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FTSE 100: Flutter sees ‘no discernible sign’ of spending slowdown

·Finance Reporter, Yahoo Finance UK
·4-min read
Flutter  A dog awaits for his owner outside Paddy Power office in Dublin city centre on St. Stephen's Day. Taoiseach Micheal Martin announced on December 22nd a series of new Level 5 restrictions designed to contain the spread of the coronavirus.Among them are restrictions on the movement of people and the opening of all non-essential retail shops (shops may remain open but have to postpone January sales). The Department of Health reported today a new daily record of new cases for the Republic of Ireland, with 1,296 new cases and 6 deaths (2,294 new cases and 26 deaths confirmed on the island of Ireland).On Saturday, December 26, 2020, in Dublin, Ireland. (Photo by Artur Widak/NurPhoto via Getty Images)
Gambling group Flutter owns Paddy Power, Betfair and FanDuel. Photo Artur Widak/NurPhoto via Getty

Gambling group Flutter (FLTR.L), owner of Paddy Power, Betfair and FanDuel, has posted a 20% fall in its first-half earnings but said it sees no signs of a consumer slowdown amid the cost of living crisis.

Flutter said its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to £476m ($580m) from £597m a year ago and the record £684m reached during the stay-home gambling boom of the COVID-hit first half of 2020. Excluding the US business, first-half earnings were down 11%.

The company also recorded a pre-tax loss of £112m for the six months to the end of June, compared to £86m a year earlier, due to higher operating and sales costs.

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Still, the gambling group said that it had seen “no discernible signs of a consumer slowdown currently, but we are closely monitoring key spend indicators given the uncertain macro economic outlook.”

People lost 9% more on its websites and at its shops, “driven by recreational player growth”, it said. Its shares gained over 10% on the FTSE 100, leading the blue-chip index on Friday.

“Flutter Entertainment took the top slot among the FTSE risers, with the shares jumping after the company said there were no signs of consumers betting less — something the market had been fearing given the cost of living crisis," Danni Hewson, financial analyst at AJ Bell, said.

"This reinforces the idea that people will be happy to keep betting in the hope of winning big during more difficult economic times."

The world's largest online betting firm also said its average monthly players rose by 14% to 8.7 million from 7.6 million during the six month period.

For the first six months of the year, the London-listed company saw an 11% boost to net revenue, standing at £3.38bn.

The company said it anticipates full year EBITDA to be in line with market expectations, with group adjusted EBITDA excluding the US of between £1.29bn and £1.39bn.

Peter Jackson, Flutter's chief executive, said that the first half of 2022 was positive for the group with significant progress made against the strategic objectives it had outlined in March.

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"We expanded our recreational customer base by over 1 million players in the half and increased the proportion of customers using safer gambling tools to over one third," he said.

"We are particularly pleased with momentum in the US where we extended our leadership in online sports betting with FanDuel claiming a 51% share of the market and number one position in 13 of 15 states, helping contribute to positive earnings in Q2," he said.

The betting and gambling company said it will review its dividend policy once it achieves its leverage targets. The board suspended dividends in March 2020 to preserve cash during the coronavirus pandemic.

“Flutter is keeping a sharp eye on the future, and the performance of its US business will be a key driver in achieving its ambitions," Richard Hunter, head of markets at Interactive Investor, said.

"The US unit, propelled in particular by its FanDuel operation, has had another successful period with market share rising to 51% and with market leading positions in the vast majority of the states in which it operates. While the unit was loss-making for the half-year, the US turned profitable in the second quarter, underpinning Flutter’s hopes of full profitability for 2023.

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"With the US now accounting for almost a third of group revenues, continued investment is being made in the region and while this is impacting profits in the short-term, the outlook for net revenues has been increased to £2.3bn to £2.5bn for the year," he added.

Flutter's US division delivered a strong performance during the six month period as quarterly revenue exceeded $750m for the first time in the second quarter with positive Adjusted EBITDA of $22m.

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