Paddy Power owner Flutter Entertainment will continue seeking new deals to break into new markets, according to chief financial officer, Jonathan Hill.
His remarks came after the Irish gambling giant reported that charges for its merger with rival, the Stars Group, sent profits sliding 99 per cent last year to €1.15 million.
Flutter paid £48 million in January for 50.1 per cent of online rummy and fantasy sports business, Junglee Games, in India, with options to buy the rest of the company in 2025.
“We see real possibilities in regulated markets,” Mr Hill said on Tuesday. However, he added that the company would not list likely targets to avoid alerting rivals to its possible intentions.
He stressed that Flutter would stick to its strategy of buying businesses with a top three position in countries where betting is regulated. Mr Hill noted that businesses with early leading positions in these markets tended to benefit disproportionately.
Online tax
Flutter has warned that Germany’s plan to impose a 5.3 per cent tax on online poker and slot machine turnover would cost it between £15 million and £25 million this year.
Mr Hill pointed out that this would be greater than the revenue Flutter earns from those businesses, while the proposal could prompt customers to bet with offshore operators not subject to the tax. He said Flutter and other licensed operators would continue to lobby law makers and monitor the legislation as it is drafted.
Flutter reported that revenue more than doubled to £4.4 billion (€4.6 billion) from £2.14 billion in 2019 on the back of its merger with the Stars Group, Canadian owner of Poker Stars and Skybet.
Profit before tax fell from £136 million following a deduction of £432 million in non-cash acquisition accounting adjustments.
The group’s accounts show that operating profit rose 141 per cent last year to £676 million from £281 million in 2019.
In all, Flutter took €573 million in charges last year, including the £432 million acqusition deduction. Financial income, tax credits and VAT refunds cut the cost of these charges to £507 million.
The enlarged group had £3.5 billion in debt immediately after the merger when through in May, but raised £800 million to pay off part of this. It ended 2020 with net debt of £2.8 billion.
This was 2.3 times earnings. The group’s target is bring that ratio to one to two times earnings. “I’m pretty comfortable with our trajectory,” said Mr Hill, adding that the group generated £817 million in cash.
Restrictions
Covid-19 restrictions left Flutter's 600-plus Paddy Power betting shops in Ireland and Britain with an operating loss of £41 million against a profit of £33 million in 2019. Its revenues fell 36 per cent to £200 million.
Flutter is continuing to pay shop staff in both countries without government aid.
Operating profit at Paddy Power Betfair online fell 18 per cent to £217 million from £263 million, mainly as a result of an increase in costs, including sales and marketing, which rose 16 per cent to £281 million. Operating losses in the US rose 87 per cent to £207 million as costs rose.
The group is continuing to spend on developing online sports betting in the US, where federal courts lifted a ban on this activity in May 2018. Revenues grew 80 per cent to £695 million.
Flutter’s US sales and marketing bill rose 107 per cent to £348 million. Overall costs, including this figure, were £865 million, while there was an accounting charge of £37 million.
Operating profit in Australia grew 119 per cent to £288 million from £131 million.
Chief executive Peter Jackson said 2020 was a historic year for Flutter as it completed the Stars Group merger and increased its stake in its US business, Fanduel.
“We continue to grow our recreational player base across all key regions. In quarter four alone the group had over 7.6 million monthly online players,” he added.
