TIDMFLTR
RNS Number : 5593S
Flutter Entertainment PLC
07 November 2019
7 Nov 2019
Q3 2019 Trading Update
Raising US guidance; excellent US sports betting and casino
momentum
Flutter Entertainment plc (the "Group") announces a trading
update for the three months ended 30 September 2019.
Unaudited GBPm Q3 2019 Q3 2018 YoY %
(nominal)
Sports revenue 417 375 +11%
Gaming revenue 116 107 +8%
------- ------- -----
Total revenue 533 483 +10%
--------------- ------- ------- -----
-- Q3 revenues grew 10% year-on-year, with good growth across both sports and gaming
-- Australia continues to perform very well with Sportsbet net revenue growth of 19%
-- US revenues grew by 67%, driven in particular by sportsbook and casino
-- As previously guided, a combination of responsible gambling
measures and international market switch offs have continued to
affect PPB Online, with revenues down 1%, albeit with more
encouraging underlying trends
-- Outlook: For Group (ex-US), 2019 EBITDA guidance remains
unchanged at GBP420-440m. Raising US guidance due to
better-than-expected revenue growth, driven by both sports betting
and online casino; US EBITDA loss now expected to be circa
GBP40-45m versus previous expectation of GBP55m.
Peter Jackson, Chief Executive, commented:
"Q3 was an important quarter for the Group with revenues up 10%
and the announcement of our combination with The Stars Group. We
believe that this deal will accelerate delivery of all of our core
strategic objectives and we are very excited about the
international growth prospects for the combined group.
Within PPB, both the Paddy Power and Betfair brands continued to
make good progress in building more recreational customer bases
through enhanced responsible gambling measures. While revenues in
the quarter were impacted by this ongoing work, we remain confident
that the changes being made will improve the sustainability of
future growth and lead to a more diversified customer base for both
brands. In our retail business, we have seen an improvement in
gaming revenue trends month-on-month and this trend has accelerated
since the start of the fourth quarter as competitors have started
to close shops across the UK.
Sportsbet delivered another strong quarter in Australia with
revenues increasing by 19%. Refinement of our pricing capabilities
and ongoing changes in our product mix are delivering positive
changes in expected margins while ongoing investment in product and
value is continuing to drive customer engagement.
In the US, FanDuel has now launched online sports betting in
Pennsylvania, West Virginia and Indiana and we have been very
encouraged by progress to date. Published market share data in
Pennsylvania shows that FanDuel quickly became the market leader
with around 50% share while we remain the clear number one operator
in New Jersey also. Notwithstanding the substantial investment we
are making, our strong customer and revenue momentum means that we
are raising our full-year guidance in the US".
Divisional analysis
Unaudited Online Australia US Retail Group
GBPm
Q3 YoY Q3 A$ Q3 US$ Q3 YoY Q3 YoY
2019 % cc % cc
2019 YoY 2019 YoY 2019 2019 % cc
% %
------ ------ ------ ----- ------ ------ ------ ------ ------ ------
Sports 163 -6% 119 +19% 76 +55% 58 +5% 417 +10%
Gaming 84 +11% - - 15 +174% 17 -37% 116 +7%
------ ------ ------ ----- ------ ------ ------ ------ ------ ------
Total revenue 247 -1% 119 +19% 91 +67% 75 -9% 533 +9%
------ ------ ------ ----- ------ ------ ------ ------ ------ ------
All growth rates referenced in the commentary are on a constant
currency basis.
Group
Total Group revenues grew 9% in Q3 with sports revenue growth of
10% and gaming growth of 7%. The addition of Adjarabet added 4
percentage points to Group growth in the quarter.
Online
Performance in PPB Online was affected in the third quarter by a
combination of ongoing enhancements to our responsible gambling
measures, international market switch offs and challenging World
Cup comparatives. Reported revenue growth across our products
therefore masked stronger underlying performance, where we are
continuing to grow our recreational customer base.
Total sports revenues declined by 6%. Adjusting the 2018
comparative for the World Cup and the international market switch
offs flagged at our interim results, growth was 5%
year-on-year.
Sportsbook revenues were down 5% (up 7% excluding the World
Cup). Net revenue margin for the quarter was broadly in line with
our expectations at 8.2%, incorporating a structural increase of 60
bps year-on-year. This improvement was due to a combination of the
ongoing benefit of country specific pricing, positive customer bet
mix changes (including increased same game multi usage) and
continued growth in our recreational customer base. Sportsbook
staking declined 13% year-on-year as a result of World Cup
comparatives, the improvement in expected margins and the removal
of some lower value staking activity within our international
business.
Exchange and B2B revenues were down 9% or 1% when adjusted for
the impact of international market switch offs and the World Cup.
Following the introduction of My Betfair Rewards in Ireland in
July, we have now rolled the programme out in the UK and we are
pleased with the initial response and engagement from
customers.
Gaming revenue in Q3 increased by 11% to GBP84m. While this was
GBP2m lower than Q2, it reflects the expected impact that enhanced
responsible gambling measures are having on our higher value tier
customers. Average daily actives for the combined Paddy Power and
Betfair gaming businesses were up 9% year-on-year in Q3,
demonstrating the ongoing shift that we are making towards a more
sustainable customer base.
Australia
In Australia, we are very pleased with our continued momentum.
Sportsbet revenues increased by 19% in the quarter to GBP119m,
driven by good customer growth over the last 12 months and a strong
net revenue margin of 11.4%. This represented a 290 basis point
improvement year-on-year.
The strong margin reflected a number of factors. Firstly, we
have seen a 50 basis point structural improvement in expected
margin thanks to a combination of ongoing refinement of our pricing
capabilities and positive bet mix changes. Popularity of our same
game multi product continued into Q3 with high levels of player
engagement helping to drive these positive changes. Secondly, we
estimate that favourable sports results contributed to a 170bp
outperformance above expected margin during the quarter.
With the uncharacteristically high margins reducing customer
recycling, stakes were unsurprisingly down 11%. We responded to the
bookmaker friendly results by increasing our investment in targeted
customer generosity during the quarter and we believe that this
will position us well during the important fourth quarter.
US(1)
US revenues increased by 67% in Q3 driven by excellent
sportsbook and gaming performance.
We launched the FanDuel sportsbook in 5 new states during the
quarter, two online (Pennsylvania and West Virginia) and three in
retail (Iowa, New York and Indiana). As part of the launch in West
Virginia, we successfully rolled out our own proprietary account
and wallet technology, in line with our goal of creating a more
flexible US technology stack.
FanDuel sportsbook remains the clear market leader in New Jersey
and following the launch of our Pennsylvania online sportsbook in
July, we have also succeeded in achieving a leading market position
there. We believe that this is the clearest demonstration yet of
our potential to replicate the success that FanDuel has had in New
Jersey. On October 22(nd) , we launched our online sportsbook in
Indiana and while it is still very early days, we have been
encouraged by our performance there to date. Overall US active
customer growth is currently running ahead of our expectations. We
have now acquired over 250,000 online sportsbook customers, up from
just over 200,000 at the time of the Stars Group announcement.
Net revenue margin across our sportsbook increased by 100 bps
year-on-year, helped by favourable sports results towards the end
of the quarter but also reflecting the evolution and growing
maturity of our US business. The main drivers of the improved
margin include better geographic diversification within the US and
a lower proportionate spend on customer acquisition bonuses as our
customer mix changes.
Casino revenues increased 174% year-on-year. Cross-sell of our
casino product to FanDuel sportsbook customers has continued apace
and the third quarter saw FanDuel remain the market leader in New
Jersey with an 18% market share. Our existing US businesses, TVG
and daily fantasy sports also delivered good growth with combined
revenues increasing 5% on a pro-forma basis. Driven principally by
sportsbook and casino, Q3 revenues have exceeded our expectations,
meaning that our expected loss in the US this year is likely to be
lower than previously guided. We now expect to incur a US EBITDA
loss of GBP40-45m in 2019 versus our previous expectation of
GBP55m.
Retail
Retail revenue declined 9% year-on-year to GBP75m, with 5%
sportsbook growth more than offset by the 37% decline in fixed odds
betting terminals ('FOBT') revenues.
Sportsbook growth was driven by a strong net revenue margin of
12.8% (Q3 2018: 11.8%). This was 60 bps above expected margin,
reflecting favourable sports results in the quarter. Staking was
down 3% year-on-year, reflecting the increased margin as well as
the inclusion of the World Cup in the prior year.
Gaming revenues decreased by 37% in Q3 2019 reflecting the
impact of the change to FOBT staking limits since April. This
compares with a decline of 44% in Q2 2019 and we have continued to
observe an ongoing improvement in this trend as the year has
progressed. This improvement has accelerated since the beginning of
October as competitors have moved to close shops in the vicinity of
our UK retail estate and we expect this trend to continue as more
closures occur. We previously guided that the impact of the change
to FOBT staking would decrease gaming revenues by 33-43% in the 12
months post regulatory change and we now believe that this is
likely to come in at the better end of this range.
Notes: (1) Market share of taxable gross revenue, based on New
Jersey DGE and Pennsylvania Gaming Control Board published
reports
Analyst Call:
The Group will host a conference call for institutional
investors and analysts this morning at 8:30am (BST). To dial into
the conference call, participants should dial 0800 783 0906 or
01296 480 100 from the UK, (01) 2421074 from Ireland and +44 1296
480 100 from elsewhere. The passcode is 497 988 73
A replay of the call will be available later today on our
corporate website:
https://www.flutter.com/investors/results-centre/year/2019
ENDS
Contacts:
Ciara O'Mullane, Investor Relations + 353 87 987 7862
Liam Kealy, Investor Relations + 353 87 665 2014
David Jennings, Corporate Finance &
Investor Relations + 353 87 951 3560
Billy Murphy, Drury / Porter Novelli + 353 1 260 5000
James Murgatroyd, Finsbury + 44 20 7251 3801
About Flutter Entertainment plc
Flutter Entertainment plc (the "Group") is a global sports
betting and gaming operator and is divided into four divisions:
-- Online; which runs the Paddy Power, Betfair and Adjarabet
online sports betting and gaming brands;
-- Australia; which consists of the Sportsbet online sports
betting brand, the #1 corporate bookmaker in Australia;
-- US; which operates as FanDuel Group and runs the FanDuel
sportsbook and daily-fantasy-sports brands, the TVG broadcasting
and advanced deposit wagering network and the Betfair online casino
in New Jersey and;
-- Retail; which runs over 620 Paddy Power retail betting shops across the UK and Ireland.
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END
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