12th Aug 2022 14:29
(Alliance News) - interactive investor on Friday said that Flutter Entertainment PLC is "keeping a sharp eye on the future", of which its US business will be a "key driver".
Shares in the gambling firm were up 12% to 10,505.00 pence each in London on Friday afternoon.
"The shares have fallen by 34% over the last year, as compared to a gain of 4% for the wider FTSE 100, although over a three-year period the price remains ahead by 44%," interactive investor's Head of Markets Richard Hunter said.
On Friday, Flutter reported a swing to a first-half loss, though revenue climbed, and the gambling firm said it is yet to see "discernible signs" of a hit due to falling consumer confidence.
The Paddy Power and Sky Bet owner added it was profitable in the US in the second quarter, as its FanDuel business scoops up more market share.
In the six months to the end of June, Flutter's revenue increased 11% to GBP3.39 billion from GBP3.05 billion a year earlier. However, it swung to a pretax loss of GBP51 million from a GBP77 million profit.
Flutter reported amortisation costs increased 3.6% year-on-year to GBP286 million. Operating costs were 17% higher at GBP1.60 billion.
Earnings before interest, tax, depreciation and amortisation were 23% lower year-on-year at GBP434 million from GBP562 million.
During the half, it said it increased its average monthly players base to players to 8.7 million, 14% higher than the prior year. Flutter said the rapid expansion of its US business FanDuel was key to this growth, along with good underlying player momentum in the UK & Ireland, as well as Australia.
In the US, its online sports betting market share accelerated to 51% in the second quarter, helped by FanDuel's "efficient" customer acquisition and strong operational execution. FanDuel provides sportsbook and fantasy sports services.
Sports betting is being legalised in many US states for the first time following a Supreme Court ruling in 2018, allowing UK bookmakers - experienced in sports betting - to tap into the lucrative market there.
interactive investor's Head of Markets Richard Hunter 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."
However, Hunter said that whilst Flutter's international business has performed well, its UK and Ireland arm is having a "rather more difficult year, with the group’s investments into safer gambling initiatives and strong comparatives against a previous year affected by various lockdowns and the tailwind of some large sporting events weighing on the numbers".
Looking ahead, Flutter expects a full-year Ebitda outcome in line with market expectations. Its adjusted Ebitda, excluding the US, is expected to land between GBP1.29 billion and GBP1.39 billion.
In the US, it expects net revenue between USD2.85 billion and USD3.1 billion, topping expectations.
In the second quarter alone, its US unit was Ebitda positive. It is on track for full-year profit in the US in 2023, which Shore Capital sees as "an important milestone".
Ebitda excluding the US was GBP608 million, which is down 10% YoY but above Shore Capital's previous estimates.
Shore Capital said: "Flutter is guiding to non-US Ebitda for the full year of GBP1.29 billion to GBP1.39 billion, including Sisal for five months, which we see as around a GBP100 million contribution. Excluding Sisal, our current estimate for flat profit contribution of GBP1.24 billion is consistent with the middle of the range.
"The second half is said to have started in line, with our estimates requiring a modest improvement in performance over that reported for the first half," Shore Capital added.
It rates the stock at "hold", with a target price of 9,382p.
Hunter reiterates similar views on Flutter's outlook. "The international business generally is where the real opportunities lie, and the strategy of short-term pain for long-term gain is beginning to show signs of success," he said.
Flutter also said it has kicked off the second half "well", with the European football season restarting.
In addition, it noted it has seen little evidence of consumer confidence woes hitting punter numbers.
"We currently see no discernible signs of a consumer slow down and resultant reduced spending levels across our businesses. However, we will continue to closely monitor key spend indicators as we move through the second half given the uncertain macroeconomic outlook," Flutter added.
By Sophie Rose; sophierose@alliancenews.com
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