ii view: Betfair owner Flutter eyes major US profits

First-half results to 30 June

• Revenue up 42% to £4.8 billion
• Adjusted profit (EBITDA) up 73% to £823 million
• Pre-tax profit of £83 million, up from a H1 loss last year of £51 million
• No interim dividend payment
• Net debt of £4.6 billion, up from £3 billion

Guidance:

• Expects full-year adjusted US profit of between £90 million to £190 million ($120m - $240m)

Chief executive Peter Jackson said: “The first half of 2023 marks a pivotal moment for the Group, with our US business now at a profitability inflection point, helping transform the earnings profile of the Group and significantly enhance our financial flexibility.

“The second half of the year has started well and we look forward to adding a US listing for Flutter shares later this year or early next year.”

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ii round-up:

Flutter Entertainment (LSE:FLTR) is a UK and overseas sports-betting and gaming company. 

It operates via four divisions. Its US business generates its biggest slug of sales at just over a third, with brands including FanDuel, FOX Bet and PokerStars. 

Its UK & Irish business follows, accounting for just under 30% of sales. Brands for its websites and betting shops include Sky Betting & Gaming, Paddy Power, Betfair and tombola.

The Australian division generates around 13% of sales mostly online via its Sportsbet brand. 

Finally, its remaining International division accounts for the balance of sales at almost a quarter. Its largely website brands include Betfair International, Adjarabet, and Junglee Games in India, along with betting outlets in Italy under the Sisal banner.  

For a round-up of these latest results released on 9 August, please click here.

ii view:

Flutter was formed from the merger of Paddy Power, Betfair and The Stars Group between 2016 and 2020. Today, it has a UK stock market value of around £25 billion sits, significantly above rivals Entain (LSE:ENT), Playtech (LSE:PTEC), and 888 Holdings (LSE:888) all at comfortably under £10 billion. Sports betting generates most of its sales at just over three-fifths, with gaming products the rest.

For investors, the potential for increased future regulation across all, or any, of its territories needs to be remembered. Despite industry initiatives, problem gambling remains an issue. Costs generally for businesses remain elevated, group net debt has risen given its previous Italian business acquisition, while no dividend is being paid unlike some rivals. 

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More favourably, acquiring more than two million new players during this latest first half, management is now forecasting an adjusted full-year US profit of between £90 million to £190 million ($120-$240 million). Both diversity of product and geographical region are present. A pending additional US stock market listing should further shine a spotlight on this likely growth business, while other markets, such as its previous move into India via Junglee Games, also warrant consideration.    

In all, and despite risks, a consensus analyst estimate for fair value at over 17,500p per share should keep existing fans of this company patient.  

Positives: 

• Diversity in both business type and geographical location
• Growing in the US

Negatives:

• Increased government regulation
• No dividend payment

The average rating of stock market analysts:

Buy