Australia A Key Component of Full-year Flutter Growth
When Flutter Entertainment reported its Q3 earnings in late 2020, the global gambling company credited its Australian market as a huge driver of its growth. That sector showed its revenue up 76% and average daily customers up 86%.
Now that Flutter is reporting its preliminary results for the full year, it is clearer that the Australian market was a vital part of the company’s success throughout the year.
2020 Financial Overview
Overall, Flutter Entertainment’s revenue for the 2020 year increased substantially to $4.398M, which was 106% higher than the $2.14M of 2019. Pro forma came in at $5.264M for 2020, up 27% year-on-year from $4.144M.
Adjusted ABITDA was $889M, up 109% over the $425M of 2019. And the adjusted earnings per share were up 35%, though at 19% pro forma.
The recreational player base grew 19% throughout the year via an acceleration of channel shift from retail to online, spurred on by the pandemic. The company also increased its investment in responsible gambling initiatives that puts customers in charge and gives them more tools.
Flutter’s merger integration went well after the PokerStars (The Stars Group) acquisition, as did the associated migration of BetEasy into Sportsbet in Australia.
A focus on the US market showed 40% share in that growing sports betting market and 20% of the general gaming market shares. With Super Bowl betting, Flutter companies acquired more than 350,000 new customers and bettors, exceeding the entirety of the 2019 acquisition numbers. By 2025, the company expects the addressable market there to exceed $20B.
Executive Comments
Flutter’s preliminary results portfolio looks to take strong momentum into 2021 with player acquisitions continuing to grow across all divisions.
Covid restrictions will continue to impact retail markets like the UK and Ireland, and a potential tax increase in Germany could reduce profits in that market. However, the overall growth will continue, with Flutter predicting an overall group revenue increase based on a 36% increase in the first seven weeks of 2021.
CEO Peter Jackson called 2020 a historic year due to the merger of The Stars Group and Flutter, not to mention the increased ownership of FanDuel in the US market. Despite working around the coronavirus pandemic hurdles, the year presented opportunities and ended with a strong financial performance.
“We delivered a very strong financial performance in 2020, benefiting from our scale and diversification,” Jackson said. “We continue to grow our recreational player base across all key regions; in Q4 alone, the Group had over 7.6M monthly online players.
“Nowhere has our growth been more evident than in the US where we have consolidated our #1 position in this crucial market, with customer economics that continue to exceed our expectations, finishing the year as the first US online operator to reach over $1.1B in gross gaming revenue.”
Australian Market Focus
As mentioned, one of the markets integral to Flutter’s success is the Australian one. It is a “core market” and looks to be a pillar of profitable growth going forward.
One of the reasons that the integration of The Stars Group was so successful was that Flutter decided to migrate BetEasy into Sportsbet. More than 90% of BetEasy customers went on to bet with Sportsbet after the migration.
Further, Flutter incorporated new technology to prioritise safer gambling initiatives in that market, upgrading the predictive models with an increased investment. The global safer gambling team increased, enabling the company to check in with double the customers in 2020 regarding safe gambling transactions. Sportsbet reported that 40% of its revenue came from customers who utilised deposit limits.
Flutter was able to transition much of its business online when the pandemic hit. Even with racing restarting without live bettors, Flutter increased its number of average monthly bettors by 26%. And the company’s overall share of the online market increased to 46%, which was 3% higher than in 2019.
Overall, where Flutter lost ground in some markets due to the pandemic, Australian and US growth catapulted the company to new heights.
Specifics of Australian Market Growth
Sportsbet excelled in 2020 when many customers had no choice but to shift their business from retail betting to online. As retail reopened in many areas, online play actually grew, indicating that many people decided to remain active online.
Some of the key figures from Flutter’s Australian market breakdown were:
- Sportsbook stakes: £9.713M (up 46% from 2019)
- Sportsbook net revenue margin: 11.1%
- Revenue: £1.075M (up 59% from 2019)
- Cost of sales as % of net revenue: 48.4%
- Gross profit: £555M (up 47% from 2019)
- Contribution: £426M (up 66% from 2019)
- Adjusted EBITDA: £318M (up 98% from 2019)
- Adjusted EBITDA margin: 29.6%
- Adjusted operating profit: £288M (up 119% from 2019)
As previously mentioned, the total average monthly players increased substantially in 2020, which is evidenced by the quarterly numbers:
- Q1 2020: 581,000 average monthly players (up 9% over 2019)
- Q2 2020: 611,000 (down 2% from 2019)
- Q3 2020: 876,000 (up 39% from 2019)
- Q4 2020: 1,109,000 (up 53% from 2019)
