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Flutter Entertainmnt (FLTR)

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Tuesday 10 August, 2021

Flutter Entertainmnt

2021 Interim Results

RNS Number : 0764I
Flutter Entertainment PLC
10 August 2021
 

 

  10 August 2021

Flutter Entertainment plc - 2021 Interim Results

Strong customer momentum driving growth; US profits expected in 2023

Flutter Entertainment plc (the "Group") announces interim results for six months ended 30 June 2021.

 

Reported1

Adjusted pro forma2

 

H1

H1

 

H1

H1

 

 

 

2021

2020

 

2021

2020

 

CC3

£m

£m

£m

YoY %

£m

£m

YoY %

YoY %

Average monthly players4 ('000s)

 

 

 

7,625

5,445

+40%

 

Group Revenue

3,053

1,536

+99%

3,053

2,389

+28%

+30%

Adjusted5 Group EBITDA6 excluding US

684

339

+101%

684

703

-3%

-2%

Adjusted Group EBITDA

597

342

+75%

597

684

-13%

-12%

Profit before tax

77

24

+221%

 

 

 

 

(Loss)/Earnings per share (pence)

(50.4)p

18.1p

 

 

 

 

 

Adjusted earnings per share (pence)

171.1p

187.5p

-9%

171.1p

286.3p

-40%

 

Net Debt at period end7

2,682

2,899

-7%

 

 

 

 

 

 

 

 

 

 

 

 

Operational Highlights: all commentary on a pro forma basis

· Group: Scale and quality of business enhanced with 30% revenue growth driven by 40% increase in average monthly players ("AMPs")

· US : FanDuel product underpins leadership position; 45% online sportsbook market share8 in Q2

-  Revenue growth of 159% to £652m ($906m); over 2.2 million customers acquired since sports betting launch at average CPA9 of $291

-  Average return on investment in first year post customer acquisition of 1.2 times9

-  Proprietary sports technology migration complete; product and risk management advantages key to strong customer acquisition/retention, also benefitting sports margin

-  Flutter US expected to generate positive EBITDA in 2023, based on our expectations of future state openings

· Group ex-US: Excellent customer growth with AMPs +26% aided by more normal sporting calendar

 

-  UK & Ireland AMPs +44%, with integration progressing well

-  Australian AMPs +52% driven by very high customer retention rates

-  International revenue decline less than anticipated with casino now largest product vertical

· Safer gambling:   Continued investment in resource and technology to optimise our controls

-  Advanced development of Affordability Triple Step in UK&I, with next phase of rollout in H2

-  Stepped up Group wide campaigns to promote safer gambling awareness and tools

Financial Highlights:

· Reported revenue and Adjusted EBITDA growth of 99% and 75% respectively benefitting from May 2020 combination with The Stars Group ("TSG")

· Reported profit before tax of £77m, including amortisation charge of £276m for acquired intangibles

· Pro forma revenue of £3.1bn, 30% higher than in H1 2020

· Pro forma Adjusted EBITDA for Group ex-US 2% lower year-on-year to £684m

· Higher US Adjusted EBITDA loss reflecting increased investment, with 6 additional states live compared to H1 2020

· Net debt reduced by 7%, equating to a leverage ratio of 2.3x

· Debt refinance complete, increasing liquidity and reducing future annual interest cost by circa £50m

· Dividend policy to be kept under review with medium-term leverage target of 1-2 times retained

 

Outlook:

· The second half of the year has started well. Assuming an uninterrupted sporting calendar for the remainder of the year and normalised sports results, we anticipate the following:

Group ex-US: Adjusted EBITDA of between £1,270m - £1,370m, assuming our retail estates remain open throughout H2  

US: Net revenue of between £1.285bn and £1.425bn ($1.8bn - $2.0bn) and Adjusted EBITDA loss of between £225m and £275m. This assumes H2 online launches in both Arizona and Connecticut

 

Peter Jackson, Chief Executive, commented:

"The first half of 2021 exceeded our expectations as we made substantial progress against our operational and strategic objectives while maintaining excellent momentum in growing our player base. Our global sports businesses benefitted from further enhancements to our products and the return to more normalised sporting calendars while we sustained our strong performance in gaming despite the challenging comparatives set last year.

In the US, we remain the number 1 online sports betting operator by some distance thanks to the quality of our products and the extensive reach of the FanDuel brand. The customer economics we are seeing in the US bode very well for the future, with early FanDuel customers generating positive payback within the first 12 months of acquisition. We remain absolutely focused on extending our sports product advantages and replicating our market share success in further states as they regulate. In gaming we see an opportunity to grow our market share and look forward to further enhancing our product offering in the coming months.

In the UK and Ireland, integration is progressing well with our 3 brands benefiting from shared learnings across product and operations. In Australia, Sportsbet delivered a phenomenal H1 performance with high customer retention rates during a period of reduced Covid disruption, suggesting that the business has experienced a permanent step change in scale. In International, which faced particularly challenging revenue comparatives following the growth in poker last year, revenue declines were less pronounced than anticipated as we continue to reposition and invest in the business for long-term sustainable growth.

Taking a lead on safer gambling remains a key priority for the Group as we continue investment across our brands and step up our activity to promote safer gambling awareness and tools. In markets where our campaigns are most advanced we are already seeing a positive impact on customer engagement and usage of safer gambling tools.

The second half of the year has started well and we look forward to making further progress in the coming months."

Notes:

1 Reported represents the IFRS reported statutory numbers. Where amounts in the table have been normalised for separately disclosed items (SDIs) they are labelled as Adjusted.

2 Flutter's combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group's financials with TSG included for a full 6-month period in 2020. Junglee, which was acquired in January 2021, has not been included on a pro forma basis. See Appendix 3 for a reconciliation of pro forma results to statutory results.

3 Constant currency ("cc") growth is calculated by retranslating the non-sterling denominated component of H1 2020 at H1 2021 exchange rates (see Appendix 4). Growth rates in the commentary are in local or constant currency.

4 Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period. The AMP numbers do not include Junglee players in 2020 or 2021 to allow for better comparability of underlying player growth for International and Group.

5 The "Adjusted" measures include items that are separately disclosed as they are: (i) not part of the usual business activity of the Group (ii) items that are volatile in nature and (iii) purchase price accounting amortization of acquired intangibles (non-cash). Therefore, they have been reported as "separately disclosed items (SDIs)" (see note 5 to the financial statements).

6 EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure.

7 Net debt is the principal amount of borrowings plus associated accrued interest, minus cash & cash equivalents plus/minus carrying value of debt related derivatives.

8 Online sportsbook market share is the GGR market share of FanDuel and FOX Bet for Q2 in the states in which FanDuel was live based on published gaming regulator reports in those states. During Q2 FanDuel was live in 10 states; Colorado (CO), Illinois (IL), Indiana (IN), Iowa (IA), Michigan (MI), New Jersey (NJ), Pennsylvania (PA), Tennessee (TN), Virginia (VA) and West Virginia (WV). During Q2 FOX Bet was live in 4 states; CO, NJ, MI and PA.

9 CPA is cost per acquisition and represents the total media and digital marketing spend per acquired customer including those cross-sold from daily fantasy sports. The return on investment is the average gross profit generated from those customers divided by their average CPA. It includes all quarterly cohorts of FanDuel sportsbook acquired between Q3 2018 through Q2 2020.

 

Analyst briefing:  

The Group will host a questions and answers call for institutional investors and analysts this morning at 9:30am (BST). Ahead of that call, a presentation will be available on the Group's corporate website ( www.flutter.com/investors ) from 7.00am. To dial into the conference call, participants need to register here where they will be provided with the dial in details to access the call.

Contacts:

 

 

 

Investor Relations:

 

David Jennings, Group Director of Investor Relations & FP&A

+ 353 87 951 3560

Ciara O'Mullane, Investor Relations

+ 353 87 947 7862

Liam Kealy, Investor Relations

+ 353 87 665 2014

Press:

 

Fi Thorne, Group Director of Corporate Affairs

+ 44 75 2111 4787

Lindsay Dunford, Group Head of Corporate Affairs

+ 44 79 3197 2959

Billy Murphy, Drury Communications

+ 353 1 260 5000

James Murgatroyd, Finsbury

+ 44 20 7251 3801

 

 

 

 

Business Review 1,2,3,4,5 

Flutter enjoyed a very strong first half of 2021 with excellent revenue growth driven by increased average monthly players ("AMPs"). We have cemented our leading market share in each of our core markets by continuing to make substantial customer-focused investments in our products, brands and value propositions. In the US, we have maintained our leadership position due to strong execution and the quality of our product offering.

During H1, pro forma revenue increased by 30% to £3.1bn, benefitting from the diversification of the Group on a product and geographic basis. Pro forma Adjusted EBITDA declined by 12% to £597m reflecting (i) increased investment in the US as we build our leadership position, (ii) substantial investments in our International division to position it for long-term success and (iii) the previously highlighted one-off nature of some lockdown related earnings in H1 2020. These were partially offset by a strong increase in sports revenue following the return to a more normalised sports calendar in Q2 2021. On a reported basis revenue and Adjusted EBITDA grew 99% and 75% respectively, reflecting a full six-month contribution from The Stars Group ("TSG") following the completion of our combination on 5 May 2020.

The Group is continuing to improve the sustainability and quality of its earnings through our focus on investment in regulated/regulating markets. The proportion of our revenues coming from regulated markets increased to 90% in H1, up 8 percentage points in just 2 years. This reflects the strength of ongoing performance in both our UK & Ireland and Australian divisions, our rapid expansion in the US and the regulation of certain other international markets over that time. At this point, no individual unregulated market accounts for more than 1.5% of Group revenue.

US deep dive: Achieving the "flywheel effect"

In the US, we generated over $900m in revenues in H1 and in Q2 we exceeded the half billion dollar mark in a single quarter for the first time. As a result, the revenue gap between our US business and its main competitors is continuing to widen, compounding the scale advantage we enjoy today.

That scale advantage is an important element of our goal to achieve a US flywheel effect which sees us use our scale to accelerate the growth of our business. The more we grow our customer base and revenues, the more we can invest in technology, products, promotions and pricing, thereby further enhancing our customer proposition. This in turn will help us to achieve better customer acquisition and retention than our competitors, increasing our scale and driving future growth.

Our success to date has been built upon two key competitive advantages, namely the quality of our product and the reach of the FanDuel brand.

1.  FanDuel product

Technology

Technology is a key enabler of our success.  We completed the migration of the FanDuel sportsbook on to our own proprietary sports betting platform in July (Flutter's Global Betting Platform) with some states live since Q1. The new platform has increased the speed, scalability and reliability of FanDuel's product, which had already been consistently ranked #1 by independent third-parties. When combined with the move to our own in-house account and wallet during 2020, it means FanDuel now operates on largely proprietary technology for sports.

Pricing and risk management

The Group's 20+ year heritage in pricing and risk management has enabled us to develop products that provide us with a sustainable competitive advantage:

· Product range: Our proprietary models provide customers with the broadest range of markets to bet on. For example, we offer over twice the number of pre-game markets and over seven times the number of in-play markets than the average of our nearest competitors on the NBA

· Our Same Game Parlay™ product: Originally developed elsewhere in the Group, this product is proving to be very popular with US customers; over 50% placed a Same Game Parlay bet during the last NFL season and we were the only operator to offer this product across NFL, NBA and MLB during H1

· Higher structural margins: The combination of the two factors above means that a higher proportion of our sportsbook stakes are placed on parlay (accumulator) type bets. These bets are structurally higher margin than single event wagers. Despite offering what we believe to be the best value in the market, our combination of pricing accuracy and advantageous product mix enables us to achieve higher gross win margins. In Q2 for example we generated gross win margins that were 300 basis points higher than the market. We estimate that approximately half of this benefit was derived from our sustainable product advantage. The remainder was due to favourable sports results, the benefit of which was compounded by our product mix

· Risk management: Confidence in our pricing accuracy allows us to take bigger bets from customers

We are continuing to maintain this product gap by iterating our existing pricing models to improve the precision of our pricing as well as also developing new models to cover more US sports. This will increase the proportion of our handle that we price in-house from 75% currently to circa 95% by the end of 2023.

We also improved FanDuel's gaming proposition during H1 with additional features such as:

· Our cross-product promotional platform to more effectively reward multi-product players

· An upgraded customer interface, leveraging Group resource at our Cluj technology hub in Romania

· Over 100 new gaming titles added in the half

We recognise however that we have more to do in gaming and look forward to expanding our portfolio of content further in the coming months. We remain convinced that (i) quality of product and (ii) having a deep understanding of what customers want are critical determinants of long-term success in this industry and a key driver of the high customer retention rates we are achieving today.

2.  FanDuel brand

The FanDuel brand has benefited from over $1bn of marketing investment to date, providing it with leading awareness across US sports betting brands. The FanDuel daily fantasy sports ("DFS") database has expanded to nearly 13 million players, from 7 million in 2017, and continues to be the source of over 40% of all sports betting customers acquired. In the first half of 2021 alone, we spent an additional £225m on marketing. We have an extensive media strategy that combines national partnerships with the NFL, Turner Sports and CBS with key regional sports network ("RSN") deals. In sportsbook states where we are live, this investment across RSNs has delivered FanDuel 39% share of voice across local sports networks, the key networks consumers use to watch their local team games in the NBA, MLB and NHL.

We utilised to great effect the scale of our existing player base to further grow our AMPs. When the effectiveness of our viral marketing campaigns, such as "Spread the Love", is combined with the quality of our product, it enables a compounding customer referral effect, where we have more and more customers referring FanDuel to their friends. This combination of customer referrals and viral marketing has been identified as the source of 33% of our sports betting customers.

Resultant market share

We have maintained our leadership position in the US online market during H1.

· Our overall online market share6 in Q2 was 31%

· Our sports betting share6 in Q2 was 45%

· Our online gaming share6 in Q2 was 20%

Encouragingly we continue to lead in states at different stages in their life cycle. We are the market leader in more mature states like New Jersey and Pennsylvania but also lead in those states that have gone live this year, namely Michigan and Virginia. We have also bridged the gap in other states, such as Illinois and Indiana, where we entered marginally later than our competitors, with our product quality coming to the fore.

Customer economics update and medium-term outlook

With the benefit of 3 years' sports betting experience in the US, a clearer picture is emerging of the returns dynamics for FanDuel.

· Scaled customer acquisition at low cost: more than 2.2 million sportsbook and gaming customers acquired to date at an average cost per acquisition (CPA) of $2917

· Year-one return: The average first year return on investment for sportsbook and gaming customers is 1.2 times the average cost to acquire those customers7

· Year-two revenue: The average revenue generated from customers in the second-year post acquisition is 11% higher than the revenue they generate in year one7

We are continuing to grow our customer base rapidly. In the last 12 months to 30 June, FanDuel acquired 1.7 million new sportsbook and gaming customers, equating to over three times the total existing base acquired up to that point. Those existing players generated a positive contribution of $190m in the last 12 months. When combined with the $212m contribution from our daily fantasy and horse racing businesses, the total contribution of our US business pre-new player acquisition was $402m. This was an increase of 138% on the prior comparable period. We were able to use this positive contribution to fund new player acquisition of $311m.

As can be seen above, the existing base is providing us with the firepower to invest further in customer acquisition as new states launch, ensuring we keep the flywheel turning. As we consider the medium-term outlook for our US business, we now believe that we will reach the point in 2023 when the positive contribution from customers acquired pre-2023 will more than offset the cost of ongoing customer acquisition. We therefore expect that the US division will generate positive EBITDA in 2023.

It is important to note that we are not setting a target date for profitability - the date the business turns profitable remains an output for us. We remain entirely focused on growing the embedded value of the business by acquiring as many customers as we can for as long as we can generate attractive returns on that investment. It is important to note that our projection assumes that none of California, Florida or Texas launch online sports betting/gaming before 2024. Should one of these large states regulate sooner, our level of investment in new player acquisition would be higher and profitability could therefore be delayed. The projection also assumes no major change to the regulatory/tax landscape in current or prospective states.

Group ex-US: Structural trends playing to our strengths 

Group ex-US delivered a strong performance in the first half of 2021 with AMPs up 26%, delivering pro forma revenue growth of 14% year-on-year. Excellent revenue performance in UK and Ireland (+30%) and Australia (+27%) more than offset a lower than anticipated decline in International revenues (-11%). On a reported basis revenue grew 90% (UK & Ireland 94%, Australia 68%, International 104%).

Several important factors influenced the market in H1: (i) sporting calendars normalised, particularly in the UK & Ireland (ii) lockdowns continued, with retail and traditional entertainment venues shut for an extended period during the half (iii) sports results were beneficial which added approximately 1 percentage point to ex-US win margins versus expectations and (iv) customers continued to migrate online as we focused on retention of the players acquired while retail was shut. Whilst it is too early to say what the long-term impact of some of the more structural changes will be, our performance in H1 and the trends we are seeing in our business provide grounds for cautious optimism.

UK & Ireland

In the UK & Ireland, AMPs grew 44% in H1, helped by the disrupted sports calendar in Q2 last year and the additional benefit derived from the European football championships this year. Gaming also performed well notwithstanding challenging Covid related comparatives and the lower share of consumer spend that these products usually generate during summer football tournaments.

SkyBet, Paddy Power and Betfair continued to deliver a differentiated proposition to recreational and more engaged customers alike as our team pursued its 'complement and compete' strategy. Good progress has been made on integration following the merger, with "centres of excellence" created across key areas. This has enabled the sharing of greater insights in areas like pricing and risk management, leading to improvements in our product offering across brands.

· Supported by targeted marketing campaigns, the SkyBet in-play experience has been enhanced while Paddy Power and Betfair are benefitting from improved 'Bet Builder' products  

· The growth in popularity of these 'Bet Builder' products benefits margins with some of the upside reinvested in enhanced rewards to acquire and retain customers

· Betfair also leveraged product improvements ahead of the Euros, being the only operator to have cash out available 100% of the time during the tournament

· As a result, all brands achieved record high engagement during the half with sports AMPs up 24% compared with 2019

Our gaming franchises benefited from improved in-house and third-party content as well as the investments we made in our proposition over the last 12 months. Leveraging the expertise of the Sky Vegas team has helped with the successful launch of daily engagement products such as 'Paddy's Wonder Wheel', 'Betfair's Prize Pinball' and the launch of the enhanced Betfair gaming experience, leading to improved customer engagement and retention across our platforms with gaming AMPs 59% higher than the comparable period in 2019.

In Retail our shops reopened during Q2, with June the first full month of trading since September 2020. Revenue in the month was approximately 80% of June 2019 levels, with a notable difference between trading in our UK estate (where revenue was +7% versus 2019) and our Irish estate where revenues were running at 50% of 2019 levels, reflecting some operational restrictions and social distancing measures that have remained in place. Our UK shops benefitted from strong gaming performance and an earlier re-opening than our Irish shops (mid-April as opposed to mid-May). We continued to pay all staff costs throughout H1 without reliance on any government support schemes available.

Australia

Australia was less impacted by Covid related interruptions in H1 than the UK & Ireland. Competitor retail outlets were open for the majority of the half and therefore H1 trends may provide a good indication of longer-term customer behaviour in the market.

The scale of our Australian online business has increased significantly over the last two years with AMPs in H1 56% higher than in H1 2019 on a pro forma basis. Retention rates exceeded our expectations, most notably among customers identified as being traditional retail customers. The proportion of staking from these customers throughout H1 remained at the same elevated levels we experienced during 2020. With added confidence in our ability to retain these customers, we believe the events of the last 17 months may represent a permanent step change in the scale of the Sportsbet business.

We look forward to sharing more details and customer insight with you at our upcoming Australian investor day on September 22nd.

International

The shape of our International division continues to evolve, reflecting both changing market dynamics as well as the progress we are making to improve the sustainability of the earnings base. During H1 several key factors influenced performance:

· The step up in investment we have made across brand, people, product and technology to improve our customer proposition and drive growth in direct casino acquisition

· The impact of the compliance measures taken in 2020 following the merger with TSG to improve the sustainability of future revenue streams

· Adverse regulatory changes introduced in Germany

· The benefit of ongoing local lockdowns which continued to stimulate online activity, albeit to a much lesser extent than in H1 2020

In July, we built on this further by acquiring Singular, an Eastern European sports betting and gaming platform which is already fully integrated with our Adjarabet business, providing us with greater optionality as we enter new markets.

The improvements we have been making have delivered some important successes:

· Our total gaming customers in H1 2021 equated to 91% of our H1 2020 total, despite the unprecedented interest in poker last year, particularly during the first lockdown

· Casino revenue has exceeded poker revenues for the first time in H1 (year-on-two-year casino revenues +49%). Our investment in direct casino and proprietary content, as well as excellent casino execution at Adjarabet and Betfair, has contributed to the change in mix

· Proprietary games developed by our in-house studios accounted for 19% of PokerStars' casino gross gaming revenue in H1, making in-house content the largest single supplier of slots content to PokerStars Casino

We will continue to invest to further build on this momentum and to leverage our scale position across our international markets.

International regulatory changes represent both a challenge and opportunity for the Group. In Germany we were disappointed with confirmation of the new turnover tax on online poker and slots products which came into effect on July 1. When considered in conjunction with the product regulations announced late last year, it is increasingly clear that generating a positive contribution in Germany will now be challenging for all operators.

Elsewhere, Brazil, Canada and the Netherlands are all on a path to regulation in the next 24 months which could lead to growth in our addressable market. It may also mean however that the contribution from these markets could decline in the short-term with the introduction of taxes and/or other regulatory changes. Longer-term we believe our scale and product advantages will position us well to grow our share over time.

Safer gambling

Safer gambling remains a key priority for the Group. We continue to invest in safer gambling resource and technology, upweighting our dedicated teams and optimising our safer gambling controls.

In the UK & Ireland we have continued to refine our Triple Step Affordability framework, which takes an individual risk-based approach to financial vulnerability, in combination with a range of other factors, to minimise the probability of harm. We believe this framework strikes the right balance between protecting vulnerable customers without impinging on the personal freedoms of the vast majority of customers who enjoy a flutter. The next phase of the roll out is expected in H2, having shared our approach with the UK Government as part of our response to the Gambling Act review. We are also engaging constructively in other areas of the Review, such as backing calls from the Betting & Gaming Council ("BGC") to include an Ombudsman in the Government's White Paper, expected later this year.

In Ireland, where the legislative process is progressing, we introduced a range of proactive measures including a ban on credit card deposits and a pre-watershed whistle-to-whistle advertising ban during live sporting events. We also committed 1% of NGR to support the research, education and treatment of problem gambling.

 

In the US, FanDuel became the first online operator in March to partner with the American Gaming Association ("AGA") on its responsible sports betting campaign, "Have a Game Plan".  The Group also announced a partnership with Gamban to provide blocking software to self-excluded customers as part of its commitment to building a comprehensive responsible gaming programme. 

Across the Group, we have stepped up spending on the promotion of safer gambling awareness and tools through a range of TV campaigns, direct marketing and on-site visibility.  We have seen an increase in the use of deposit limits and other safer gambling tools across all our brands in the UK and Ireland following introduction of these measures.  In Australia, Sportsbet launched the "Take a sec before you bet" campaign at the end of July aimed at highlighting the benefits of pre-emptive deposit limits, while in the US FanDuel enhanced its customer experience on-site with information on tools and safe play.

Capital structure and balance sheet update8

As at June 30th, the Group had gross debt of £3,316m and a net debt position of £2,682m, representing a leverage ratio of 2.3x. Post period end, the Group announced the sale of Oddschecker Global Media for an initial £135m in cash, with the potential for this to rise to £155m in time depending on the future performance of the business.

In mid-July the Group announced completion of a debt refinancing transaction that will reduce its effective cost of debt to 2.5% (from circa 4.2% previously), leading to expected annualised savings of approximately £50m based on current leverage levels. The transaction also resulted in an increase in available liquidity of circa £250m for general corporate purposes.

The Group remains committed to its medium-term leverage target of 1-2 times and the Board will review the Group's dividend policy once leverage returns to these levels.

Other updates

Following the December 2020 ruling of the Kentucky Supreme Court in relation to a legacy case taken by the State against two TSG Isle of Man companies, the Group intends to submit a petition to the US Supreme Court to review the Kentucky judgement. Our petition will be submitted this month and we expect that the US Supreme Court will decide whether to take up the case during Q4 2021.

Separately, further to our statement on April 7 this year, the Group confirms that it has entered into a legal arbitration process with FOX Corporation with respect to its option to acquire an 18.6% stake in FanDuel. An arbitrator has been appointed and the Group intends to vigorously defend its position. A ruling in the arbitration is not expected before 2022.

 

 

Operating and Financial Review1-5, 9-12

Pro forma review

Group

 

 

Pro forma

 

H1

H1

 

CC

2021

2020

Change

Change

£m

£m

%

%

Average monthly players ('000s)

7,625

5,445

+40%

 

 

 

 

 

 

Sports revenue

1,894

1,199

+58%

+57%

Gaming revenue

1,159

1,190

-3%

+1%

Total revenue

3,053

2,389

+28%

+30%

 

 

 

 

 

Cost of sales

(1,109)

(738)

+50%

+51%

Cost of sales as a % of net revenue

36.3%

30.9%

+540bps

+510bps

 

 

 

 

 

Gross profit

1,944

1,650

+18%

+20%

 

 

 

 

 

Sales and marketing

(728)

(426)

+71%

+77%

Contribution

1,215

1,224

-1%

+1%

 

 

 

 

 

Other operating costs

(563)

(475)

+19%

+20%

Corporate costs

(55)

(66)

-16%

-10%

 

 

 

 

 

Adjusted EBITDA1,2

597

684

-13%

-12%

Adjusted EBITDA margin %

19.6%

28.6%

-910bps

-930bps

 

 

 

 

 

Depreciation and amortisation

(125)

(117)

+7%

+8%

Adjusted1 operating profit

472

567

-17%

-16%

 

 

 

 

 

Adjusted1 basic earnings per share

171.1p

286.3p

-40%

 

 

 

 

 

 

Net debt at period end

2,682

2,899

-7%

 

Note: Flutter's combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group's financials with TSG included for a full 6-month period in both 2020 and 2021. Junglee, which was acquired in January 2021, has been included on a reported basis due to materiality.

Pro forma total revenue increased 30% to £3.1bn in the half, driven by growth of 57% in sports and 1% in gaming, with AMPs 40% higher at 7.6m. The growth in sports reflected excellent online performance in the UK & Ireland, Australia and the US, where we expanded our US sportsbook to 10 states (versus 4 for most of H1 2020). Sports revenue benefited from a more normal sporting calendar in 2021, while favourable sports results versus expectations contributed to an extra 120bps in win margin across the Group.

While sports benefitted from easy comparatives, the opposite was true of poker and casino where player engagement levels were elevated during the first international lockdown period in H1 2020.

Cost of sales as a percentage of net revenue increased by 510 basis points to 36.3% due to a higher proportion of revenue coming from the US which has higher direct costs. The changing product revenue mix in International and the US has also driven up direct costs in these divisions.

Merger related costs synergies in the half were £52m, with £7m in cost of sales, £22m in sales and marketing and £23m in other operating costs. We remain on track to deliver synergies of £170m by 2023, in line with our previous guidance.

Sales and marketing increased by £302m to £728m, with two-thirds of this increase attributable to the US division where we continue to invest heavily in customer acquisition in both new and existing states. The US expansion, including migration to the Group sports betting platform, is also the material driver of the 20% increase in other operating costs.

Adjusted EBITDA declined 12% to £597m. Excluding the US, Adjusted EBITDA was just 2% lower as the strong operating leverage achieved in UK & Ireland Online and Australia supported increased investment in our International division. Additionally, US EBITDA losses widened by £67m, due to our significant investment in scaling our rapidly expanding business.

The Group's adjusted effective tax rate in the period was 22.9% (HY 2020: 9.3%), primarily driven by the changing mix of taxable earnings across geographies. The full-year 2021 adjusted Group ex-US effective tax rate is now expected to be between 17% and 19% (FY2020: 10.4%) due to a growing share of profits coming from our Australian and UK&I divisions.

Adjusted basic EPS reduced 115p to 171p reflecting the increased US investment in the current period and our higher share count in H1 2021. Our acquisition of an additional 37.2% stake in FanDuel was mainly settled via the issuance of shares directly to Fastball and through an equity raise.

Net debt as at 30 June 2021 of £2,682m was 7% or £217m lower than the prior comparable period. This mainly reflects the net cash generated by the operating activities of the business over the last 12 months less cash used to fund the additional interest acquired in FanDuel in December 2020.

 

 

 

UK & Ireland

 

 

 

 

 

 

 

 

 

 

Pro forma

UK & Ireland Total

UK & Ireland Online

UK & Ireland Retail

H1

H1

 

H1

H1

 

H1

H1

 

2021

2020

Change

2021

2020

Change

2021

2020

Change

£m

£m

%

£m

£m

%

£m

£m

%

Average monthly players ('000s)

 

 

 

3,303

2,299

+44%

 

 

 

 

 

 

 

 

 

 

 

 

 

Sportsbook stakes

6,091

3,614

+69%

5,885

3,231

+82%

207

383

-46%

Sportsbook net revenue margin

10.7%

12.8%

-210bps

10.6%

12.6%

-200bps

12.5%

14.6%

-210bps

 

 

 

 

 

 

 

 

 

 

Sports revenue

738

525

+40%

712

470

+52%

26

56

-54%

Gaming revenue

397

350

+14%

382

327

+17%

16

23

-33%

Total revenue

1,135

875

+30%

1,094

796

+37%

41

79

-47%

 

 

 

 

 

 

 

 

 

 

Cost of sales

(342)

(241)

+42%

(332)

(224)

+48%

(10)

(17)

-43%

Cost of sales as a % of net revenue

30.1%

27.6%

+250bps

30.4%

28.2%

+220bps

23.4%

21.6%

+180bps

Gross profit

793

634

+25%

762

572

+33%

32

62

-49%

 

 

 

 

 

 

 

 

 

 

Sales and marketing

(207)

(168)

+23%

(204)

(166)

+23%

(3)

(3)

-%

Contribution

587

465

+26%

558

406

+37%

29

59

-51%

 

 

 

 

 

 

 

 

 

 

Other operating costs

(227)

(215)

+6%

(160)

(146)

+9%

(68)

(69)

-2%

Adjusted EBITDA1,2

359

251

+43%

398

260

+53%

(39)

(10)

+296%

Adjusted EBITDA margin

31.6%

28.6%

+300bps

36.4%

32.7%

+370bps

(93.6%)

(12.4%)

-8,120bps

 

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

(63)

(58)

+8%

(42)

(36)

+15%

(21)

(21)

-3%

Adjusted1 operating profit

297

193

+54%

356

224

+59%

(59)

(31)

+91%

The UK & Ireland division operates Paddy Power, Betfair and Sky Betting & Gaming brands online, as well as retail operations in the UK & Ireland.

Our UK & Ireland division delivered revenue growth of 30% to £1.1bn and Adjusted EBITDA that was 43% higher than the prior period. This performance was delivered despite our retail units being closed for the entirety of Q1 and a proportion of Q2.

UK & Ireland Online

Revenue in UK & Ireland Online grew by 37% in H1 driven by strong AMP growth of 44% (Q1: +23%, Q2 +70%). Sports AMPs were the primary driver of this growth, reflecting softer comparatives in the prior year. Compared with the equivalent period in 2019, AMPs grew by 27% in H1.

Sports revenue grew 52% with sportsbook up 53% driven by staking growth of 82%. While actual margins were 110bps ahead of expectations in the half, they were down 200bps year-on-year to 10.6%. This was due to the fact that net revenue margins in H1 2020 were 390bps above expectations, reflecting particularly bookmaker friendly results.

Structural margin enhancements through product improvements and an increased demand from customers for higher margin products such as 'Request a Bet' and 'Bet Builder' helped to partially offset the year-on-year swing in results. Exchange and B2B revenue grew by 40% in H1 reflecting the normalised sporting calendar compared with the prior year.

Online gaming revenue grew 17%, despite the tougher comparatives, with improved cross-sell volumes from a higher number of sports AMPs and our enhanced product proposition helping to improve engagement.

Cost of sales as a percentage of revenue increased by 220 basis points to 30.4% reflecting (i) an increase in racing costs and streaming fees and (ii) the impact of an uplift in generosity provided to our customers which increases our effective tax rate.

Sales and marketing grew 23% to £204m as marketing budgets normalised following the cancellation of some sporting events in Q2 last year which had resulted in some savings. The increase also reflected increased investment ahead of the Euro 2020 campaign. Spend as a percentage of revenue declined by 210bps however, primarily due to the increase in revenue.  

Other operating costs were up 9% reflecting increased investment in people, product and technology platforms. The uplift also reflects additional spend on safer gambling research, education and treatment programmes.

 

UK & Ireland Retail

Covid related shop closures continued to impact the financial performance of our Retail business. Revenue declined by 47% in H1 with Retail incurring a £39m Adjusted EBITDA loss. Both of our estates remained shut throughout Q1 with our UK retail shops re-opening on 12 April and our Irish shops re-opening on 17 May. Following re-opening, a variety of operational restrictions and social distancing requirements remain in place.

Given the unusual operating environment, overall retail performance has been in line with our expectations since re-opening. June revenues equated to approximately 80% of June 2019 levels with the performance in our UK shops particularly encouraging. June revenue in our UK estate was 7% ahead of June 2019 levels, helped by a strong gaming performance where revenues were up 33% on the same month 2 years ago. In Ireland, performance has reflected a more gradual re-opening of society with June revenues running 50% below 2019 levels. We anticipate that this gap will narrow in the coming months as further social restrictions are lifted.

Other operating costs declined by 2%, despite the fact that we continued to pay all our retail staff during the period of shop closures.

 

 

 

 

 

Australia4

 

 Pro forma

H1

H1

 

CC

2021

2020

Change

Change

£m

£m

%

A$

Average monthly players ('000s)

906

596

+52%

 

 

 

 

 

 

Sportsbook stakes

5,000

3,723

+34%

+27%

Sportsbook net revenue margin

11.7%

11.7%

-bps

-bps

 

 

 

 

 

Total revenue

585

435

+35%

+27%

 

 

 

 

 

Cost of sales

(275)

(200)

+38%

+30%

Cost of sales as a % of net revenue

47.0%

45.9%

+110bps

+100bps

Gross profit

310

235

+32%

+25%

 

 

 

 

 

Sales and marketing

(59)

(59)

-1%

-6%

Contribution

252

176

+43%

+35%

 

 

 

 

 

Other operating costs

(51)

(55)

-7%

-11%

Adjusted EBITDA1,2

201

121

+66%

+56%

Adjusted EBITDA margin

34.3%

27.9%

+640bps

+630bps

 

 

 

 

 

Depreciation and amortisation

(13)

(14)

-9%

-15%

Adjusted1 operating profit

188

107

+76%

+66%

Australia encompassed Sportsbet and BetEasy online brands, migrating to a single brand, Sportsbet, in September 2020. 

Sportsbet delivered an excellent financial performance in the half with Adjusted EBITDA growth of 56% to £201m, driven by a combination of 27% revenue growth and the realisation of merger related cost synergies which reduced total operating costs by 8%.

Revenue growth was volume driven with AMPs up 52% (Q1 +43%; Q2 +61%) to 906,000 players. Sportsbet also benefited from a more normalised sports calendar in Q2 following the deferral of local and international sporting codes into Q3 and Q4 during 2020. The business will face more challenging comparatives in H2 from the condensed prior year sporting calendar.

Sportsbook stakes were 27% higher at £5bn. Sportsbook net revenue margin was in line with the prior year at 11.7% with the incremental generosity offered to retain customers offset by favourable sports results and improvements in expected margin. Favourable sports results in the period added 140 basis points to actual margin.

Cost of sales as a percentage of net revenue increased to 47.0% due to additional racing costs.

Sales and marketing as a percentage of net revenue declined 360 basis points in H1, significantly benefiting from the synergies associated with the single brand strategy. We continue to invest heavily in the Sportsbet brand, in tandem with personalised generosity (which is captured within net revenue margin), to maintain our expanded customer base and strong momentum. Other operating costs declined 11% due to merger related synergies.

These cost efficiencies are providing excellent operating leverage with Adjusted EBITDA as a % of net revenue expanding 630 basis points in the half to 34.3%.

 

 

International4

Pro forma

H1

H1

 

CC

2021

2020

Change

Change

£m

£m

%

%

Average monthly players ('000s)

1,945

1,999

-3%

 

 

 

 

 

 

Sportsbook stakes

871

555

+57%

+61%

Sportsbook net revenue margin

9.1%

8.7%

+40bps

+40bps

 

 

 

 

 

Sports revenue

118

74

+59%

+62%

Gaming revenue

562

727

-23%

-19%

Total revenue

680

801

-15%

-11%

 

 

 

 

 

Cost of sales

(199)

(181)

+10%

+14%

Cost of sales as a % of net revenue

29.3%

22.6%

+670bps

+640bps

Gross profit

481

620

-22%

-18%

 

 

 

 

 

Sales and marketing

(171)

(110)

+55%

+71%

Contribution

310

510

-39%

-37%

 

 

 

 

 

Other operating costs

(131)

(113)

+16%

+16%

Adjusted EBITDA1,2

179

397

-55%

-52%

Adjusted EBITDA margin

26.3%

49.5%

-2,330bps

-2,280bps

 

 

 

 

 

Depreciation and amortisation

(25)

(24)

+4%

+7%

Adjusted1 operating profit

154

373

-59%

-56%

International includes PokerStars, Adjarabet, Betfair and Junglee brands which collectively offer online poker, casino, sports betting and rummy products. Excludes PokerStars US business and Betfair's UK & Ireland operations.

Revenue in our International division declined by 11% in H1 with Adjusted EBITDA of £179m. AMPs were down 3% year-on-year (Q1: +14%, Q2: -16%) but remain 17% above the equivalent period in 2019, reflecting the progress made in enlarging our International customer base.

The performance of the International division during the first half reflected a number of key factors:

· Challenging gaming comparatives; we previously disclosed that H1 2020 PokerStars revenues were boosted by £205m due to the first lockdown

· The compliance changes we made following our merger with TSG, along with adverse German regulatory developments, which we previously said would reduce annual contribution by £115m on a combined basis

· Localised lockdowns continuing into 2021 which contributed to higher gaming engagement in Q1, albeit not as pronounced as in 2020

· An increase in the proportion of revenues coming from regulated jurisdictions, with higher attributable direct costs and taxes

· Increased investment in line with our long-term strategy to improve our customer proposition, resulting in an EBITDA margin of 26.3%

Gaming revenue declined by 19% with casino growing 5% and poker declining by 34%. We estimate that approximately a quarter of the £205m revenue benefit from last year was retained in H1 due to ongoing lockdowns and player response to our promotional investments.

Casino growth of 5% was driven by our continued investment in direct casino acquisition in PokerStars, as well as enhanced in-house and third-party casino content driving improved cross-sell. Adjarabet and Betfair casino performed strongly during the period.

Sports revenue grew by 62% with strong growth across all sportsbooks, as stakes were 61% higher. Net revenue margin was 9.1%, 70bps ahead of expectations due to favourable sports results. We chose to reinvest this in the form of increased promotional generosity to customers. Overall margins increased by 40bps from the prior year due to improved pricing and risk management initiatives.

Cost of sales increased by 640bps to 29.3% due to (i) an ongoing increase in the proportion of revenues coming from regulated markets, (ii) an increase in the proportion of gaming revenues coming from casino and (iii) an increase in payment processing costs.

Sales and marketing as a percentage of revenue increased by 12 percentage points, primarily reflecting increased investment in the PokerStars brand and investment in high growth regions such as India and Latin America. We launched the "Epic Downtime" PokerStars Casino campaign, further expanded our collaboration with Neymar through our newly launched "I'm in" poker campaign and invested in showcasing poker through live streaming platforms to drive engagement. We also increased Betfair spend in LATAM ahead of the Euros and Copa America, expanding investment in the largest free to air TV provider in Brazil, further leveraging our long-term partnerships with CONMEBOL and sponsorships of Copa Libertadores and Copa Sudamerica.

Other operating costs increased by 16% as we invested in product and technology, customer operations and improved our wider operational capabilities to address the significant historic underinvestment in the PokerStars business. This will ensure that the business is on a stable footing for future growth.

 

 

 

US4

 

 Pro forma

H1

H1

 

CC

2021

2020

Change

Change

£m

£m

%

US$

Average monthly players ('000s)

1,470

552

+166%

 

 

 

 

 

 

Sportsbook stakes

5,072

1,090

+365%

+402%

Sportsbook net revenue margin

6.2%

4.9%

+130bps

+130bps

 

 

 

 

 

Sports revenue

452

164

+175%

+202%

Gaming revenue

200

113

+76%

+95%

Total revenue

652

278

+135%

+159%

 

 

 

 

 

Cost of sales

(293)

(116)

+152%

+177%

Cost of sales as a % of net revenue

44.9%

41.9%

+300bps

+300bps

Gross profit

359

162

+122%

+145%

 

 

 

 

 

Sales and marketing

(292)

(88)

+230%

+262%

Contribution

67

73

-8%

+2%

 

 

 

 

 

Other operating costs

(154)

(93)

+66%

+83%

Adjusted EBITDA1,2

(87)

(19)

+348%

+376%

Adjusted EBITDA margin

(13.3%)

(6.9%)

-630bps

-610bps

 

 

 

 

 

Depreciation and amortisation

(22)

(18)

+20%

+33%

Adjusted1 operating profit

(108)

(38)

+189%

+213%

The US division includes FanDuel, FOX Bet, TVG, PokerStars and Stardust brands, offering regulated real money and free-to-play sports betting, online gaming, daily fantasy sports and online racing wagering products to customers in the US

Revenue grew 159% to £652m ($906m) in H1, with 93% of revenue attributable to FanDuel Group, benefiting from:

· Growth in AMPs of 166% to 1.5 million

· Continued strong performance in existing sportsbook and gaming states

· Successful state launches in Michigan (sportsbook and gaming) and Virginia (sportsbook)

· A full six-month contribution from four 2020 state launches, most of which occurred in H2 2020

· A relatively uninterrupted US sporting calendar in Q2 versus the widespread deferrals in 2020

Sports revenue trebled to £452m, with growth of 540% in sportsbook and 36% in other sports (DFS and TVG racing combined). Sportsbook net revenue margin grew 130 basis points to 6.2% due to an increase in our expected margin. Sports results were favourable in the period though this was offset by an increase in customer acquisition promotional activity.

Gaming net revenue increased 95% aided by the January launch in Michigan and growth in existing casino states.

Cost of sales as a percentage of net revenue increased 300 basis points to 44.9% reflecting the higher proportion of revenue coming from higher cost sportsbook and gaming verticals.

Marketing costs increased 262% to £292m, equating to over 80% of our entire 2020 spend of £348m. The increased spend has driven customer acquisition five times higher in H1 versus the comparable period benefitting from new state launches and continued high levels of acquisition in existing states.

Other operating costs grew 83%, well below revenue growth, with a doubling of our spend on product and technology as we build our capabilities within what is a rapidly expanding business. Lobbying costs associated with expansion of sports betting to new states are also included within other operating costs.

The US division made an Adjusted EBITDA loss of £87m in the half due to the significant investment in customer acquisition upon launch in Michigan and Virginia.

 

 

Statutory review

Group

 

Adjusted

Separately disclosed items

Reported

Adjusted

Separately disclosed items

Reported

 

H1 2021

H1 2021

H1 2021

H1 2020

H1 2020

H1 2020

 

£m

£m

£m

£m

£m

£m

Sports revenue

1,894

 

1,894

924

 

924

Gaming revenue

1,159

 

1,159

598

14

612

Total revenue

3,053

-

3,053

1,522

14

1,536

 

 

 

 

 

 

 

Cost of sales

(1,109)

(13)

(1,122)

(496)

(2)

(498)

Cost of sales as a % of

net revenue

36.3%

 

36.8%

32.6%

 

32.4%

 

 

 

 

 

 

 

Gross profit

1,944

(13)

1,931

1,026

12

1,038

 

 

 

 

 

 

 

Operating costs

(1,347)

(22)

(1,368)

(685)

(69)

(754)

 

 

 

 

 

 

 

EBITDA

597

(35)

562

342

(57)

285

EBITDA margin %

19.6%

 

18.4%

22.4%

 

18.5%

 

 

 

 

 

 

 

Depreciation and amortisation

(125)

(276)

(401)

(89)

(128)

(217)

Operating profit/ (loss)

472

(310)

162

253

(185)

68

 

 

 

 

 

 

 

Net interest expense

(74)

(11)

(85)

(35)

(9)

(44)

Profit/ (loss) before tax

398

(321)

77

218

(194)

24

 

 

 

 

 

 

 

Taxation

(91)

(72)

(163)

(29)

14

(15)

Profit/ (loss) after tax

306

(392)

(86)

189

(180)

9

 

 

 

 

 

 

 

Basic earnings/ (loss)

per share

171.1 

p

 

(50.4)

p

187.5 

p

 

18.1 

p

 

 

 

 

 

 

 

Net current liabilities

 

 

(327)

 

 

(521)

Net assets

 

 

10,724

 

 

10,996

           

The significant growth across all revenue and cost lines reflects a full six-month contribution from TSG in 2021 following the completion of our merger on 5 May 2020. Therefore, the 2020 comparative only includes a 56 day contribution from TSG. This resulted in Group reported revenue growth of 99% to £3.1bn when combined with the following factors:

· Further expansion of our market leading US online business to 10 states in 2021 from 4 in 2020

· A more normal sporting calendar in the half following widespread cancellations in Q2 2020

· Strong underlying growth in our online UK & Ireland and Australia divisions

Reported EBITDA increased 98% to £562m driven by these factors, partly offset by the increased investment we are making in customer acquisition in the US. Group operating profit increased 139% to £162m, including a charge of £276m in non-cash acquisition related intangibles.

The Group made a loss after tax of £86m for the period following a £105m increase in the deferred tax liability on separately identifiable acquisition related intangibles. This charge resulted from the change in the UK's main corporate tax rate from 19% to 25% applicable from 1 April 2023. See notes 5 of the financial statements for more details. When combined with the increased US losses, the Group had a basic loss per share of 50.4p in the six months ended 30 June 2021 compared to basic earnings per share of 18.1p in the corresponding period.

Net current liabilities reduced from £521m at 31 December 2020 to £327m at 30 June 2021 mainly due to the reclassification of the Oddschecker Global Media assets from non-current to current as a result of the announcement of the sale of this business post period end and also the movement of the current cross-currency interest swaps from being in a liability position at 31 December 2020 to being in an asset position at 30 June 2021.

Net assets reduced from £11.0bn to £10.7bn in the period mainly due to the foreign currency translation impact of goodwill and intangible assets.

 

 

 

 

 

 

 

Divisional performance

 

UK & Ireland

Australia

International

US

Group

 

H1

H1

 

H1

H1

 

H1

H1

 

H1

H1

 

H1

H1

 

 

2021

2020

Change

2021

2020

Change

2021

2020

Change

2021

2020

Change

2021

2020

Change

 

£m

£m

%

£m

£m

%

£m

£m

%

£m

£m

%

£m

£m

%

Sports revenue

738

357

+107%

585

348

+68%

118

56

+112%

452

163

+177%

1,894

924

+105%

Gaming revenue

397

228

+74%

 

 

 

562

277

+102%

200

93

+116%

1,159

598

+94%

Revenue before SDIs

1,135

585

+94%

585

348

+68%

680

333

+104%

652

256

+155%

3,053

1,522

+101%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

(342)

(163)

+110%

(275)

(148)

+86%

(199)

(86)

+133%

(293)

(99)

+195%

(1,109)

(496)

+124%

Cost of sales as a % of net revenue

30.1%

27.9%

+220bps

47.0%

42.6%

+440bps

29.3%

25.7%

+360bps

44.9%

38.8%

+610bps

36.3%

32.6%

+380bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

793

422

+88%

310

200

+55%

481

248

+94%

359

157

+129%

1,944

1,026

+89%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs

(434)

(290)

+50%

(109)

(90)

+21%

(302)

(115)

+162%

(446)

(154)

+189%

(1,291)

(649)

+99%

Corporate costs

 

 

 

 

 

 

 

 

 

 

 

 

(55)

(36)

+54%

Adjusted EBITDA1

359

133

+171%

201

110

+83%

179

133

+35%

(87)

2

-3,849%

597

342

+75%

Adjusted EBITDA margin

31.6%

22.7%

+900bps

34.3%

31.6%

+280bps

26.3%

39.8%

-1,350bps

(13.3%)

0.9%

-1,420bps

19.6%

22.4%

-290bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

(63)

(50)

+26%

(13)

(12)

+7%

(25)

(9)

+192%

(22)

(16)

+36%

(125)

(89)

+41%

Operating profit/(loss) before SDIs

297

83

+257%

188

98

+92%

154

124

+24%

(108)

(14)

+685%

472

253

+87%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greece tax expense

 

 

 

 

 

 

(13)

-

+100%

 

 

 

(13)

-

+100%

Amortisation of acquisition related intangibles

(113)

(51)

+120%

(11)

(4)

+141%

(139)

(56)

+146%

(13)

(16)

(15%)

(276)

(128)

+116%

VAT refund

-

10

(100%)

 

 

 

 

 

 

 

 

 

-

10

(100%)

Operating profit/(loss) after divisional SDIs

184

42

+337%

177

93

+90%

2

68

(97%)

(122)

(30)

+313%

184

135

+36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combination fees and associated costs

 

 

 

 

 

 

 

 

 

 

 

 

-

(26)

(100%)

Restructuring and Integration costs

 

 

 

 

 

 

 

 

 

 

 

 

(22)

(41)

(47%)

Operating profit/(loss)

 

 

 

 

 

 

 

 

 

 

 

 

162

68

+139%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK & Ireland

Revenue growth was 94% in the UK and Ireland with sport +107% and gaming +74%. The primary drivers of reported revenue growth were (i) the acquisition of the SkyBet business as part of the merger with TSG not fully reflected in the prior year which drove both sports and gaming growth and (ii) the normalisation of the sporting calendar in the current year when compared with the volume of cancelled and deferred sports events from March 2020 due to Covid. Adjusted EBITDA grew +171% reflecting the additional contribution of SkyBet and strong operational leverage in the division.

 

Australia

In Australia, revenue grew 68% to £585m reflecting a full six-month contribution from BetEasy (TSG's Australian brand) customers who migrated to Sportsbet following the integration of the two brands in September 2020 and strong growth in the Sportsbet customer base. The single brand strategy has resulted in significant cost synergies with marketing and other operating costs falling 720 basis points as a percentage of revenue to 18.7%. This operating leverage benefit and top line growth saw Adjusted EBITDA grow 83% to £201m.

International

Our International division delivered reported revenue growth of 104% with sport +112% and gaming +102%. The primary driver of reported revenue growth within the International division was similarly related to the merger with TSG and the addition of the PokerStars brand to our international portfolio. 

Adjusted EBITDA grew +35% reflecting the additional contribution of PokerStars which more than offset the increase in investment we have made in the brand post-merger.

US

Revenue grew 155% in the US during the half benefiting from:

· Continued strong performance in existing sportsbook and gaming states.

· Successful state launches in Michigan (sportsbook and gaming) and Virginia (sportsbook)

· A full six-month contribution from four 2020 state launches, most of which occurred in H2 2020

· A relatively uninterrupted US sporting calendar in Q2 versus the widespread deferrals in 2020

Marketing costs increased 312% to £292m, reflecting the launches in new states and the continued high levels of customer acquisition we are seeing in existing states. The US division made an Adjusted EBITDA loss of £87m in the half due to this significant investment upon launch in Michigan and Virginia.

 

 

 

 

 

Separately disclosed items

 

H1

H1

 

2021

2020

 

£m

£m

Amortisation of acquisition related intangible assets

(276)

(128)

Combination fees and associated costs

-

(26)

Restructuring and integration costs

(22)

(41)

Greece tax expense

(13)

-

VAT refund

-

10

Operating profit impact of separately disclosed items

(310)

(185)

 

 

 

Financial income

-

49

Financial expense

(11)

(59)

Profit before tax impact of separately disclosed items

(321)

(194)

 

 

 

Tax (charge) / credit on separately disclosed items

(72)

14

Total separately disclosed items

(392)

(180)

Separately disclosed items do not relate to business as usual activity of the Group, items that are volatile in nature or non-cash purchase price accounting amortisation and therefore are excluded from Adjusted profits.

Amortisation of acquisition related intangible assets increased to £276m mainly due to the May 2020 combination with TSG, resulting in a full six month charge in 2021.

Restructuring and integration costs primarily relate to the integration with TSG.

The Greece tax expense relates to a historic case brought by the Greek authorities against Paddy Power when it was operating under an interim licence between 2012-14. The Group continues to appeal this ruling but following the dismissal of the case by the Athens Administrative Court of Appeal in June 2021, a once-off expense of £13m has been recognized.

Financial expense relates to foreign exchange losses on the Group's financing activities.

The increase in the UK's main corporation tax rate from 19% to 25% from 1 April 2023 (as outlined in note 7 of the financial statements) has resulted in a £105m increase in the deferred tax liability on separately identifiable acquisition related intangible assets. This charge is partly offset by the tax credit associated with other separately disclosed items.

 

 

 

 

Cash flow and financial position

 

 Pro forma

H1

H1

2021

2020

£m

£m

Adjusted EBITDA

597 

 

684 

 

Capex

(138)

 

(118)

 

Working capital

18 

 

105 

 

Corporation tax

(92)

 

(63)

 

Lease liabilities paid

(27)

 

(24)

 

Adjusted free cash flow

358 

 

584 

 

 

 

 

Cash flow from separately disclosed items

(24)

 

(84)

 

Free cash flow

333 

 

500 

 

 

 

 

Interest cost

(70)

 

(101)

 

Other borrowing costs

(5)

 

(22)

 

Settlement of swaps

-

 

(28)

 

Settlement of Kentucky Supersedeas Bonds

(71)

 

-

 

Purchase of shares by the Employee Benefit Trust ("EBT")

(89)

 

-

 

Acquisitions

(51)

 

-

 

Other

(4)

 

5

 

Net increase in cash before equity raise and cash acquired in business combination

43 

 

356 

 

 

 

 

Proceeds from equity raise

 

806 

 

Cash acquired in business combination

18 

 

 

Net increase in cash

61 

 

1,162 

 

 

 

 

Net debt8 at start of year

(2,814)

 

(3,827)

 

Foreign currency exchange translation

26 

 

(253)

 

Change in fair value of hedging derivatives

45 

 

19 

 

Net debt8 as at 30 June

(2,682)

 

(2,899)

 

The Group had Adjusted free cash flow of £358m during H1, down from £584m in the prior year primarily due to the effect of lockdown related benefits on performance and working capital in H1 2020.

Capital expenditure of £138m, reflects increased investment in product and technology capabilities across the Group, as well as further expansion into the US. We also refurbished a number of Flutter offices ahead of the anticipated "return to work" of colleagues.

Corporate tax payments were higher than the prior period due to the change in the geographic mix of profits during the first half.

Working capital of £18m was favourably impacted by the increase in size and scale of the Group. As expected however our working capital benefit was lower than during H1 last year when we benefitted from the deferral of certain payments. The performance of our Australian and US horse racing businesses in particular last year resulted in increased creditors, with the direct costs associated with these revenues generally paid one quarter after the revenue is generated.

Cash flow from SDIs principally relates to restructuring and integration costs in relation to the combination with TSG.

Interest costs were £31m lower than in 2020 on a pro forma basis due to the repayment of debt following the Group's equity raise in May 2020 and the reduction in the weighted average cost of debt following agreement of more favourable financing terms at that time.

During the period the Group paid the Commonwealth of Kentucky £71m, in line with the provision outstanding at 31 December 2020.

In the first half, an £89m share purchase was made by the Employee Benefit Trust in respect of FanDuel employee share awards, with further purchases of £92m expected in the second half. These purchases relate to employee incentive schemes that were put in place at the time of the original FanDuel acquisition to incentivise value creation in FanDuel.

The £51m acquisition charge relates to the acquisition of Junglee Games during the period.

As at 30 June 2021, the Group had net debt of £2,682m, excluding customer balances, representing a leverage ratio of 2.3x times9. The July 2021 refinancing resulted in an increase in pro forma net debt to £2,721m with no material change to the Group leverage ratio. The Group continues to hedge the impact of currency fluctuations on its leverage ratio through cross currency swap agreements. Changes in the fair value of these hedging derivatives are reflected in net debt.

Foreign exchange

At current spot rates, the foreign exchange impact on H2 2021 Adjusted EBITDA versus H2 2020 is a circa £6m headwind. 

Current trading/Outlook

The second half of the year has started well, albeit July is traditionally a quieter period for many parts of our business reflecting less busy sporting calendars. Assuming normalised net revenue margins for the balance of the year and a regular sporting calendar the Group anticipates:

· Adjusted EBITDA for Group ex-US of between £1,270m - £1,370m. This guidance reflects our confidence in the underlying performance of both our UK & Ireland and Australian divisions, with the expectation that our retail estates can remain open for the remainder of the year

· As previously flagged International EBITDA will be negatively impacted in H2 2021 by between £15m and £25m due to the German tax change that has come into effect on July 1. The business is also less likely to benefit from some of the tailwinds it enjoyed in H1 when player engagement remained at elevated levels in parts of Europe as a result of the stay-at-home restrictions

· In the US, we expect to generate revenue of between £1.285bn - £1.425bn ($1.8bn - $2.0bn) and an Adjusted EBITDA loss of between £225m - £275m. This assumes that we launch online in both Arizona and Connecticut in H2

 

 

___________________________________________________________________________________

1 The "Adjusted" measures that are separately disclosed as they are: (i) not part of the usual business activity of the Group (ii) items that are volatile in nature and (iii) purchase price accounting amortization of acquired intangibles (non-cash). Therefore, they have been reported as "separately disclosed items (SDIs)" (see note 5 to the financial statements).

2 EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure. This measure is used internally to evaluate performance, to establish strategic goals and to allocate resources. The directors also consider the measure is commonly reported and widely used by investors as an indicator of operating performance and ability to incur and service debt, and as a valuation metric. It is a non-GAAP financial measure and is not prepared in accordance with IFRS and, as not uniformly defined terms, it may not be comparable with measures used by other companies to the extent they do not follow the same methodology used by the Group. Non-GAAP measures should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with IFRS. All of the adjustments shown have been taken from the financial statements.

Flutter's combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group's financials with TSG included for a full 6-month period in 2020. Junglee, which was acquired in January 2021, has not been included on a pro forma basis. See Appendix 3 for a reconciliation of pro forma results to statutory results.

4 Growth rates in the commentary are in local or constant currency11 except reported numbers which are in nominal currency.

5Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period. The AMP numbers do not include Junglee players in 2020 or 2021 to allow for better comparability of underlying player growth for International and Group.

6 Online sportsbook market share is the GGR market share of FanDuel and FOX Bet for Q2 in the states in which FanDuel was live based on published gaming regulator reports in those states. During Q2 FanDuel was live in 10 states; Colorado (CO), Illinois (IL), Indiana (IN), Iowa (IA), Michigan (MI), New Jersey (NJ), Pennsylvania (PA), Tennessee (TN), Virginia (VA) and West Virginia (WV). During Q2 FOX Bet was live in 4 states; CO, NJ, MI and PA. Online gaming market share reflects the combined MI, NJ, PA and WV market share of our gaming brands.

7CPA is cost per acquisition and represents the total media and digital marketing spend per acquired customer including those cross-sold from daily fantasy sports. The year-one return on investment (ROI) is the average gross profit generated from customers divided by their average CPA. The year-one ROI includes all quarterly cohorts of FanDuel sportsbook and gaming customers acquired who have four full quarters of actual activity (i.e. customers acquired in Q3 2018 through Q2 2020). The revenue generated in year two will include all quarterly cohorts of FanDuel sportsbook and gaming customers acquired who have two full years of actual activity (i.e. customers acquired in Q3 2018 through Q2 2019).

8 The leverage ratio is calculated using pro forma Adjusted EBITDA for the 12-month period to 30 June 2021.

9Net debt is the principal amount of borrowings plus associated accrued interest, minus cash & cash equivalents plus/minus carrying value of debt related derivatives.

10 Reported represents the IFRS reported statutory numbers. Where amounts have been normalised for SDIs they are labelled as Adjusted.

11 Constant currency ("cc") growth is calculated by retranslating the non-sterling denominated component of H1 2020 at H1 2021 exchange rates (see Appendix 4). Growth rates in the commentary are in local or constant currency.

12 Differences due to rounding unless otherwise stated.

 

 

 

 

Appendix 1: Divisional Key Performance Indicators H1 2021

Unaudited pro forma

 

£m pro forma1

UK & Ireland3

Australia

International

US

Group

H1

H1

CC2 %

H1

H1

CC2 %

H1

H1

CC2 %

H1

H1

CC2 %

H1

H1

CC2 %

2021

2020

Change

2021

2020

Change

2021

2020

Change

2021

2020

Change

2021

2020

Change

Average monthly players3 (000's)

3,303

2,299

+44%

906

596

+52%

1,945

1,999

-3%

1,470

552

+166%

7,625

5,445

+40%

Sportsbook stakes

6,091

3,614

+68%

5,000

3,723

+27%

871

555

+61%

5,072

1,090

+402%

17,034

8,982

+87%

Sportsbook net revenue margin

10.7%

12.8%

-210bps

11.7%

11.7%

-bps

9.1%

8.7%

+40bps

6.2%

4.9%

+130bps

9.6%

11.1%

-150bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

738

525

+40%

585

435

+27%

118

74

+62%

452

164

+202%

1,894

1,199

+57%

Gaming revenue

397

350

+14%

 

 

 

562

727

-19%

200

113

+95%

1,159

1,190

+1%

Total revenue

1,135

875

+30%

585

435

+27%

680

801

-11%

652

278

+159%

3,053

2,389

+30%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

(342)

(241)

+42%

(275)

(200)

+30%

(199)

(181)

+14%

(293)

(116)

+177%

(1,109)

(738)

+51%

Cost of sales as % of net revenue

30.1%

27.6%

+260bps

47.0%

45.9%

+100bps

29.3%

22.6%

+640bps

44.9%

41.9%

+300bps

36.3%

30.9%

+510bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

793

634

+25%

310

235

+25%

481

620

-18%

359

162

+145%

1,944

1,650

+20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales & marketing

(207)

(168)

+23%

(59)

(59)

-6%

(171)

(110)

+71%

(292)

(88)

+262%

(728)

(426)

+77%

Contribution

587

465

+26%

252

176

+35%

310

510

-37%

67

73

+2%

1,215

1,224

+1%

Other operating costs

(227)

(215)

+6%

(51)

(55)

-11%

(131)

(113)

+16%

(154)

(93)

+83%

(563)

(475)

+20%

Corporate costs

 

 

 

 

 

 

 

 

 

 

 

 

(55)

(66)

-10%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

359

251

+42%

201

121

+56%

179

397

-52%

(87)

(19)

+376%

597

684

-12%

Adjusted EBITDA margin

31.6%

28.6%

+270bps

34.3%

27.9%

+630bps

26.3%

49.5%

-2,280bps

(13.3%)

(6.9%)

-610bps

19.6%

28.6%

-930bps

Depreciation & amortisation

(63)

(58)

+9%

(13)

(14)

-15%

(25)

(24)

+7%

(22)

(18)

+33%

(125)

(117)

+8%

Adjusted operating profit /(loss)

297

193

+51%

188

107

+66%

154

373

-56%

(108)

(38)

+213%

472

567

-16%

 

1 Flutter's combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group's financials with TSG included for a full 6-month period in 2020. Junglee, which was acquired in January 2021, has not been included on a pro forma basis. See Appendix 3 for a reconciliation of pro forma results to statutory results.

2 Constant currency ("cc") growth is calculated by retranslating the non-sterling denominated component of FY 2020 at FY 2021 exchange rates (see Appendix 4). Growth rates in the commentary are in local or constant currency.

 

3 Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period. The AMP numbers do not include Junglee players in 2020 or 2021 to allow for better comparability of underlying player growth for International and Group.
 

Appendix 2:  Quarterly Divisional Key Performance Indicators

Unaudited pro forma

 

Quarter 2

 

UK & Ireland

Australia

International

US

Group

 

Q2 2021

Q2 2020

CC2 %

Q2 2021

Q2 2020

CC2 %

Q2 2021

Q2 2020

CC2 %

Q2 2021

Q2 2020

CC2 %

Q2 2021

Q2 2020

CC2 %

Proforma1

£m

£m

Change

£m

£m

Change

£m

£m

Change

£m

£m

Change

£m

£m

Change

Average monthly players3 (000's)

3,440

2,027

+70%

982

611

+61%

1,863

2,223

-16%

1,292

395

+227%

7,578

5,256

+44%

Sportsbook stakes

3,009

1,374

+120%

2,548

2,177

+13%

419

245

+79%

2,358

226

+1,074%

8,333

4,023

+105%

Sportsbook net revenue margin

10.8%

12.6%

-180bps

12.0%

12.6%

-60bps

9.6%

7.0%

+260bps

8.3%

6.2%

+210bps

10.4%

11.9%

-150bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

367

194

+89%

306

273

+8%

61

27

+132%

264

76

+289%

998

571

+75%

Gaming revenue

201

192

+5%

 

 

 

268

430

-34%

101

70

+62%

570

692

-14%

Total revenue

568

386

+47%

306

273

+8%

329

457

-24%

364

146

+181%

1,567

1,263

+27%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK & Ireland Online

UK & Ireland Retail

 

 

 

 

 

 

 

 

 

 

Q2 2021

Q2 2020

CC2 %

Q2 2021

Q2 2020

CC2 %

 

 

 

 

 

 

 

 

 

Proforma1

£m

£m

Change

£m

£m

Change

 

 

 

 

 

 

 

 

 

Average monthly players3 (000's)

3,440

2,027

+70%

 

 

 

 

 

 

 

 

 

 

 

 

Sportsbook stakes

2,804

1,348

+109%

205

27

+677%

 

 

 

 

 

 

 

 

 

Sportsbook net revenue margin

10.6%

12.6%

-200bps

12.7%

14.6%

-190bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

341

190

+80%

26

4

+576%

 

 

 

 

 

 

 

 

 

Gaming revenue

185

187

-1%

16

4

+270%

 

 

 

 

 

 

 

 

 

Total revenue

526

378

+40%

42

8

+416%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter 1

 

UK & Ireland

Australia

International

US

Group

 

Q1 2021

Q1 2020

CC2 %

Q1 2021

Q1 2020

CC2 %

Q1 2021

Q1 2020

CC2 %

Q1 2021

Q1 2020

CC2 %

Q1 2021

Q1 2020

CC2 %

Proforma1

£m

£m

Change

£m

£m

Change

£m

£m

Change

£m

£m

Change

£m

£m

Change

Average monthly players3 (000's)

3,167

2,571

+23%

831

581

+43%

2,027

1,774

+14%

1,648

710

+132%

7,672

5,635

+36%

Sportsbook stakes

3,083

2,240

+37%

2,451

1,545

+46%

452

311

+47%

2,714

864

+235%

8,700

4,959

+72%

Sportsbook net revenue margin

10.6%

13.0%

-240bps

11.4%

10.4%

+100bps

8.6%

10.1%

-150bps

4.4%

4.6%

-20bps

8.8%

10.5%

-170bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

371

331

+12%

279

161

+59%

57

47

+22%

189

88

+130%

896

627

+41%

Gaming revenue

196

158

+24%

 

 

 

294

297

+4%

99

43

+146%

589

498

+22%

Total revenue

568

489

+16%

279

161

+59%

351

344

+7%

288

132

+135%

1,485

1,126

+33%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UK & Ireland Online

UK & Ireland Retail

 

 

 

 

 

 

 

 

 

 

Q1 2021

Q1 2020

CC2 %

Q1 2021

Q1 2020

CC2 %

 

 

 

 

 

 

 

 

 

Proforma1

£m

£m

Change

£m

£m

Change

 

 

 

 

 

 

 

 

 

Average monthly players3 (000's)

3,167

2,571

+23%

 

 

 

 

 

 

 

 

 

 

 

 

Sportsbook stakes

3,081

1,883

+63%

2

356

-99%

 

 

 

 

 

 

 

 

 

Sportsbook net revenue margin

10.6%

12.7%

-210bps

(5.7%)

14.6%

-2,030bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

371

279

+33%

-

52

-100%

 

 

 

 

 

 

 

 

 

Gaming revenue

196

139

+41%

-

19

-100%

 

 

 

 

 

 

 

 

 

Total revenue

568

419

+35%

-

71

-100%

 

 

 

 

 

 

 

 

 

 

1 Flutter's combination with TSG completed on 5 May 2020. The pro forma numbers presented show the Group's financials with TSG included for a full 6-month period in 2020. Junglee, which was acquired in January 2021, has not been included on a pro forma basis. See Appendix 3 for a reconciliation of pro forma results to statutory results.

2 Constant currency ("cc") growth is calculated by retranslating the non-sterling denominated component of FY 2020 at FY 2021 exchange rates (see Appendix 4). Growth rates in the commentary are in local or constant currency.

3 Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period. The AMP numbers do not include Junglee players in 2020 or 2021 to allow for better comparability of underlying player growth for International and Group.

 

 

Appendix 3: Reconciliation of pro forma results to Statutory results

The merger of Flutter and TSG completed on 5 May 2020, with the merger accounted for as an acquisition of TSG by Flutter on that date. The statutory results reflect this accounting treatment. Pro forma results for the Group are prepared as if Flutter and TSG had always been merged and are included in these Interim Results, as they best represent the Group's underlying performance. The difference between the statutory and pro forma results is inclusion of the results of TSG in the period prior to completion as per the table below. Junglee, which was acquired in January 2021, has been included in reported figures but has not been included on a pro forma basis.

 

Pro forma adjusted results

TSG results pre-merger completion*

Separately disclosed items

Statutory results

 

H1

H1

H1

H1

H1

H1

H1

H1

£m

2021

2020

2021

2020

2021

2020

2021

2020

Sports revenue

1,894

1,199

-

275

-

-

1,894

924

Gaming revenue

1,159

1,190

-

592

-

14

1,159

612

Total revenue

3,053

2,389

-

866

-

14

3,053

1,536

 

 

 

 

 

 

 

 

 

Cost of sales

(1,109)

(738)

-

(243)

(13)

(2)

(1,122)

(498)

Cost of sales as a % of net revenue

36.3%

30.9%

 

 

 

 

36.8%

32.4%

Gross profit

1,944

1,650

-

624

(13)

12

1,931

1,038

 

 

 

 

 

 

 

 

 

Sales and marketing

(728)

(426)

-

(139)

-

-

(728)

(287)

Contribution

1,215

1,224

-

484

(13)

12

1,202

752

 

 

 

 

 

 

 

 

 

Other operating costs

(563)

(475)

-

(112)

-

-

(563)

(362)

Corporate costs

(55)

(66)

-

(30)

(22)

(69)

(77)

(105)

EBITDA

597

684

-

342

(35)

(57)

562

284

EBITDA margin

19.6%

28.6%

 

 

 

 

18.4%

18.5%

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

(125)

(117)

-

(28)

(276)

(128)

(401)

(217)

Operating profit

472

567

-

314

(310)

(185)

162

68

 

 

 

 

 

 

 

 

 

Revenue by division

 

 

 

 

 

 

 

 

UK & Ireland

1,135

875

-

290

-

14

1,135

599

Australia

585

435

-

87

-

-

585

348

International

680

801

-

468

-

-

680

333

US

652

278

-

22

-

-

652

256

 

 

 

 

 

 

 

 

 

Adjusted EBITDA by division

 

 

 

 

 

 

 

 

UK & Ireland

359

251

-

118

-

10

359

143

Australia

201

121

-

11

-

-

201

110

International

179

397

-

264

(13)

-

166

133

US

(87)

(19)

-

(22)

-

-

(87)

2

Corporate costs

(55)

(66)

-

(30)

(22)

(68)

(77)

(104)

* Note the adjustments to reflect the exclusion of TSG results prior to the merger also include any transactions that are now deemed to be intercompany as a result of the merger. 

 

Appendix 4: Reconciliation of pro forma growth rates to pro forma constant currency growth rates

Constant currency ("cc") growth is calculated by retranslating non-sterling denominated component of H1 2020 at H1 2021 exchange rates as per the table below.

 

 

 

 

H1

H1

 

 

H1

H1

%

2020

2020

CC %

£m

2021

2020

Change

FX impact

CC

Change

Sports revenue

1,894

1,199

+58%

10

1,209

+57%

Gaming revenue

1,159

1,190

-3%

(48)

1,142

+1%

Total revenue

3,053

2,389

+28%

(37)

2,351

+30%

 

 

 

 

 

 

 

Cost of sales

(1,109)

(738)

+50%

5

(733)

+51%

Cost of sales as a % of net revenue

36.3%

30.9%

+540bps

 

31.2%

+510bps

Gross profit

1,944

1,650

+18%

(32)

1,618

+20%

 

 

 

 

 

 

 

Sales and marketing

(728)

(426)

+71%

15

(411)

+77%

Contribution

1,215

1,224

-1%

(17)

1,207

+1%

 

 

 

 

 

 

 

Other operating costs

(563)

(475)

+19%

7

(468)

+20%

Corporate costs

(55)

(66)

-16%

4

(62)

-10%

Adjusted EBITDA

597

684

-13%

(6)

678

-12%

Adjusted EBITDA margin

19.6%

28.6%

-910bps

 

28.8%

-930bps

 

 

 

 

 

 

 

Depreciation and amortisation

(125)

(117)

+7%

2

(115)

+8%

Adjusted operating profit

472

567

-17%

(5)

562

-16%

 

 

 

 

 

 

 

Revenue by division

 

 

 

 

 

 

UK & Ireland

1,135

875

+30%

1

876

+30%

Australia

585

435

+35%

25

459

+27%

International

680

801

-15%

(38)

764

-11%

US

652

278

+135%

(26)

252

+159%

 

 

 

 

 

 

 

Adjusted EBITDA by division

 

 

 

 

 

 

UK & Ireland

359

251

+43%

3

254

+42%

Australia

201

121

+66%

8

129

+56%

International

179

397

-55%

(22)

375

-52%

US

(87)

(19)

+348%

1

(18)

+376%

Corporate costs

(55)

(66)

-16%

4

(62)

-10%

 

 

Appendix 5: Reconciliation of pro forma cash flow to reported statutory cash flow

In the Operating and Financial Review the cash flow has been presented on a pro forma net cash basis. The merger of Flutter and TSG completed on 5 May 2020, with the merger accounted for as an acquisition of TSG by Flutter on that date. The statutory cash flow reflects this treatment while the pro forma cash flow is prepared as if Flutter and TSG had always been merged. The difference between the net cash basis and the reported cash flow is the inclusion of borrowings to determine a net cash position.

 

Pro forma cash flow

TSG results pre-merger completion

Adjustment to include borrowings

Statutory cash flow

 

H1

H1

H1

H1

H1

H1

H1

H1

£m

2021

2020

2021

2020

2021

2020

2021

2020

Adjusted EBITDA1

597

684

-

342

-

-

597

342

Capex2

(138)

(118)

-

(33)

-

-

(138)

(85)

Working capital3

18

105

-

(8)

-

-

18

114

Corporation tax

(92)

(63)

-

(3)

-

-

(92)

(60)

Lease liabilities paid

(27)

(24)

-

(5)

-

-

(27)

(19)

Adjusted free cash flow

358

584

-

293

-

-

358

292

 

 

 

 

 

 

 

 

 

Cash flow from separately disclosed items4

(24)

(84)

-

-

-

-

(24)

(84)

Free cash flow

333

500

-

293

-

-

333

208

 

 

 

 

 

 

 

 

 

Interest cost5

(70)

(101)

-

(64)

-

-

(70)

(37)

Other borrowing costs5

(5)

(22)

-

-

-

-

(5)

(22)

Settlement of swaps

-

(28)

-

-

-

-

-

(28)

Settlement of Kentucky Supersedeas Bonds

(71)

-

-

-

-

-

(71)

-

Purchase of shares by the EBT

(89)

-

-

-

-

-

(89)

-

Acquisitions

(51)

-

-

-

-

-

(51)

-

Other6

(4)

5

-

6

-

-

(4)

(1)

Net increase in cash before equity raise and business combinations

43

356

-

235

-

-

43

121

 

 

 

 

 

 

 

 

 

Proceeds from equity raises

-

806

-

-

-

-

-

806

Net amounts repaid on borrowings7

-

-

-

-

(13)

(686)

(13)

(686)

Cash acquired in business combinations

18

-

-

-

-

445

18

445

Net increase / (decrease) in cash

61

1,162

-

235

(13)

(240)

48

686

 

 

 

 

 

 

 

 

 

Net (debt)/cash at start of year8

(2,814)

(3,827)

(3,328)

(3,563)

89

372

603

108

Foreign currency exchange translation

26

(253)

-

-

(44)

245

(18)

(8)

Change in fair value of hedging derivatives

45

19

-

-

(45)

(19)

-

-

Net debt as at 30 June8

(2,682)

(2,899)

(3,328)

(3,328)

(12)

357

634

787

 

1Adjusted EBITDA includes the following line items in the statutory cash flow: Profit for the period, separately disclosed items, tax expense before separately disclosed items, financial income before separately disclosed items, financial expense before separately disclosed items and depreciation and amortisation before separately disclosed items

2 Capex includes purchase of property, plant and equipment, purchase of intangible assets, capitalised internal development expenditure, lease incentive received and payment of contingent deferred consideration

3 Working capital includes (increase)/decrease in trade and other receivables, increase in trade, other payables and provisions, employee equity-settled share-based payments expense before separately disclosed items, loss / (gain) on disposal of assets and investments and foreign currency exchange loss / (gain) 

4 Cash flow from separately disclosed items relates to costs incurred as a result of the Combination with TSG

5 Interest and other borrowing costs includes interest paid, interest received and fees in respect of borrowing facilities

6 Other includes proceeds from the issue of shares on exercise of employee options, dividends paid to non-controlling interest, release of cash from restricted cash, lease interest paid and other

7 Net amounts repaid on borrowings includes repayment of USD and EUR First Lien Term Loan B and old GBP Term Loan facility

8 Net debt comprises principal outstanding balance of borrowings, accrued interest on those borrowings, cash and cash equivalents and derivatives held for hedging debt instruments

 

 

Designated Foreign Issuer Status

 

In connection with its acquisition of The Stars Group Inc. on 5 May, 2020, the Company became a "reporting issuer" under applicable securities laws in each of the provinces and territories of Canada. The Company also qualifies as a "designated foreign issuer", as such term is defined in National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers of the Canadian Securities Administrators. As such, the Company is not subject to the same ongoing reporting requirements as most other reporting issuers in Canada. Generally, the Company will be in compliance with Canadian ongoing reporting and disclosure requirements if it complies with the requirements of the UK Financial Conduct Authority in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 (United Kingdom), as amended from time to time, and the applicable laws of England and Wales (the "UK Rules") and files any documents required to be filed or furnished pursuant to the UK Rules on its profile on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com maintained by the Canadian Securities Administrators.

 

 

 

STATEMENT OF DIRECTORS RESPONSIBILITIES

For the half-year ended 30 June 2021

 

The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

 

In preparing the condensed set of financial statements included within the half-yearly financial report, the Directors are required to:

 

prepare and present the condensed set of financial information in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland; the Transparency Directive and the Transparency Rules of the Central Bank of Ireland;

ensure the condensed set of financial information has adequate disclosures;

select and apply appropriate accounting policies; and

make accounting estimates that are reasonable in the circumstances. 

 

The Directors are responsible for designing, implementing and maintaining such internal controls as they determine is necessary to enable the preparation of the condensed set of financial statements that is free from material misstatement whether due to fraud or error.

 

We confirm that to the best of our knowledge:

 

1)  the condensed set of consolidated financial statements in the half-yearly financial report of Flutter Entertainment plc for the six months ended 30 June 2021 ("the interim financial information") which comprises the Condensed Consolidated Interim Income Statement, the Condensed Consolidated Interim Statement of Other Comprehensive Income, the Condensed Consolidated Interim Statement of Financial Position, the Condensed Consolidated Interim Statement of Cash Flows, the Condensed Consolidated Interim Statement of Changes in Equity and related explanatory notes, have been presented and prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.

 

2)  the interim financial information presented, as required by the Transparency Directive, includes:

 

a)  an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements;

 

b)  a description of the principal risks and uncertainties for the remaining six months of the financial year;

 

c)  related parties' transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the enterprise during that period; and 

 

d)  any changes in the related parties' transactions described in the last annual report that could have a material effect on the financial position or performance of the enterprise in the first six months of the current financial year.

 

 

 

 

On behalf of the board

 

 

Peter Jackson    Jonathan Hill

Chief Executive Officer    Chief Financial Officer 

9 August 2021

 

 

 

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which are considered to have a material impact on the Group's future performance and strategic objectives are set out on the following pages. The principal risks and uncertainties are consistent with those defined in the Group's Annual Report & Accounts 2020, available at www.flutter.com. 

This is not intended to be an exhaustive and extensive analysis of all risks which may affect the Group. Additional risks and uncertainties currently deemed to be less material, or not presently known to Management, may also have an adverse effect on the performance and strategic objectives of the Group.

 

Changes to Legal, Regulatory and Licensing landscape

Why we need to manage this

How we manage and mitigate the risk

The risks relating to the constantly changing and complex regulatory environments in which the Group and its brands operate, both in terms of multiple jurisdictions and evolving regulatory landscapes, can make it commercially  challenging for the Group to operate, or restrict its ability to grow.

The Group has dedicated internal and external Legal, Regulatory and Compliance teams covering all regions with responsibility for working with and advising Divisions on any upcoming regulatory changes and working with the business to set appropriate policies, processes and controls to adapt and ensure compliance.

For material changes to regulations and legislations (e.g. the UK Gambling Act Review), dedicated project teams are established to ensure a robust approach to

consultation processes.

For material markets, the Group invests significantly in external counsel advice to conduct ongoing monitoring and to guide and support strategic decision-making and planning associated with these markets.

The Group invests continuously in the flexibility and scalability of our technology, which is key for entering or remaining in markets and allows for adaptability as market conditions change.

The Group and its Divisions have dedicated Corporate Affairs teams and hold membership of associations and industry groups working with regulators and governments to influence and drive proportionate, transparent and reasonable regulation in all markets.

 

 

Cyber Resilience and Protection of Data

Why we need to manage this

How we manage and mitigate the risk

A resilient IT environment is critical to the protection of customer data and other sensitive assets as well as the provision of critical services during a cyber-attack. With the enlarged Flutter Group this also increases the impact and likelihood of potential cyber-attack vectors and data breaches.

The Group continues to invest significantly in cyber security resources and technologies and works with a variety of external security specialists to ensure security arrangements and systems are appropriate for our evolving threat landscape and continue to follow leading practice.

Appointment of a Group Chief Information Security Officer to work with Group and Divisional security teams to devise and advance our strategy for cyber security and enhance our control assurance capabilities

The Group has a number of data protection policies, supported by an overarching Flutter data protection policy, in place in order to protect the privacy rights of individuals in accordance with the relevant local data protection and privacy legislation, including GDPR, which are monitored by the Legal and Data Protection teams to ensure business awareness and compliance with relevant laws and best practice.

Annual information security and data protection training is mandatory for employees, as well as conducting regular training and awareness sessions for key parts of the business which handle customer and staff personal information.

 

Transformation

Why we need to manage this

How we manage and mitigate the risk

The Group continues to progress through transformation across the organisation, Divisions and brands including its structures, business operations, culture and technology which present both opportunities and risks.

Robust transformation programme ongoing, overseen by a global governance structure, Accountable Executives and dedicated specialists, to progress the relevant transformation work, organisational restructuring and technology projects to meet the needs of the enlarged Group.

The Group has dedicated and experienced internal resources, complemented with external advisors in place to manage projects and programmes associated with transformation, with direct reporting lines to the Group's Executive Committee and Board.

For our large cross Divisional programmes we have a dedicated project governance team and framework which offers direction, harnesses collective capabilities and manages performance.

The Group has robust structures and processes in place to manage and deliver synergy targets as committed to investors as part of the merger.

The Group has put in place dedicated project teams and workstreams to define the new Flutter culture and talent strategy following the merger.

 

 

 

US Strategy

Why we need to manage this

How we manage and mitigate the risk

The successful execution of the growth strategy for the US business across its brands and partnerships is critical. Ensuring the Group continues to allocate resources and capital appropriately is key to remaining competitive and pursuing our US growth opportunities.

The Group continues to secure and maintain strong commercial relationships with our market access partners and strategic media partners to secure access to new markets and continued growth.

We continue to invest in people, product and brands to acquire further market share and maintain agility, scalability and leading market position.

In addition, the Group also has dedicated external advisers, internal expertise and resources to support with the assessment of the US competitive landscape to take appropriate actions.

We continue to further develop our in-house technology stack, including the adoption of our proprietary global betting platform for the provision of sports betting, to continuously improve our offering and meet evolving stakeholder needs.

Our dedicated US Legal and Compliance teams work closely with the business teams to monitor ongoing compliance across multiple jurisdictions to continuously improve our processes and controls to ensure compliance with our federal and state obligations.

 

People

Why we need to manage this

How we manage and mitigate the risk

The attraction and retention of key senior management and Executive level employees during a significant period of transformation and growth across the Group is critical to achieving our strategic objectives.

Dedicated workstreams have been put in place by the Group CPO function to align processes to identify talent acquisition partners to support internal teams to build a pipeline and attract the best talent for the Group going forward.

Through the Nomination and Remuneration Committee, the Board reviews key positions (namely the Executive Directors and senior management), succession plans and the remuneration and incentives in place across the Group.

The Remuneration Committee also reviews the structure in place for wider workforce with the objective to incentivise and retain talent to support the delivery of the Group's

long-term strategy.

The Group launched our new vision, purpose and values, in alignment with Divisional perspectives, and what it means to work at Flutter, supported by playbooks, talkshops and toolkits. Surveys continue to be conducted to listen and learn from employees and understand colleague engagement levels Group wide.

The Group and Divisional CPO functions continue to drive health and well-being initiatives as part of the Group's response to Covid, in addition to a dynamic Future Ways of Working approach which evolves to feedback and circumstances, to ensure our people are supported.

 

 

Ongoing Compliance of Legal, Regulatory and Licensing landscape

Why we need to manage this

How we manage and mitigate the risk

The interpretation and ongoing compliance with complex and multiple regulatory and legislative requirements, applicable to the Group's activities in the markets in which it operates is critical to the sustainability and reputation of our business.

For the jurisdictions in which we hold a licence, dedicated Divisional Compliance teams work closely with the business teams to monitor ongoing compliance and continuously enhance our processes and controls to ensure compliance with regulatory frameworks and licence requirements.

Annual compliance training, including Anti-Bribery and Corruption, Data Protection and Anti-Money Laundering is mandatory for all staff, as well as conducting regular training and awareness sessions for key parts of the business that are  potentially at a higher risk of encountering scenarios presenting  a heightened compliance risk of to the Group.

We have in place a number of Group-led overarching policies and compliance programmes in order to govern processes across Divisions and thereby ensuring compliance with applicable laws and regulations.

Management provides legal and regulatory updates through established governance forums at both Divisional and Group level Committees such as the Board Audit Committee and the Board Risk Committee on the application of various laws and regulations by the relevant jurisdiction to ensure that they are appropriately understood and managed.

 

Safer Gambling

Why we need to manage this

How we manage and mitigate the risk

Safer Gambling underpins every element of the Group's strategy. We want to demonstrate consistency and global alignment with our Safer Gambling strategy to protect our customers who are at risk of the potential negative effects of gambling and to ensure we grow our business sustainably.

Group Safer Gambling strategy is embedded into our businesses from how we identify and interact with at-risk customers through to how we communicate to a broad group of stakeholders and how we encourage Safer Gambling tool usage.

We leverage and share policies, processes and practices across the newly enlarged Group to enhance the strategic approach to Safer Gambling and demonstrate our serious commitment to ESG.

A leading range of tools are provided on all our brand sites to  support customers in managing their spend and play, and the Group and its brands are continually working to improve and enhance our tools and site content to enable us to identify and interact with at-risk customers.

The Group works closely with leading external third parties to facilitate internal teams to enhance our understanding, and capabilities in relation to identification of problem gambling through the use of artificial intelligence.

The Group continues to invest significantly in improvements for tackling the problem through donations to research, treatment, education initiatives, as well as through driving collaboration across the industry with other operators, charities and regulatory bodies.

Third Parties and Key Suppliers

Why we need to manage this

How we manage and mitigate the risk

Across our Divisions and Group, we place significant reliance upon critical suppliers in technology, marketing, sports content and media which are fundamental to our business and product offerings. The effective management of critical third-party relationships, performance and regulatory expectations are key to the Group's strategic objectives.

Strategic and critical suppliers are subject to regular business and quality reviews with dedicated resources for ongoing relationship and performance management.

The Group's Procurement function has developed and maintains a Critical Supplier Heatmap and established processes to provide ongoing liaison with key suppliers to respond to challenges posed by Covid and ensure continuity of critical services.

As part of our procurement processes, we employ dedicated resources supplemented by subject matter expertise within risk, compliance, legal and technology, to protect and enhance value, demonstrate our high standards of corporate integrity and reinforce organisational resilience.

Where possible, the Group limits reliance on a single supplier to reduce potential single point of failure.

IT Resilience

Why we need to manage this

How we manage and mitigate the risk

Our business operations and products have a critical dependency on our in-house technology and its ability to recover in timely manner from severe disruption, or from cyber related incidents with minimal impact on our customers.

The Group continues to invest in our proprietary technology and resources to improve IT resilience, eliminate single points of failure and to drive better performance.

The Group has established a standard scale to aid comparison of the IT Disaster Recovery resilience levels in each Division and to ensure adequate improvement plans are developed and tracked to mitigate any material risks.

We have dedicated resources to develop, enhance and test our Disaster Recovery capability for our key products across all our brands of the Group.

Globally, we have key metrics on critical systems and platforms which are regularly monitored and reported to identify any potential emerging issues on our brands or customer facing technologies.

We have defined formal incident management process in place for identifying, escalating and resolving issues and a post-incident process to ensure we continuously improve our proprietary technology stack and incident response processes.

Tax

Why we need to manage this

How we manage and mitigate the risk

Given the global nature of our business and the changing tax landscape  in relation to our industry, we adopt a balanced approach in delivering value through  commercially aligned tax planning, efficient structuring of commercial activities and M&A, alongside proactive management of tax risk areas.

The Group has dedicated internal and external Legal, Compliance and Tax teams for all regions with responsibility for working with and advising Divisions on any upcoming changes and working with the business to set appropriate policies, processes and controls to adapt and ensure compliance.

The Group holds memberships in industry groups working with regulators and governments in relation to influencing and driving proportionate and reasonable regulation and tax regimes.

The Group closely monitors changes in tax regulations in the markets which we operate in allowing the Group to assess, works in collaboration with Tax authorities to adapt and take necessary actions where appropriate, and we also periodically scan for emerging threats and uncertainties on the horizon.

The Group has dedicated qualified tax teams to manage its tax affairs for all regions with responsibility for advising senior leadership teams and business units to set appropriate policies, operating guidelines and controls.

In addition, the Group uses external tax and legal advisors for complex tax matters and to advise on significant uncertainties where necessary.

 

 

 

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2021

 

 

 

For the six months ended

For the six months ended

 

 

30 June 2021

30 June 2020

 

 

Before

separately disclosed

items

Separately disclosed

items

(Note 5)

Total

Before

separately disclosed

items

Separately disclosed

items

(Note 5)

Total

Unaudited

Note

£m

£m

£m

£m

£m

£m

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

4

3,052.5 

 

 

3,052.5 

 

1,522.4 

 

13.7 

 

1,536.1 

 

Cost of sales

 

(1,109.0)

 

(12.9)

 

(1,121.9)

 

(495.9)

 

(2.0)

 

(497.9)

 

Gross profit

 

1,943.5 

 

(12.9)

 

1,930.6 

 

1,026.5 

 

11.7 

 

1,038.2 

 

 

 

 

 

 

 

 

 

Operating costs excluding depreciation and amortisation

 

(1,346.5)

 

(21.7)

 

(1,368.2)

 

(684.8)

 

(68.9)

 

(753.7)

 

EBITDA1

 

597.0 

 

(34.6)

 

562.4 

 

341.7 

 

(57.2)

 

284.5 

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

 

(125.0)

 

(275.5)

 

(400.5)

 

(88.9)

 

(127.8)

 

(216.7)

 

Operating profit

 

472.0 

 

(310.1)

 

161.9 

 

252.8 

 

(185.0)

 

67.8 

 

 

 

 

 

 

 

 

 

Financial income

6

 

 

 

0.4 

 

49.2 

 

49.6 

 

Financial expense

6

(74.2)

 

(10.7)

 

(84.9)

 

(34.9)

 

(58.5)

 

(93.4)

 

Profit before tax

 

397.8 

 

(320.8)

 

77.0 

 

218.3 

 

(194.3)

 

24.0 

 

 

 

 

 

 

 

 

 

Tax (expense) / credit

7

(91.4)

 

(71.6)

 

(163.0)

 

(29.1)

 

14.1 

 

(15.0)

 

Profit / (loss) for the period

 

306.4 

 

(392.4)

 

(86.0)

 

189.2 

 

(180.2)

 

9.0 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the Company

 

300.9 

 

(389.5)

 

(88.6)

 

191.3 

 

(172.8)

 

18.5 

 

Non-controlling interest

 

5.5 

 

(2.9)

 

2.6 

 

(2.1)

 

(7.4)

 

(9.5)

 

 

 

306.4 

 

(392.4)

 

(86.0)

 

189.2 

 

(180.2)

 

9.0 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

Basic

8

 

 

(£0.504)

 

 

 

£0.181 

 

Diluted

8

 

 

(£0.504)

 

 

 

£0.179 

 

 

1

EBITDA is defined as profit for the period before depreciation, amortisation and impairment, financial income, financial expense and tax expense / credit. It is considered by the Directors to be a key measure of the Group's financial performance.

 

 

 

 

CONDENSEDCONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2021

 

 

 

 

 

Six months ended

Six months ended

 

 

30 June 2021

30 June 2020

Unaudited

 

£m

£m

 

 

 

 

(Loss) / profit for the period

 

(86.0)

 

9.0 

 

 

 

 

 

Other comprehensive (loss) / income:

 

 

 

Items that are or may be reclassified subsequently to profit or loss:

 

 

 

Effective portion of changes in fair value of cash flow hedges

 

(156.0)

 

(88.2)

 

Fair value of cash flow hedges transferred to the income statement

 

164.7 

 

86.5 

 

Foreign exchange (loss) / gain on translation of the net assets of foreign currency denominated entities, net of tax1

 

(161.8)

 

174.7 

 

Debt instruments at FVOCI

 

(0.6)

 

0.1 

 

Other comprehensive (loss) / income

 

(153.7)

 

173.1 

 

Total comprehensive (loss) / income for the period

 

(239.7)

 

182.1 

 

 

 

 

 

Attributable to:

 

 

 

Equity holders of the Company

 

(242.5)

 

181.0 

 

Non-controlling interest

 

2.8 

 

1.1 

 

Total comprehensive (loss) / income for the period

 

(239.7)

 

182.1 

 

 

1 Foreign exchange loss on translation of the net assets of foreign currency denominated entities is presented including an income tax charge of £1.7m which relates to the tax effect on foreign exchange activities with respect to the Group's hedging activities. A corresponding tax credit of £1.7m in relation to the same is recognised in the Condensed Consolidated Income Statement such that there is no overall impact on the Condensed Consolidated Interim Statement of Financial position.

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

 

 

 

 

30 June 2021

31 December 2020

 

 

 

Unaudited

Audited

 

 

Note

£m

£m

Assets

 

 

 

 

Property, plant and equipment

 

 

380.1 

 

361.9 

 

Intangible assets

 

 

5,135.8 

 

5,527.8 

 

Goodwill

 

9

9,354.9 

 

9,516.7 

 

Deferred tax assets

 

 

2.1 

 

7.4 

 

Non-current tax receivable

 

 

27.6 

 

15.3 

 

Investments

 

11

3.7 

 

3.0 

 

Derivative financial assets

 

16

27.5 

 

16.9 

 

Financial assets - restricted cash

 

 

7.9 

 

6.9 

 

Other receivables

 

11

59.3 

 

75.2 

 

Total non-current assets

 

 

14,998.9 

 

15,531.1 

 

 

 

 

 

 

Trade and other receivables

 

11

189.8 

 

139.5 

 

Derivative financial assets

 

16

20.0 

 

 

Financial assets - restricted cash

 

 

554.3 

 

587.9 

 

Cash and cash equivalents

 

 

623.1 

 

603.4 

 

Current investments at FVOCI - customer deposits

 

 

78.8 

 

82.8 

 

Current tax receivable

 

 

46.6 

 

47.5 

 

Assets held for sale

 

12

124.1 

 

 

Total current assets

 

 

1,636.7 

 

1,461.1 

 

Total assets

 

 

16,635.6 

 

16,992.2 

 

 

 

 

 

 

Equity

 

 

 

 

Issued share capital and share premium

 

 

2,489.7 

 

2,481.7 

 

Merger Reserve

 

 

7,982.9 

 

7,982.9 

 

Treasury shares

 

 

(40.7)

 

(40.7)

 

Shares held by employee benefit trust

 

 

(94.8)

 

(5.8)

 

Cash flow hedge reserve

 

 

(1.6)

 

(10.3)

 

Other reserves

 

 

9.9 

 

152.3 

 

Retained earnings

 

 

333.9 

 

405.0 

 

Total equity attributable to equity holders of the parent

 

 

10,679.3 

 

10,965.1 

 

Non-controlling interest

 

 

44.7 

 

30.8 

 

Total equity

 

 

10,724.0 

 

10,995.9 

 

 

 

 

 

 

Liabilities

 

 

 

 

Trade and other payables

 

13

1,039.4 

 

1,033.0 

 

Customer balances

 

 

602.4 

 

643.4 

 

Derivative financial liabilities

 

16

148.2 

 

150.9 

 

Provisions

 

14

27.9 

 

14.3 

 

Current tax payable

 

 

45.5 

 

41.0 

 

Lease liability

 

 

50.1 

 

48.3 

 

Borrowings

 

15

49.8 

 

50.8 

 

Total current liabilities

 

 

1,963.3 

 

1,981.7 

 

 

 

 

 

 

Trade and other payables

 

13

2.8 

 

14.6 

 

Derivative financial liabilities

 

16

99.2 

 

102.3 

 

Provisions

 

14

72.5 

 

145.0 

 

Deferred tax liabilities

 

 

566.5 

 

500.9 

 

Non-current tax payable

 

 

15.1 

 

18.0 

 

Lease liability

 

 

159.6 

 

145.7 

 

Borrowings

 

15

3,032.6 

 

3,088.1 

 

Total non-current liabilities

 

 

3,948.3 

 

4,014.6 

 

Total liabilities

 

 

5,911.6 

 

5,996.3 

 

Total equity and liabilities

 

 

16,635.6 

 

16,992.2 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

 

 

Six months ended

Six months ended

 

 

30 June 2021

30 June 2020

Unaudited

 

 

 

 Note

£m

£m

Cash flows from operating activities

 

 

 

(Loss) / profit for the period

 

(86.0)

 

9.0 

 

Separately disclosed items

5

392.4 

 

180.2 

 

Tax expense before separately disclosed items

 

91.4 

 

29.1 

 

Financial income before separately disclosed items

 

 

(0.4)

 

Financial expense before separately disclosed items

 

74.2 

 

34.9 

 

Depreciation and amortisation before separately disclosed items

 

125.0 

 

88.9 

 

Employee equity-settled share-based payments expense before separately disclosed items

 

35.5 

 

18.0 

 

Foreign currency exchange (gain) / loss

 

(11.8)

 

15.4 

 

Gain on disposal of property, plant and equipment and intangible assets

 

 

(0.2)

 

Cash from operations before changes in working capital

 

620.7 

 

374.9 

 

(Increase) / decrease  in trade and other receivables

 

(36.5)

 

5.8 

 

Increase in trade, other payables and provisions

 

30.3 

 

74.6 

 

Cash generated from operations

 

614.5 

 

455.3 

 

Taxes paid

 

(92.0)

 

(60.0)

 

Cash generated from operations, net of taxes paid

 

522.5 

 

395.3 

 

Combination fees, restructuring and integration costs paid

5

(24.5)

 

(83.9)

 

Amounts paid in respect of Kentucky Supersedeas Bonds

14

(71.1)

 

 

Net cash from operating activities

 

426.9 

 

311.4 

 

Cash Flows from investing activities:

 

 

 

Purchase of property, plant and equipment

 

(33.4)

 

(21.8)

 

Purchase of intangible assets

 

(23.9)

 

(21.5)

 

Capitalised internal development expenditure

 

(66.4)

 

(37.1)

 

Purchase of business

10

(51.5)

 

 

Cash acquired on business combinations

10

17.8 

 

445.2 

 

Payment of contingent deferred consideration

10

(19.0)

 

(4.6)

 

Change in restricted cash

 

(2.1)

 

 

Other

 

(0.5)

 

0.6 

 

Net cash  (used in) / from investing activities

 

(179.0)

 

360.8 

 

Cash flows from financing activities:

 

 

 

Proceeds from the issuance of new shares in respect of equity placement (net of issuance costs)

17

 

806.3 

 

Proceeds from the issue of shares on exercise of employee options

 

8.0 

 

8.9 

 

Dividend paid to non-controlling interest

17

(5.1)

 

(7.0)

 

Payment of lease liabilities

 

(26.8)

 

(18.9)

 

Payment of lease interest

 

(3.9)

 

(2.8)

 

Lease incentive received

 

4.8 

 

 

Proceeds from GBP First Lien Term Loan A and previous GBP Term Loan

15

 

950.0 

 

Net amounts drawn down previous GBP Revolving Credit facility

 

 

(117.2)

 

Repayment of USD & EUR First Lien Term Loan B and old GBP Term Loan facility

15

(12.9)

 

(1,513.5)

 

Amounts repaid on overdraft facility

 

 

(5.0)

 

Interest paid

 

(70.0)

 

(37.5)

 

Settlement of derivatives

 

 

(27.6)

 

Financing fees paid in respect of borrowing facilities

 

(4.6)

 

(21.5)

 

Ordinary shares of the Company acquired by the Employee Benefit Trust

17

(89.0)

 

 

Net cash from  (used in) / from financing activities

 

(199.5)

 

14.2 

 

Net increase  in cash and cash equivalents

 

48.4 

 

686.4 

 

Cash and cash equivalents at start of period

 

603.4 

 

108.1 

 

Foreign currency exchange loss  on cash and cash equivalents

 

(18.1)

 

(8.0)

 

Cash and cash equivalents at end of period

 

633.7 

 

786.5 

 

Presented on the Statement of Financial Position within:

 

 

 

Cash and Cash equivalents

 

623.1 

 

786.5 

 

Assets held for sale

12

10.6 

 

 

 

 

633.7 

 

786.5 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

 

Number of ordinary shares in issue

Issued share capital and share premium

Merger reserve

Treasury shares

Shares held by employee benefit trust

Cash flow hedge reserve

Fair value reserve

Foreign exchange translation reserve

Other reserves

Share-based payment reserve

Retained earnings

Total equity attributable to shareholders of the Company

Non-controlling interest

Total equity

Unaudited

m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2021

177.0 

 

2,481.7 

 

7,982.9 

 

(40.7)

 

(5.8)

 

(10.3)

 

(0.4)

 

49.6 

 

2.3 

 

100.8 

 

405.0 

 

10,965.1 

 

30.8 

 

10,995.9 

 

Total comprehensive income / (loss) for the year

 

 

 

 

 

 

 

 

 

 

 

(Loss) / profit for the period

 

 

 

 

 

 

 

 

 

 

(88.6)

 

(88.6)

 

2.6 

 

(86.0)

 

Foreign exchange translation

 

 

 

 

 

 

 

(160.3)

 

 

 

 

(160.3)

 

0.2 

 

(160.1)

 

Tax charge on foreign exchange hedging

 

 

 

 

 

 

 

(1.7)

 

 

 

 

(1.7)

 

 

(1.7)

 

Effective portion of changes in fair value of cash flow hedges

 

 

 

 

 

(156.0)

 

 

 

 

 

 

(156.0)

 

 

(156.0)

 

Fair value of cash flow hedges transferred to the income statement

 

 

 

 

 

164.7 

 

 

 

 

 

 

164.7 

 

 

164.7 

 

Debt instruments at FVOCI

 

 

 

 

 

 

(0.6)

 

 

 

 

 

(0.6)

 

 

(0.6)

 

Total comprehensive income / (loss) for the period

 

 

 

 

 

8.7 

 

(0.6)

 

(162.0)

 

 

 

(88.6)

 

(242.5)

 

2.8 

 

(239.7)

 

Transactions with owners of the Company, recognised directly in equity

 

 

 

 

 

 

 

 

 

Shares issued on exercise of employee share options (Note 17)

0.3 

 

8.0 

 

 

 

 

 

 

 

 

 

 

8.0 

 

 

8.0 

 

Business combinations (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

16.2 

 

16.2 

 

Ordinary shares of the Company acquired by the Employee Benefit Trust (Note 17)

 

 

 

 

(89.0)

 

 

 

 

 

 

 

(89.0)

 

 

(89.0)

 

Equity-settled transactions - expense recorded in the income statement

 

 

 

 

 

 

 

 

 

36.6 

 

 

36.6 

 

 

36.6 

 

Tax on share-based payments

 

 

 

 

 

 

 

 

 

 

1.1 

 

1.1 

 

 

1.1 

 

Transfer to retained earnings on exercise of share options and vesting of share awards

 

 

 

 

 

 

 

 

 

(16.4)

 

16.4 

 

 

 

 

Dividend paid to non-controlling interest (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

(5.1)

 

(5.1)

 

Total contributions by and distributions to owners of the Company

0.3 

 

8.0 

 

 

 

(89.0)

 

 

 

 

 

20.2 

 

17.5 

 

(43.3)

 

11.1 

 

(32.2)

 

Balance at 30 June 2021

177.3 

 

2,489.7 

 

7,982.9 

 

(40.7)

 

(94.8)

 

(1.6)

 

(1.0)

 

(112.4)

 

2.3 

 

121.0 

 

333.9 

 

10,679.3 

 

44.7 

 

10,724.0 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

  For the six months ended 30 June 2020

 

 

 

 

 

 

 

Number of ordinary shares in issue

Issued share capital and share premium

Merger reserve

Treasury shares

Shares held by employee benefit trust

Cash flow hedge reserve

Fair value  reserve

Foreign exchange translation reserve

Other reserves

Share-based payment reserve

Retained earnings

Total equity attributable to shareholders of the Company

Non-controlling interest

Total equity

Unaudited

m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2020

80.3 

 

428.3 

 

 

(40.7)

 

(6.1)

 

2.3 

 

 

(21.5)

 

2.3 

 

80.6 

 

3,539.5 

 

3,984.7 

 

204.9 

 

4,189.6 

 

Total comprehensive income / (loss) for the year

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) / profit for the period

 

 

 

 

 

 

 

 

 

 

18.5 

 

18.5 

 

(9.5)

 

9.0 

 

Foreign exchange translation

 

 

 

 

 

 

 

157.9 

 

 

 

 

157.9 

 

10.6 

 

168.5 

 

Tax credit on foreign exchange hedging

 

 

 

 

 

 

 

6.2 

 

 

 

 

6.2 

 

 

6.2 

 

Effective portion of changes in fair value of cash flow hedges

 

 

 

 

 

(88.2)

 

 

 

 

 

 

(88.2)

 

 

(88.2)

 

Fair value of cash flow hedges transferred to the income statement

 

 

 

 

 

86.5 

 

 

 

 

 

 

86.5 

 

 

86.5 

 

Debt instruments at FVOCI

 

 

 

 

 

 

0.1 

 

 

 

 

 

0.1 

 

 

0.1 

 

Total comprehensive income / (loss) for the period

 

 

 

 

 

(1.7)

 

0.1 

 

164.1 

 

 

 

18.5 

 

181.0 

 

1.1 

 

182.1 

 

Transactions with owners of the Company, recognised directly in equity

 

 

 

 

 

 

 

 

 

 

 

Shares issued on equity placement (net of issuance costs) (Note 17)

8.0 

 

812.6 

 

 

 

 

 

 

 

 

 

(6.3)

 

806.3 

 

 

806.3 

 

Shares issued on exercise of employee share options (Note 17)

0.8 

 

8.9 

 

 

 

 

 

 

 

 

 

 

8.9 

 

 

8.9 

 

Shares issued as consideration for the acquisition of TSG (Note 10)

65.3 

 

5.1 

 

6,189.5 

 

 

 

 

 

 

 

 

 

6,194.6 

 

 

6,194.6 

 

Issue of replacement options (Note 10)

 

 

 

 

 

 

 

 

 

58.8 

 

 

58.8 

 

 

58.8 

 

Shares issued as consideration for acquisition of TSG Australia (Note 10)

0.8 

 

79.7 

 

 

 

 

 

 

 

 

 

 

79.7 

 

 

79.7 

 

Equity-settled transactions - expense recorded in income statement

 

 

 

 

 

 

 

 

 

27.6 

 

 

27.6 

 

 

27.6 

 

Equity-settled transactions - vestings

 

 

 

 

0.3 

 

 

 

 

 

(0.2)

 

(0.1)

 

 

 

 

Tax on share-based payments

 

 

 

 

 

 

 

 

 

 

3.7 

 

3.7 

 

 

3.7 

 

Transfer to retained earnings on exercise of share options and vesting of share awards

 

 

 

 

 

 

 

 

 

(69.4)

 

69.4 

 

 

 

 

Dividend paid to non-controlling interest (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

(7.0)

 

(7.0)

 

Dividends to shareholders

1.3 

 

0.1 

 

 

 

 

 

 

 

 

 

(0.1)

 

 

 

 

Total contributions by and distributions to owners of the Company

76.2 

 

906.4 

 

6,189.5 

 

 

0.3 

 

 

 

 

 

16.8 

 

66.6 

 

7,179.6 

 

(7.0)

 

7,172.6 

 

Balance at 30 June 2020

156.5 

 

1,334.7 

 

6,189.5 

 

(40.7)

 

(5.8)

 

0.6 

 

0.1 

 

142.6 

 

2.3 

 

97.4 

 

3,624.6 

 

11,345.3 

 

199.0 

 

11,544.3 

 

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

 

1. General information

 

Flutter Entertainment plc (the "Company") is a company incorporated in the Republic of Ireland. The Condensed Consolidated Interim Financial Statements of the Company for the six months ended 30 June 2021 comprise the Company and its subsidiaries (together referred to as the "Group"). These Condensed Consolidated Interim Financial Statements are unaudited but have been reviewed by KPMG, the Group's auditor, whose report is set out on the last page of this document.

 

The financial information presented herein does not comprise full statutory financial statements and therefore does not include all of the information required for full annual financial statements. Full statutory financial statements for the year ended 31 December 2020, prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU together with an unqualified audit report thereon under Section 391 of the Irish Companies Act 2014, will be annexed to the annual return and filed with the Registrar of Companies in Ireland.

 

During the six months period ended 30 June 2020, the Company completed an all share Combination with The Stars Group Inc. (the "Combination") - see Note 10 for further information on the Combination. The results of The Stars Group Inc. ('TSG') prior to completion of the Combination are not included in these condensed consolidated interim financial statements.

 

These Condensed Consolidated Interim Financial Statements were approved for issue by the Board of Directors of Flutter Entertainment plc on 9 August 2021.

 

 

 

2. Basis of preparation and accounting policies

 

The Condensed Consolidated Interim Financial Statements have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim Financial Reporting' as adopted by the EU.

 

The Condensed Consolidated Interim Financial Statements are prepared on the historical cost basis except for derivative financial instruments (which include betting transactions), equity securities, certain financial assets which have been designated as FVOCI, contingent deferred consideration and share-based payments, all of which are stated at fair value (grant date fair value in the case of equity-settled share-based payments).  The Condensed Consolidated Interim Financial Statements are presented in pounds sterling and are rounded to the nearest £0.1 million.

 

Going concern

The Group reported a loss after tax for the six months ended 30 June 2021 of £86m.  This includes £276m of non-cash amortisation of acquisition related intangible assets charged against profit in the period.  The net cash generated from operating activities during the six month period ended 30 June 2021 was £427m. The balance sheet at 30 June 2021 reported a net current liability position of £327m.

 

The Directors have considered the available financial resources which include, at 30 June 2021, £634m of cash and cash equivalents and a £450m Revolving Credit Facility with undrawn capacity of £435m. Also, as announced on 19 July 2021, the Group raised $500m of incremental debt as part of a debt refinancing, of which c.£250m is incremental liquidity. Whilst there are certain loan repayments due within the next 12 months, of £50m, the Group's lending facilities primarily fall due in 2025 as set out in more detail in Note 15. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. See 'Principal risks and uncertainties' in this report for more detail.

 

The Group's forecasts to the period ending 31 December 2022 and beyond indicate that it will continue to have significant financial resources, continue to settle its debts as they fall due and operate well within its banking covenants as outlined in Note 15 for at least a period of 12 months from the date of these interim financial statements. Various downside scenarios over and above those already included in the base case model on the potential impact of further reductions to cashflows due to ongoing litigation in the State of Kentucky (see Note 14), and enhanced regulation have also been considered in respect of these forecasts. In the event that it was necessary to draw down additional debt funding, the Directors have a reasonable expectation that this could be achieved within the confines of its existing debt facilities and financial covenant requirements.

 

Having given regard to the above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these condensed consolidated financial statements, and therefore they continue to adopt the going concern basis in its consolidated financial statements.

 

 

2. Basis of preparation and accounting policies (continued)

 

New accounting policies

The financial information contained in these Condensed Consolidated Interim Financial Statements has been prepared in accordance with the accounting policies set out in the Group's last annual financial statements in respect of the year ended 31 December 2020, except as set out below.

 

Operating segment reporting

Operating segments are distinguishable components of the Group that have been established based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker (the Board of Directors, "CODM") in order to assess each segment's performance and to allocate resources to them. Geographical segments provide services within a particular economic environment that are subject to risks and rewards that are different from those components operating in alternative economic environments. In 2021, as a result of internal restructuring and integration initiatives, the Group has determined its reportable segments to be UK&I, Australia, International and US.  These reportable segments reflect the way financial information is reviewed by the Group's CODM.

 

The previous reportable segments, as disclosed in the Group's 2020 Annual report, of PPB, PokerStars and Sky Betting and Gaming have been realigned to follow the Group's integrated operational model and internal structure. The Group has restated the operating segment information for the six months ended 30 June 2020 accordingly.

 

For further information on operating segments see Note 4.

 

Interest rate benchmark reform (IBOR Reform) - Phase two

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (the Phase two amendments) were issued in August 2020 and were initially adopted by the Group effective 1 January 2021. 

 

The Group applied the Phase 2 amendments prospectively. However, in accordance with the exceptions permitted in the Phase 2 amendments, the Group has elected not to restate the prior period to reflect the application of these amendments, including not providing additional disclosures for 2020. There is no impact on opening equity balances as a result of retrospective application.

 

In March 2021, the Financial Conduct Authority (FCA) announced the timing of LIBOR cessation, with the publication of all non-USD LIBOR rates ceasing on December 31, 2021. One and three month USD LIBOR will continue to be published through June 30, 2023. There are currently no stated plans in respect of the cessation of EURIBOR. The Group has commenced its process to amend contractual terms or implement appropriate fallback provisions in response to IBOR reform and these arrangements will be completed in the second half of 2021.

 

 

 

 

3. Judgements and estimates

 

The preparation of interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

 

Judgements

In preparing these Condensed Consolidated Interim Financial Statements, the significant judgements in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the Consolidated Financial Statements as at and for the year ended 31 December 2020 and are detailed below:

 

 

 

 

 

 

 

 

 

3. Judgements and estimates (continued)

 

Kentucky proceedings

In 2010, prior to the combination with The Stars Group ("TSG"), the Commonwealth of Kentucky filed legal proceedings against various operators including certain companies that later became subsidiaries of TSG. The suit sought recovery of alleged losses incurred by Kentucky residents playing real-money poker on the PokerStars platform during a period between 2006 and 2011. The gross gaming revenues that TSG generated in Kentucky on the PokerStars platform during the relevant period were approximately US$18m. In 2015, a Kentucky trial court judge entered judgement against two TSG Isle of Man subsidiaries, Stars Interactive Holdings (IOM) Ltd. ("SIHL") and Rational Entertainment Enterprises Ltd. ("REEL") and awarded damages to the Commonwealth of Kentucky of approximately US$870m plus post judgement interest.

 

In February 2016, in order to stay enforcement of the judgement while the matter was appealed, SIHL and REEL posted supersedeas bonds to the value of US$100m, on which the stay was conditioned. In 2018, the ruling against SIHL and REEL was vacated in its entirety by the Kentucky Court of Appeals.

 

Following an appeal by the Commonwealth of Kentucky, on 17 December 2020, the Kentucky Supreme Court reinstated the full 2015 award of damages, including post judgement interest, against SIHL and REEL.

 

As at 31 December 2020, the Group recognised a provision of US$100m (£73.3m) as part of the TSG combination fair value acquisition accounting in respect of this litigation, which reflected the value of the supersedeas bond in place since February 2016. No liability was previously recognised by either TSG or Flutter prior to this judgement. 

 

A rehearing petition was filed before the Kentucky Supreme Court on 6 January 2021 and was subsequently denied on 25 March 2021. In May 2021, following an April 2021 order by the Kentucky trial court, the $100m (£71.1m) bonds were paid to the Commonwealth of Kentucky, in line with the provision outstanding at 31 December 2020. The Commonwealth of Kentucky has commenced other action to seek to enforce the judgement.

 

The Group is currently in the process of preparing a Petition for Writ of Certiorari to be filed with the US Supreme Court, seeking review of the judgement based on US Constitutional grounds, including that the judgement violates due process and the prohibition on excessive fines.

 

Based on the restrictions on the Commonwealth of Kentucky's ability to enforce the judgement and any further pay-outs being less than probable at 30 June 2021, the Group did not recognise any additional provision with respect to this litigation as at 30 June 2021.  This assessment relies on estimates and assumptions and involves a series of judgements about future events which will be reassessed in future periods if events or circumstances change. 

 

Contingent liabilities

The Group reviews its legal proceedings following developments in the same at each balance sheet date, considering, among other things: the nature of the litigation, claim or assessment; the legal processes and potential level of damages in the jurisdiction in which the litigation, claim or assessment has been brought; the progress of the case (including progress after the date of the consolidated financial statements but before those statements are issued); the opinions or views of legal counsel and other advisors; experience of similar cases; and any decision of the Group's Management as to how it will respond to the litigation, claim or assessment. The Group assesses the probability of an outflow of resources to settle the alleged obligation as well as if the outflow can be reliably measured. If these conditions are not met, no provision will be recorded, and the relevant facts will be disclosed as a contingent liability. See Note 19 - Commitments and Contingencies for further detail.

 

FOX Corporation 

As part of the Combination with TSG, the Group acquired certain commercial agreements in place between TSG and FOX Corporation ("FOX") in relation to TSG's US business.

On 8 May 2019, TSG and FOX announced plans to launch FOX Bet, the first-of-its kind national media and sports wagering partnership in the United States and as such, entered into a commercial agreement of up to 25 years. As part of the agreement, FOX receive certain brand license, integration and affiliate fees. In addition, TSG agreed to a minimum annual advertising commitment on certain FOX media assets during the term of the commercial agreement. Prior to the tenth anniversary of the commercial agreement, and subject to certain conditions and applicable gaming regulatory approvals, FOX has the right to acquire up to a 50% equity stake in TSG's US business, which excludes FanDuel. In accordance with IFRS 2 Share-based payments based on the judgement of Management, this right granted to FOX is considered a contingently cash-settled share-based payment because FOX, subject to receiving regulatory approvals and meeting certain other conditions, has discretion to exercise the right. During the six months ended 30 June 2021, the Group recorded £4.7m to sales and marketing expense in relation to the commercial agreement and at 30 June 2021 the total fair value liability due was £5.0m.

 

3. Judgements and estimates (continued)

 

Management has made certain judgements in the recognition and measurement of liabilities in relation to this commercial agreement and associated right of FOX to acquire equity, including its judgement as to the probable method of settlement. The right has been valued using a discounted cash flow model and as it represents a contingent cash-settled share-based payment, will be recorded at fair value at each reporting period.

 

As announced on 2 October 2019, in order to achieve economic alignment of Flutter's and TSG's strategic third-party relationships across their respective US businesses, concurrent with the Combination with TSG, the Group entered into an arrangement with FOX, pursuant to which FSG Services, a wholly-owned subsidiary of FOX, had an option to acquire an 18.6% equity interest in FanDuel Group at its market value in July 2021. Under the terms of the agreement an arbitration mechanism was put in place in the event of a disagreement between the two parties relating to the option.

 

In April 2021, FOX filed an arbitration claim against the Group with respect to its option to acquire an 18.6% equity interest in FanDuel for the same price that the Group paid for the acquisition of 37.2% of FanDuel from Fastball Holdings LLC in December 2020, representing an £11.2 billion valuation for FanDuel. In the Group's opinion this valuation would be materially favourable for FOX compared to the fair market valuation as of July 2021. An arbitrator has been appointed and the Group intends to vigorously defend its position. A ruling in the arbitration is not expected before 2022.

 

Estimates

Determining the fair value of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. The following discussion sets forth key sources of estimation uncertainty at the end of the reporting period that management believes have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

 

Measurement of the recoverable amounts of cash generating units containing goodwill, indefinite life licences and  intangible assets