- US revenue surges despite poor results
- US listing on track for end of January
Flutter Entertainment (FLTR), the Ireland-based betting company, saw its share price rise by 11 per cent after a fourth-quarter trading update showing a surge in US revenue sent investors scrambling for the shares.
Unaudited revenue for its US sports and gaming book rose in the quarter by 26 per cent (to £1.13bn at constant currency) compared with this time last year. However, a weak margin and some unfavourable sports results mean the company’s full-year cash profit is likely to undershoot forecasts by £50mn.
Adverse results in November’s NFL games caused a 320 basis point swing in the achieved margin; on a reported basis the theoretical margin in the fourth quarter was 13.5 per cent in the US, up by 220 basis points. Flutter reckons that adverse results cost it $343mn (£270mn) inrevenue. Meanwhile, there was strong growth in the UK and Ireland segment, with a 19 per cent rise in constant currency to £647mn on the back of increased market share.
Flutter remains on course to commence its listing on the New York Stock Exchange on 29 January and reports its full-year results on 26 March.
Broker Peel Hunt has cut its guidance for 2023 based on the £60mn in cash profits generated by the US business. That means 7 per cent lower earnings per share for 2023 of 415p, giving a price/earnings ratio of 31.4. That does not represent a great value deal, particularly when missteps such as unexpected teams winning are beyond the control of management. Great potential, but we need to see a more affordable price. Hold.
Last IC view: Hold, 14,240p, 9 Aug 2023
