up 74.1% to £397m. Players in the UK and Ireland staked a total of £6.09bn, up 68.7%, with a margin of 10.7%, down from the particularly high margin of 12.8% in 2020.
Dividing UK and Ireland revenue further into retail and online, online revenue grew 37.1% to £1.09bn, of which £712m came from sports. Retail revenue on the other hand fell by 47.2% because of betting shop closures, with £26m of this total coming from sports and £16m from gaming.
In Australia, where only sports betting is permitted, Flutter’s Sportsbet brand brought in £585m, up 34.8%, as stakes grew 34.0% to £5.00bn.
Jackson said that, given Australia’s lower levels of novel coronavirus (Covid-19), this might suggest the brand’s growth will last.
“In Australia, Sportsbet delivered a phenomenal H1 performance with high customer retention rates during a period of reduced Covid disruption, suggesting that the business has experienced a permanent step change in scale,” he said.
The US, meanwhile, where Flutter operates the FanDuel brand, had the fastest growth. Revenue was up 135.1% to £652m. THis was driven mostly by betting growth, with sports revenue up 175.0% to £452m, thanks in part to new markets such as Michigan and Virginia opening.
Jackson said FanDuel had established a strong position as the market leader in the US, and that customers were proving to be worth the high acquisition costs.
“In the US, we remain the number one online sports betting operator by some distance thanks to the quality of our products and the extensive reach of the FanDuel brand,” Jackson said. “The customer economics we are seeing in the US bode very well for the future, with early FanDuel customers generating positive payback within the first 12 months of acquisition.
“We remain absolutely focused on extending our sports product advantages and replicating our market share success in further states as they regulate. In gaming we see an opportunity to grow our market share and look forward to further enhancing our product offering in the coming months.”
Flutter also said that as it continues to build a revenue advantage over competitors, this allows it to grow further and more quickly.
Gaming revenue grew 75.9% to £200m. Total US stakes came to £5.07bn, up 365.0% from 2020.
Flutter’s international segment, meanwhile – including the PokerStars brand – was the only one to see revenue decline as it experienced a 15.0% drop to £680m. While international sporting revenue grew to £118m, international gaming revenue was down 23.2% to £562m.
Flutter said one reason for this drop was that H1 of 2020 had been an especially strong year for PokerStars and poker in general. While exact comparisons to 2019 are not possible due to differences in reporting before Flutter’s merger with the Stars Group, PokerStars’ gaming revenue in 2019 was £479m, compared to 2021’s £562m.
Flutter said the decline was also partly due to compliance changes Flutter opted to make after the merger, including withdrawing the brand from China, Taiwan and Macau. This, it said, meant a higher proportion of its revenues in H1 came from regulated jurisdictions.
It added that “adverse German regulatory developments” under the country’s new State Treaty for Gaming played a part in the dip as well. While the treaty hadn’t officially come into effect in H1, operators were required to abide by its rules under a transitionary system.
Jackson said the decline was less severe than Flutter expected.
“In International, which faced particularly challenging revenue comparatives following the growth in poker last year, revenue declines were less pronounced than anticipated as we continue to reposition and invest in the business for long-term sustainable growth,” he said.
Flutter then paid £1.11bn in costs of sales, up 49.6% year-on-year, for a gross profit of £1.94bn, a 19.2% increase. Cost of sales grew faster than revenue mostly due to the growth of Flutter’s US segment, which the operator said has higher costs.
After sales and marketing costs, which grew 71.0% to £728m – of which the US made up almost £500m – Flutter was left with £1.22bn, down by 0.7% from H1 of 2020.
Other operating costs also increased, by 19.5% to £563m. Flutter again said the US was the “material driver” of the increase, due mostly to migration to Scientific Games’ now up-for-sale OpenSports platform, used by most of Flutter’s other sportsbook brands.
Flutter paid an additional £55m in corporate costs, down 15.7%, for adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £597m, down 13.3%.
After depreciation and amortisation increased by 7.0% to £125m, Flutter’s adjusted operating profit was £472m, down 16.8% year-on-year.
The business said it also expects a strong second half of the year, projecting EBITDA between £1.00bn and £1.15bn. While the business expects to record EBITDA of between £1.27bn and £1.37bn when excluding the US, it projects an EBITDA loss between £225m and £275m for the US segment.
The month after H1 ended also saw a number of significant changes at Flutter. The operator agreed to sell its Oddschecker affiliate arm to private equity business Bruin Capital in a deal worth up to £155m Flutter also announced that Amy Howe would become chief executive of its US-facing FanDuel subsidiary, following Matt King’s decision to step down, a decision that may delay a potential IPO for FanDuel.
Original article: https://igamingbusiness.com/flutters-revenue-grows-beyond-3bn-in-h1-but-us-costs-mean-profit-declines/
