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Flutter Entertainment (FLTR) half-year profits crashed after the parent of the Paddy Power and Betfair brands racked up nearly £200m in costs connected to its merger with Canadian gambling operator The Stars Group (TSG). Flutter was also badly hit by coronavirus-induced disruption to the sporting calendar, although homebound poker players helped to offset the toll.
Flutter’s PokerStars brand, which had been in decline prior to lockdown, experienced a 40 per cent revenue boost over the first half, driven by the temporary absence of sports betting and the closure of shops. The brand’s average daily gaming customers rocketed 70 per cent in Flutter’s second quarter. The group will spend an additional £50m on marketing to help promote PokerStars even with the expectation that this trend won’t continue.
Flutter has also pledged investment in the US, where it is the leader on sports and gaming market share. It expects cash losses of up to £160m for the year.
Peel Hunt forecasts full-year 2020 adjusted pre-tax profits and earnings per share of £417m and 314p respectively, rising to £828m and 485p in 2021.
| FLUTTER ENTERTAINMENT (FLTR) | ||||
| ORD PRICE: | 12,740p | MARKET VALUE: | £ 19.7bn | |
| TOUCH: | 12,550-12,740p | 12-MONTH HIGH: | 12,910p | LOW: 4,922p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 121 | |
| NET ASSET VALUE: | 7,330p* | NET DEBT: | 25% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019** | 1.02 | 81.0 | 96.2 | 67.00 |
| 2020 | 1.54 | 24.0 | 18.1 | nil |
| % change | +51 | -70 | -81 | – |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £15.4bn, or 9,951p a share. **EPS restated to include 1.3m new shares issued in May 2020 as payment of 2019 final dividend | ||||
IC View
Flutter shares have flown upwards in spite of huge uncertainty over the return of sporting fixtures along with ongoing regulatory pressures. The shares now trade at a hefty 41 times forward earnings. We move to hold in anticipation of further momentum from increased sporting activity and the benefits of Flutter’s new gaming customer base, but await a better entry point before considering a further upgrade. Hold.
Last IC view: Sell, 5,608p, 16 Mar 2020
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