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Flutter Entertainmnt (FLTR)

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Tuesday 02 March, 2021

Flutter Entertainmnt

2020 Preliminary Results

RNS Number : 7728Q
Flutter Entertainment PLC
02 March 2021
 

 

2 March 2021

Flutter Entertainment plc - 2020 Preliminary Results

Transformational year for Group; Earnings ahead of expectations

Flutter Entertainment plc (the "Group") announces preliminary results for year ended 31 December 2020.

 

 

 

Reported1

Pro forma2

 

 

 

2020

2019

 

2020

2019

 

CC3
YoY %

 

 

£m

£m

YoY %

£m

£m

YoY %

Group revenue4

 

 

4,398

2,140

+106%

5,264

4,144

+27%

+28%

 

 

 

 

 

 

 

 

 

 

Adjusted5 Group EBITDA6 excluding US

1,037

462

+125%

1,401

1,170

+20%

+23%

 

 

 

 

 

 

 

 

 

 

Adjusted Group EBITDA

 

 

889

425

+109%

1,231

1,089

+13%

+16%

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

1

136

-99%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share7

 

 

29.3p

180.2p

-84%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings per share

 

402.7p

298.4p

+35%

496.6p 

415.7p

+19%

 

 

 

 

 

 

 

 

 

 

 

Net debt at year end8

 

 

2,814

265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational highlights

· Transformational year for Group

Unparalleled scale and diversification achieved following merger with The Stars Group, Inc ("TSG")

Accelerated buy-out of minority shareholders in FanDuel at compelling valuation

Reinforced balance sheet to support investment and growth

· Excellent momentum with 19% growth in recreational players9 across Group

Acceleration of channel shift from retail to online and increased share of entertainment spend

· Further investment in safer gambling initiatives to ensure sustainable growth  

Enhanced predictive technology; increase in safer gambling tool usage by customers

Advocating a customer driven approach to affordability

· Merger integration progressing well

Australian integration complete, PokerStars strategy in place and core momentum maintained

Annualised cost synergies now expected to be £170m, up from £140m previously

· US online leadership maintained with 40% sports betting and 20% gaming market shares in Q410

Total addressable market in 2025 now expected to exceed £14bn ($20bn)

2020 contribution of £70m ($91m) from sportsbook and gaming customers acquired in 2018 and 2019, demonstrating substantial US earnings power

Record breaking Super Bowl LV; over 350,000 sportsbook and gaming customers acquired, exceeding entire 2019 customer acquisition in 1 week; strong start in both Michigan and Virginia

Financials 1,2,3,5,6,11

· Growth in reported revenue and reported adjusted EBITDA reflects addition of TSG from May 2020

· Reported profit of £1m after deduction of £432m in non-cash acquisition accounting adjustments

· Pro forma revenue and EBITDA increased primarily due to customer growth and positive sports results

· Pro forma online revenue of £5,035m, 34% higher than 2019, constituting 96% of total Group revenue

· Pro forma increase in cash of £817m in 2020 after SDIs and interest and before equity placings

· Leverage ratio of 2.3 times, materially reduced from 3.2 times at time of merger

Current trading/Outlook

· Strong momentum in 2021 with growth in player volumes across all divisions

· Favourable sports results relative to expectations, particularly in UK and Ireland

· Group revenue +36% year on year in the first 7 weeks of the year (to Feb 21)  

· Covid restrictions impacting retail business in UK and Ireland with estimated monthly EBITDA loss of £9m for each month that both UK and Irish retail estates remain shut

· Proposed German tax change would reduce contribution by £15m- £25m in 2021 if introduced from 1 July

 

Peter Jackson, Chief Executive, commented:

"2020 was an historic year for the Group as we completed our merger with TSG, commenced the integration of our two businesses and increased our ownership of FanDuel in the US, whilst at the same time navigating the challenges presented by the Covid-19 pandemic.

Safer gambling is critical to building a sustainable global business and we are determined to lead the industry in implementing the highest standards of customer protection across our markets.  This includes the UK, where we welcome the Government's review of gambling legislation and support the delivery of a balanced framework that will protect vulnerable customers while allowing the many who enjoy a bet to continue to do so safely.

We delivered a very strong financial performance in 2020, benefiting from our scale and diversification. We continue to grow our recreational player base across all key regions, in Q4 alone the Group had over 7.6m monthly online players. Nowhere has our growth been more evident than in the US where we have consolidated our #1 position in this crucial market, with customer economics that continue to exceed our expectations, finishing the year as the first US online operator to reach over $1.1bn in gross gaming revenue .

During this exceptionally testing time, we have focused on safeguarding the welfare of colleagues and contributed more to the communities in which we operate. I would like to take this opportunity to thank all my colleagues for their ongoing commitment and resilience as we face these challenging times together. While the global outlook remains uncertain, our momentum remains strong and we look forward to the future with confidence."

 

 

 

 

 

 

Notes:

1 Reported represents the IFRS reported statutory numbers. Where amounts in the table have been normalised for 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 12-month period in both 2019 and 2020. The pro forma numbers include a 12-month contribution from Adjarabet in 2019 (completion date: Feb 1 2019). See Appendix 4 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 FY 2019 at FY 2020 exchange rates (see Appendix 5). Growth rates in the commentary are in local or constant currency except reported numbers which are in nominal currency.

4 Revenue excludes SDIs which relate to a £15.9m refund of VAT from the HMRC, based on the historic incorrect application of VAT to UK gaming machines.

5 The "Adjusted" measures exclude separately disclosed items that are not part of the usual business activity of the Group and have therefore been reported as "separately disclosed items (SDIs)" (see note 6 to the financial statements).

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

7 The 2019 earnings per share figures have been restated to incorporate the 1,312,260 new Flutter ordinary shares that were issued in May 2020 as payment of the 2019 final dividend. The weighted average number of shares in issue during the period was adjusted to include these bonus shares as if they were issued 1 January 2019.

8 Net debt at 31 December 2020 is the principal amount of borrowings plus associated accrued interest, minus cash & cash equivalents plus/minus carrying value of debt related derivatives. This is comprised of the principal amount of borrowings plus associated accrued interest of £3,231m plus debt related derivatives of £186m less gross cash excluding customer balances of £603m 31 December 2020 (see Appendix 6).

9 Monthly Players are the total number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month. The average number of monthly players are taken to derive the measure per reporting period.

10 Online sportsbook market share is the GGR market share of FanDuel and FOX Bet for Q4 in the states in which FanDuel was live based on published gaming regulator reports in those states. During Q4 FanDuel was live in 8 states; Colorado (CO), Illinois (IL), Indiana (IN), Iowa (IA), New Jersey (NJ), Pennsylvania (PA), Tennessee (TN) and West Virginia (WV). During Q4 FOX Bet was live in 3 states; CO, NJ and PA. Online gaming market share reflects the combined NJ and PA market share of the FanDuel, FOX Bet, PokerStars and Betfair brands during Q4.

11 The leverage ratio is calculated using pro forma Adjusted EBITDA for the 12-month period to 31 December 2020.

 

 

Analyst briefing:  

The Group will host a questions and answers call for institutional investors and analysts this morning at 9:30am (GMT). Ahead of that call, a presentation will be available on the Group's corporate website ( www.flutter.com ) from 8am. 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.

A presentation replay facility will also be available at 8am on our corporate website: https://www.Flutter.com/investors .

 

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, Head of Corporate Communications

+ 44 79 3197 2959

Billy Murphy, Drury / Porter Novelli

+ 353 1 260 5000

James Murgatroyd, Finsbury

+ 44 20 7251 3801

 

Business Review 1,2,3,4

2020 was a transformational year for Flutter as we attained unparalleled scale and diversification following the completion of the TSG merger. We increased our exposure to the fast-growing US market by accelerating our buy-out of the minority shareholders in FanDuel at a compelling valuation and we ensured our balance sheet is well capitalised, positioning the Group well for future investment opportunities.

Protecting both our colleagues and customers through Covid, as well as supporting our communities, were key priorities throughout the year. We mobilised quickly in March to support the well-being of our employees, without availing of government support schemes, and we enhanced our safer gambling measures in response to lockdowns and the evolving preferences of our customers.

Safeguarding business momentum was a key priority as we commenced our integration work with TSG and we achieved this with a 19% increase in monthly players5 and revenue growth of 28%. This growth reflected excellent operational performance as well as two key structural tailwinds benefitting our sector, namely the migration of traditional retail spend to online and a shift in leisure spending patterns towards more home-based activities.

Within our online business we benefitted from enhanced product and geographic diversification, something that was particularly evident following the widespread cancellation of sports during the second quarter, when we saw commensurate growth in our gaming and poker franchises.  As sports resumed, we saw strong levels of engagement across our sports betting businesses, with customer growth of 32% in Q4 as we exited 2020.

Overall the Group delivered an excellent financial performance. On a pro forma basis revenue grew by 28% to £5.3bn. Adjusted EBITDA increased by 16% to £1.2bn as profitability in our core online businesses helped to fund the marketing and platform investments we are making in our US and International divisions.

Flutter Group strategy

The TSG merger and the minority buy-out of FanDuel have significantly accelerated progress against our four-pillar strategy:

Pillar 1 - To maximise profitable growth in our core markets (UK & Ireland, Australia)

Pillar 2 - To grow our business in the rest of the world

Pillar 3 - To attain podium positions in international regulated markets

Pillar 4 - To grow our leadership position in the US

In our core markets, we have significantly expanded the scale of our operations and identified a clear path to running the combined businesses more efficiently. The recreational nature of our brands in these markets positions us well to capitalise on regulatory developments in the future.

The strategy within our International division to attain global scale and diversification was greatly accelerated by the merger, adding new podium positions and many more top ten markets. Given this significant expansion, we have now sharpened our investment focus within PokerStars, identified key target markets and tailored plans for our brands and product. We set out the core elements of this plan below.

Having attained a leadership position in the US, our strategy now is to continue to grow it through further investment and leveraging the strong set of assets that we have.

Ultimately, we believe that the online gaming sector is similar to other large digital markets, whereby the largest player achieves superior economics through operational leverage, creating a virtuous circle for future investment in product, marketing and generosity which in turn drives further growth. 

Integration

Against the challenging backdrop of Covid, a key objective in 2020 was to maintain momentum across the Group, both before and after our merger with TSG. This included protecting the pipeline of innovative new products within our divisions and continuing to prioritise growth in the business over near-term cost synergies. Whilst maintaining performance, we have nevertheless made significant integration progress since our merger in May and have reorganised the Group into a new four divisional structure which we will report against from Q1 2021.

While our primary focus will continue to be delivery of this growth-oriented strategy, we also see material opportunities to drive cost efficiency across the Group. Following additional work, we have increased our estimate of annualised cost synergies from £140m to £170m. The additional savings mainly come from Australia following our decision to move rapidly to a single brand. Further detail on synergy guidance is provided in the operating and financial review.

Safer gambling

During 2020 we continued to prioritise safer gambling initiatives across the Group. We improved our operational capabilities, expanded our safer gambling teams and stepped up investment in technology. We upgraded the predictive models we use in UK & Ireland, Australia and PokerStars to monitor and track more customer behaviours while in the US, we enhanced our cross-product safer gambling capabilities through the migration of our customers onto our proprietary account and wallet. Education is key and in tandem with ensuring our safer gambling teams have the resources required to make our customers aware of the safer gambling tools available to them, we also committed to spend 20% of our UK TV and radio marketing budget on safer gambling messaging.

Through these initiatives we have significantly improved our ability to effectively identify and interact with customers who may be at risk. For example, we more than doubled the number of customers we checked in with via a safer gambling interaction in the UK, Ireland and Australia in 2020. In PPB 33% of those customers then went on to use a safer gambling tool. In SBG approximately 40% of revenue came from customers who have a deposit limit in place. This ensures our continued focus on growing a sustainable and recreational customer base.

Effective regulation is key to ensuring sustainability and we intend to be at the forefront of change. For example in Ireland, we recently introduced a credit card ban, a whistle to whistle advertising ban and increased our funding to improve customer protections in that market. In the UK, the Gambling Act Review has commenced, and we are actively engaging with all key stakeholders during the consultation period. Ian Proctor, Executive Chairman of Flutter UK & Ireland, has been instrumental in coordinating a major project to review our safer gambling initiatives. We have allocated substantial internal resources to providing robust and transparent responses to the request for evidence where we are advocating a customer specific and proportionate approach to affordability. We remain hopeful that a regulatory framework will be put in place that will better protect customers while recognising people's freedom to spend their disposable income as they choose.

UK & Ireland

In the UK and Ireland, our three brands will 'complement and compete'. We are sharing the best of our technology and insights across brands while allowing for differentiated marketing approaches. The 2020 performance of Paddy Power and Sky Betting and Gaming, where average monthly customers grew 36% and 12% in H2 respectively, clearly demonstrated how two recreational brands can compete effectively side-by-side while Betfair's unique offering continues to appeal to more value conscious customers.

The migration of retail customers to online is playing to our strengths. The mass market appeal of our brands, coupled with the quality of our product offering, is seeing us capture a higher share of migrated spend. We estimate that during H2, of regular UK high street bettors that migrated online, over 40% chose one of our brands as their main online account. This despite the fact that our brands only account for 5% of betting shops in the UK.

During 2020, we estimate that our share of total online revenue in the UK 6 was approximately 28%, with a 42% share of sports and a 19% share of gaming (2019 total share: 27%). We are encouraged by the increased engagement we are seeing amongst recreational customers in particular; we estimate that over 55% of all online sports bettors engaged with our brands during Q4. This was up eight percentage points on the comparable period in 2019 and illustrates why we believe we are well positioned ahead of prospective regulatory change.

Australia

The Australian online market enjoyed similar structural changes to the UK and Irish markets during 2020. With retail closed for prolonged periods and racing continuing behind closed doors, average monthly players increased by 26% across our business. We estimate that our share of the online market6 increased from 43% in 2019 to 46% in 2020.

This strong performance was delivered while completing the integration of Sportsbet and BetEasy. We made the decision to move to a single brand quickly and completed the brand migration ahead of the 2020 Spring Carnival. The migration of BetEasy customers across to the Sportsbet platform was seamless with players accounting for more than 90% of BetEasy revenues in the 12 months pre-migration going on to bet with Sportsbet. To support the migration, we provided incremental product improvements on the Sportsbet platform, such as tokenised generosity to ensure continuity of key product features already enjoyed by BetEasy customers. By doing so, we reduced the risk of customer attrition, while also enhancing the product offering to Sportsbet customers.

International

In International (comprising PokerStars, Betfair International and Adjarabet), we have established a new leadership team that combines the experience of senior members of PPB with the considerable gaming expertise of the TSG team. We outlined at our interim results that we would be implementing changes in order to align compliance standards and markets with Flutter policies and in addition, a new strategy has been developed that places multi-year investment across product, technology and marketing at the heart of our plans to grow the business. The key aspects of the strategy are as follows:

· Brand strategy: As the PokerStars brand has the largest customer base and strongest brand awareness within our international markets, it will be our lead brand. We will continue to promote Betfair in select markets such as Italy, Spain, Romania and Latin America where it enjoys strong consideration amongst sports bettors.

· Technology: This will include addressing some legacy technology challenges facing the business to create flexible, stable and modern platforms for future growth.

· Reassert PokerStars' leadership in poker: While PokerStars remains the global leader in poker, its share of the online poker market has reduced in recent years. While desktop is, and will remain, an important channel for many online poker players, improving the customer experience on mobile is also essential. We launched a new PokerStars app in Q3, replacing the existing app originally developed in 2011. We have also significantly increased marketing and customer generosity to promote the brand and product.

· Invest in direct casino acquisition: PokerStars has one of the best casino offerings in the market with over 1,500 titles, of which 100 are proprietary to Flutter. In 2020 alone, we launched over 500 new titles on the platform. PokerStars has traditionally relied on cross-sell from poker to grow the casino business. In H2, we commenced direct casino investment and while it is early days, we saw the number of customers acquired directly to casino treble in 2020.

· Create simple, intuitive cross-sell capabilities: Multi-product customers deliver better unit economics than single product players. In the near-term, our focus will continue to be on poker and casino cross-sell with increasing emphasis on sports once product improvements have been delivered during 2022.

· Pursue bolt-on opportunities in new growth markets. We will look to add to our portfolio of International businesses. The success of Adjarabet has highlighted the benefits of acquiring local brand leaders to which we can bring additional expertise. One recent example is our investment in Junglee Games, a fast-growing online rummy and daily fantasy sports (DFS) operator in India. We acquired an initial 50.1% stake in January 2021 for £48m and we look forward to helping it to grow further in the coming years. Put and call options have been put in place that will enable us to acquire 100% of the business in 2025.

US

In the US we have continued to make huge progress. Following our recent launches in Michigan and Virginia, the FanDuel sportsbook is now live online in 10 states, reaching almost a quarter of the US population. Through very strong execution, we have reinforced our leadership position, delivering Q4 market shares of 40% in online sports betting and 20% in iGaming7.

As we assess the US opportunity, we now expect the addressable market to exceed our previous estimates while the profitability we are now seeing from early customer cohorts is reinforcing our positive view with respect to the long-term potential for our business.

Total addressable market ("TAM"): We now expect the TAM for our US brands to exceed £14bn ($20bn) in 2025, a material upgrade to our previous estimate, primarily due to:

· An increase in our estimated value of sportsbook and gaming driven by the spending patterns we are seeing in the early states in which we have gone live (e.g. New Jersey, Pennsylvania and Michigan)

· An increase in the number of states that we expect to regulate sports betting and gaming; we now expect online sports betting to be available to 65% of the US adult population by 2025 while gaming is expected to be accessible to 16% (previously 50% and 11% respectively)

Not all states will have reached their mature value by 2025 and so we expect the value of the market to continue to grow thereafter.

Customer economics: In the US, our 2020 EBITDA loss of £170m reflected our ongoing investment in customer acquisition in both new and existing states. This headline investment however masked the strong underlying sportsbook and gaming contribution generated from customers acquired in 2018 and 2019 in New Jersey, Pennsylvania, West Virginia and Indiana:

· Contribution from these early cohorts was £70m ($91m) in 2020. Contribution is the revenue we report after deducting cost of sales and marketing costs and is before accounting for fixed costs which can be spread over the expanding number of states as they launch. This positive contribution was driven by our proven ability to retain customers due to our superior product offering. On average, retention rates in the US after 12 months have been 1.8 times those of our UK brands.

· This positive contribution more than funded our ongoing investment in customer acquisition in these states where we continued to grow strongly, more than doubling our customer base during the year. The advantage our DFS platform gives us in acquiring customers efficiently at scale persists.

· Excluding 2020 state launches, combined contribution from all customers in NJ, PA, WV and IN was positive during the year with £39m ($51m) generated in New Jersey (versus previous guidance of £31m ($40m)). 

This positive contribution, combined with the profitability of our TVG racing and FanDuel daily fantasy sports businesses (both of which continue to perform well), is providing us with an ongoing source of funding to invest in our US expansion.

Operational update: In 2020 we made further progress in increasing the reliability and scalability of our US technology platforms. We moved FanDuel on to our own proprietary account and wallet, making player cross-sell journeys smoother and thereby improving our customer acquisition funnel. We also began to migrate our sports betting platform across to the Group's Global Betting Platform on a state by state basis, with two states now live, giving FanDuel access to a wider range of Flutter platform features. We expect to complete this migration by the start of the next NFL season.

FanDuel continues to lead the market when it comes to product. We have the widest breadth of betting markets available in the US. Our experienced global in-house trading team of over 650 people continues to innovate, helping us deliver higher margin product advantages such as Same Game ParlayTM and engaging customer experiences such as our "Spread the Love" campaigns, both of which have proven to be very popular with customers.

We are also continuing to refine our state launch "playbook" as we expand into new states. As an example, even before we went live in Michigan and Virginia in January 2021, we had a significant number of registered sportsbook and gaming customers. During Super Bowl LV week, we acquired over 350,000 new sportsbook and gaming customers, exceeding our customer acquisition for all of 2019. Our 2021 customer acquisition year to date is already close to 90% of that achieved in all of 2020. This leaves us with a business today of unparalleled scale, with a market leading online sportsbook and gaming market share7 of 31% and revenue of more than 1.4 times our nearest competitor. Our US revenues currently exceed our next two nearest competitors combined.

Finally, the early acquisition of FanDuel minorities in December, at a significant discount to fair market value, has simplified our US business. In consultation with our media partner Fox, we are now better placed to assess the optimal structure for our US operations going forward.

Capital structure and balance sheet update8

The Group's capital structure has evolved significantly during the period. The main drivers of change were:

· Debt re-financing in March, with well-priced facilities totalling £1.4bn secured

· Combination with TSG in May increasing the Group's leverage to 3.2 times

· Equity placing of £0.8bn in May to provide strategic flexibility for additional investment opportunities

· Accelerated acquisition of Fastball's 37.2% stake in FanDuel for £3.3bn in December, of which 87% was financed via equity (including a £1.1bn placing)

The net result was that the Group concluded 2020 with net debt of £2.8bn, equating to pro forma leverage of 2.3 times, materially down from 3.2 times at the time of merger completion. The Group remains committed to its medium-term leverage target of 1-2 times and once achieved, the Board will review its dividend policy.

 

Kentucky legal proceedings

On 17 December 2020, the Kentucky Supreme Court reinstated a 2015 £621m ($870m) trial court judgment against TSG with compounding interest of 12% per annum. As previously disclosed, the gross gaming revenues that TSG generated in Kentucky during the relevant period were approximately £13m ($18m). Flutter has since petitioned the Kentucky Supreme Court for a rehearing. Flutter is confident that any amount it ultimately becomes liable to pay will be a limited proportion of the reinstated judgement. Further detail is available at note 15 to the financial statements.

 

 

 

 

Operating and Financial Review1-15

Group

 

Reported

Pro forma

 

FY

FY

 

FY

FY

 

CC

 

2020

2019

Change

2020

2019

Change

Change

 

£m

£m

%

£m

£m

%

%

 

 

 

 

 

 

 

 

Sports revenue

2,725

1,667

+64%

3,000

2,400

+25%

+25%

Gaming revenue

1,673

473

+253%

2,264

1,743

+30%

+32%

Total revenue

4,39810

2,140

+106%

5,264

4,144

+27%

+28%

 

 

 

 

 

 

 

 

Cost of sales

(1,539)

(650)

+137%

(1,782)

(1,198)

+49%

+49%

Cost of sales as a % of net revenue

35.0%

30.4%

+460bps

33.8%

28.9%

+490bps

+480bps

 

 

 

 

 

 

 

 

Gross profit

2,859

1,490

+92%

3,483

2,946

+18%

+20%

 

 

 

 

 

 

 

 

Sales and marketing

(991)

(465)

+113%

(1,130)

(840)

+34%

+36%

Contribution

1,868

1,025

+82%

2,353

2,105

+12%

+13%

 

 

 

 

 

 

 

 

Other operating costs

(884)

(544)

+62%

(997)

(880)

+13%

+13%

Corporate costs

(95)

(55)

+73%

(125)

(137)

-9%

-9%

 

 

 

 

 

 

 

 

Adjusted EBITDA1,2

889

425

+109%

1,231

1,089

+13%

+16%

Adjusted EBITDA margin %

20.2%

19.9%

+30bps

23.4%

26.3%

-290bps

-240bps

 

 

 

 

 

 

 

 

Depreciation and amortisation

(213)

(145)

+47%

(241)

(220)

+10%

+10%

 

 

 

 

 

 

 

 

Adjusted1 operating profit

676

281

+141%

990

869

+14%

+18%

 

 

 

 

 

 

 

 

Adjusted net interest expense

(110)

(14)

+673%

 

 

 

 

Separately disclosed items

(565)

(131)

+332%

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

1

136

-99%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted1 earnings per share

402.7p

298.4p

 +35%

496.6p 

415.7p

+19%

 

 

 

 

 

 

 

 

 

Basic earnings per share

29.3p

180.2p

-84% 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share

0.0p

200p

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt at period end

2,814

265

 

 

 

 

 

Note: Flutter's combination with TSG completed on 5 May 2020. Reported 2020 numbers reflect a full 12-month contribution from Flutter and a 241-day contribution from TSG. The pro forma numbers presented show the Group's financials with TSG included for a full 12-month period in both 2019 and 2020. The pro forma numbers include a 12-month contribution from Adjarabet in 2019.

Reported

Revenue grew by 106% in 2020 to £4,398m reflecting the combination with TSG on 5 May 2020. Adjusted EBITDA grew by 109% to £889m.

Profit before tax was £1m (2019: £136m) after separately disclosed items ('SDIs') totalling £565m (2019: £131m). The growth in SDIs was primarily driven by an increase in the amortisation of acquired intangibles from £113m to £432m associated with the combination with TSG and deal costs associated with the TSG merger and the initial delivery of synergies. Adjusted net interest expense reflects the significant increase in debt from the point of the combination with TSG.

Basic earnings per share were 29.3 pence primarily due to non-cash merger related accounting.  No dividend is proposed for 2020 (2019: 200 pence per share).

Proforma3

Total revenue increased 28% to £5,264m with Adjusted EBITDA increasing by 16% to £1,231m. Performance was strong throughout 2020 with revenue growth of 22% in H1, accelerating to 34% in H2. Within the revenue mix, sports and gaming grew 25% and 32% respectively.

Performance in sports reflected a year of two halves with growth of 8% in H1 and 40% in H2. The first half was adversely impacted by Covid-related sports cancellations and temporary closures of retail. This was particularly pronounced during the second quarter.

Sportsbook staking declined 13% in H1 with growth in Australia and the US partially offsetting declines in UK and Ireland. Sports revenue still grew 8% in H1 as net revenue margins increased 280bps year on year. This increase reflected a material benefit from bookmaker friendly sports results in all divisions as well as an uplift from changing customer preferences which saw players wager more on higher margin sports and bet types.

During H2 the return of global sports, a condensed sporting calendar and the launch of 3 new US states all contributed to 40% sports revenue growth. Stakes grew 45% year on year driven by the continued migration of customers from retail to online as access to retail betting across Ireland, the UK and Australia was adversely affected by Covid. Net revenue margins remained flat year on year in the second half, with the benefit of favourable sports results and structural margin improvements in the Group ex-US offsetting increased promotional investment in US customer acquisition. 

Combined gaming revenue increased by 32% in 2020; 40% in H1 and 25% in H2. The excellent growth reflected a substantial influx of recreational customers, in particular during the first global lockdown. Poker and casino both benefitted from this customer growth.

Cost of sales as a percentage of revenue increased by 480 basis points due to the higher proportion of revenues generated in Australia and the US during the year, where taxes, product fees and markets access costs lead to a higher cost of sales.

Other operating costs increased 13% year on year primarily reflecting our expanded presence in the US and increased investment in PokerStars during the second half of the year. Corporate costs reduced by 9% due to merger related synergies.

Adjusted EBITDA grew 16% with strong operating leverage in SBG and Australia helping to fund marketing and platform investment in PokerStars and the US.

As we flagged at the time of the merger announcement, there are certain costs (such as share based payments and recurring professional/legal fees) that TSG historically treated as SDIs, but Flutter considers "business as usual" operating costs. Flutter now treats all of these costs as operating costs. Had Flutter's accounting treatment been applied to TSG's 2019 reported earnings, TSG's full year EBITDA would have been £663m versus its previously reported figure of £724m, a reduction of £61m. A full reconciliation of previously reported financials to presented pro forma financials can be found in Appendix 3.

The pro forma effective tax rate for the Group was 13.2% in 2020 (2019: 10.4%) primarily driven by the geographic mix of profits during the year and the increase in US losses not recognised for deferred tax purposes.  Excluding the US, the pro forma effective tax rate was 10.4% in 2020.

Adjusted earnings per share increased by 19% to 496.6p in 2020 reflecting the strong performance of the Group.

 

PPB

 

 

 

 

 

 

 

 

 

 

 

PPB Total

PPB Online

PPB Retail

 

FY

FY

 

FY

FY

 

FY

FY

 

 

2020

2019

Change

2020

2019

Change

2020

2019

Change

Pro forma

£m

£m

%

£m

£m

%

£m

£m

%

 

 

 

 

 

 

 

 

 

 

Sportsbook stakes

5,847

6,983

-16%

4,848

5,189

-7%

998

1,793

-44%

Sportsbook net revenue margin

10.5%

9.3%

+120bps

9.7%

8.1%

+160bps

14.3%

12.8%

+150bps

 

 

 

 

 

 

 

 

 

 

Sports revenue

813

896

-9%

670

667

+1%

143

230

-38%

Gaming revenue

481

427

+13%

424

344

+23%

57

82

-30%

Total revenue

1,294

1,323

-2%

1,094

1,011

+8%

200

312

-36%

 

 

 

 

 

 

 

 

 

 

Cost of sales

(382)

(355)

+8%

(339)

(285)

+19%

(44)

(70)

-38%

Cost of sales as a % of net revenue

29.5%

26.8%

+270bps

30.9%

28.2%

+280bps

21.8%

22.4%

-60bps

 

 

 

 

 

 

 

 

 

 

Gross profit

912

968

-6%

756

726

+4%

156

242

-35%

 

 

 

 

 

 

 

 

 

 

Sales and marketing

(287)

(248)

+16%

(281)

(241)

+16%

(6)

(7)

-11%

Contribution

625

720

-13%

475

485

-2%

150

235

-36%

 

 

 

 

 

 

 

 

 

 

Other operating costs

(354)

(330)

+7%

(206)

(172)

+20%

(148)

(159)

-7%

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA1,2

271

390

-31%

269

314

-14%

2

76

-98%

Adjusted EBITDA margin

20.9%

29.5%

-850bps

24.6%

31.0%

-640bps

0.9%

24.5%

-2,360bps

 

 

 

 

 

 

 

 

 

 

Depreciation and amortisation

(94)

(93)

+1%

(52)

(50)

+4%

(43)

(43)

-1%

 

 

 

 

 

 

 

 

 

 

Adjusted1 operating profit

176

297

-41%

217

263

-18%

(41)

33

-223%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPB Online

Q1

Q2

Q3

Q4

FY20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly players '000s

1,358

 1,107

  1,457

  1,719

 1,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average monthly players5 YoY%

+1%

-25%

+22%

+34%

+6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPB operates Paddy Power, Betfair and Adjarabet brands online, as well as retail operations in the UK and Ireland. 

Adjusted EBITDA for PPB declined 31% in 2020 to £271m. The Covid pandemic resulted in shop closures for much of 2020 while PPB online was negatively impacted by the cancellation of sports. This was most pronounced on the betting exchange where we offered 18% fewer markets than during 2019.

PPB Online

Revenue increased by 8% to £1,094m, driven by 6% growth in average monthly players to 1.4m. A revenue decline of 8% in H1 was more than offset by 24% growth in H2, benefitting from excellent growth in average monthly players through the second half of the year.

Total sports revenue (sportsbook and exchange) grew 1%. Sportsbook revenue increased 12%. While sportsbook staking was down 7% (declining 32% in H1 with growth of 20% in H2), net revenue margins increased 160 basis points year on year to 9.7%. Favourable sports results drove most of this uplift, accounting for approximately 140 basis points of the increase. Exchange and B2B revenue declined by 19% in 2020, but in H2 the exchange grew 3% as the sporting calendar normalised and US election markets generated good levels of customer interest.

Gaming revenue grew 23%, with quarterly growth rates improving sequentially as the year progressed (Q1: +9%, Q4: +29%). This improvement reflected continued investment in new customer propositions such as 'Paddy's Wonder Wheel' and 'Betfair's Prize Pinball', both of which proved popular with customers.

Cost of sales as a percentage of revenue increased by 280 basis points to 30.9% in 2020. The strong performance of gaming, which attracts higher direct costs, an additional quarter of higher remote gaming duty rate (introduced April 1 2019) and extra online costs to support a shortfall in racing funding all contributed to this increase.

Sales and marketing grew 16% with incremental spend upon the return of sports in H2 and investment to support the launch of our improved gaming product, resulting in strong customer growth. The increase in other operating costs of 20% also reflected the investment in this improved product, combined with further expansion of our safer gambling programmes.

PPB Retail

Adjusted EBITDA was £2m in 2020 (2019: £76m). This reflected the disruption across our retail estates due to Covid restrictions, with our shops closed on average for 38% of 2020. This led to a 36% decline in revenue.  In the period post-March when shops were open, underlying performance was reasonably strong notwithstanding the disrupted nature of trading and social distancing measures in place.

Revenue declined 28% in our UK estate, where our shops were closed 36% of the year. In Ireland revenue declined 46%, with shops closed 40% of the time. The better performance in the UK can be attributed to competitor shop closures, more favourable sports results and a strong performance from gaming when available.

Operating costs declined 7% in 2020. We paid, and continue to pay, our staff when shops are closed, without availing of any government support schemes to do so.

While retail has been highly disrupted in 2020, we continue to see a great opportunity for our well-invested estate within the portfolio of Group assets.

 

SBG9

 

FY

FY

 

 

 

 

2020

2019

Change

 

 

Pro forma

£m

£m

%

 

 

 

 

 

 

 

 

Sportsbook stakes

4,173

4,578

-9%

 

 

Sportsbook net revenue margin

13.6%

9.1%

+450bps

 

 

 

 

 

 

 

 

Sports revenue

590

442

+34%

 

 

Gaming revenue

385

295

+31%

 

 

Total revenue

975

736

+32%

 

 

 

 

 

 

 

 

Cost of sales

(278)

(203)

+37%

 

 

Cost of sales as a % of net revenue

28.5%

27.6%

+90bps

 

 

 

 

 

 

 

 

Gross profit

697

533

+31%

 

 

 

 

 

 

 

 

Sales and marketing

(160)

(156)

+3%

 

 

Contribution

537

377

+43%

 

 

 

 

 

 

 

 

Other operating costs

(146)

(124)

+18%

 

 

 

 

 

 

 

 

Adjusted EBITDA1,2

391

253

+55%

 

 

Adjusted EBITDA margin

40.1%

34.4%

+570bps

 

 

 

 

 

 

 

 

Depreciation and amortisation

(28)

(22)

+28%

 

 

 

 

 

 

 

 

Adjusted1 operating profit

364

232

+57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBG

Q1

Q2

Q3

Q4

FY 20

 

 

 

 

 

 

Average monthly players '000s

1,621

  1,297

  1,574

1,766

1,564

 

 

 

 

 

 

Average monthly players5 YoY%

+4%

-17%

+12%

+12%

+3%

 

 

 

 

 

 

SBG includes SkyBet sportsbook and Sky Gaming's various casino brands. It also includes Oddschecker

SBG grew Adjusted EBITDA by 55% to £391m driven by a combination of 32% revenue growth and cost control, particularly in marketing, where costs only increased 3%.

Sports revenue advanced 34% with a 450 basis point increase in net revenue margin to 13.6%. The increased margin reflected two factors:

· Favourable sports results with the actual margin 330 basis points higher than expected across both football and racing; and

· An increase in Sky Bet's expected margin of 120 basis points, with horse racing the main driver due to the change in mix of racing during Q2 cancellations and ongoing refinement of our pricing strategy.

Full year sportsbook stakes declined 9% with H1 staking 30% lower year on year, with a subsequent 13% increase in H2. The irregular sporting calendar and sustained period of favourable sports results both influenced half yearly staking trends. We believe that H2 growth is more reflective of the underlying trend in the business, with record levels of customer engagement since the start of the 2020/2021 football season.

Sales and marketing costs increased 3% during 2020 to £160m, with marketing spend decreasing as a percentage of net revenue by around 500 basis points to 16.4%. This reflected the fact that revenues were boosted by positive sports results and the cancellation of some marketing spend during sports' hiatus in H1.

While other operating costs increased 18% as we invested to support the expansion of the business, we benefitted from material operating leverage on revenue growth of 32%. The efficiencies in marketing and other operating costs has resulted in Adjusted EBITDA margin of 40.1% for 2020, a 570 basis point improvement on 2019.
 

Australia4,9

 

FY

FY

 

CC

 

 

2020

2019

Change

Change

 

Pro forma

£m

£m

£

A$

 

 

 

 

 

 

 

Sportsbook stakes

9,713

6,751

+44%

+46%

 

Sportsbook net revenue margin

11.1%

10.1%

+100bps

+100bps

 

 

 

 

 

 

 

Revenue

1,075

681

+58%

+59%

 

 

 

 

 

 

 

Cost of sales

(520)

(299)

+74%

+76%

 

Cost of sales as a % of net revenue

48.4%

43.9%

+450bps

+450bps

 

 

 

 

 

 

 

Gross profit

555

382

+45%

+47%

 

 

 

 

 

 

 

Sales and marketing

(129)

(124)

+4%

+5%

 

Contribution

426

258

+65%

+66%

 

 

 

 

 

 

 

Other operating costs

(108)

(96)

+12%

+14%

 

 

 

 

 

 

 

Adjusted EBITDA1,2

318

161

+97%

+98%

 

Adjusted EBITDA margin

29.6%

23.7%

+590bps

+570bps

 

 

 

 

 

 

 

Depreciation and amortisation

(30)

(30)

+1%

+2%

 

 

 

 

 

 

 

Adjusted1 operating profit

288

131

+119%

+119%

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia

Q1

Q2

Q3

Q4

FY 20

 

 

 

 

 

 

Average monthly players '000s

581

  611

  876

  1,109

794

 

 

 

 

 

 

Average monthly players5 YoY%

+9%

-2%

+39%

+53%

+26%

 

 

 

 

 

 

           

 

Revenue grew 59% in 2020 to £1,075m with excellent operating leverage resulting in Adjusted EBITDA growth of 98%.

Strong top line growth was driven by the addition of over 675,000 new players as Sportsbet benefited from a significant channel shift of retail customers to online. Momentum in customer growth accelerated as the year progressed. A condensed calendar of marquee sporting events such as the Spring Racing Carnival and State of Origin series saw average monthly players grow by 46% in H2 to more than 1.1m by Q4.

Staking increased by 46% to £9.7bn despite net revenue margins increasing 100 basis points year on year with several factors driving this growth:

· Generosity increased by 150 basis points, helping to stimulate acquisition and staking growth, particularly in H2 when staking was up 71% compared to the prior year

· Favourable results added 80 basis points to net revenue margin

· The temporary increase in racing's share of revenue led to a structural margin benefit

· Customers continued to move towards higher margin products such as "Same Game Multis" with over 50% of Australian customers placing a bet of this type during 2020

Cost of sales as a percentage of revenue increased 450 basis points, driven by a higher proportion of revenues coming from racing (which incur higher product fees) as well as the impact of an increase in tax and product fee rates in 2020.

Sales and marketing increased by £10m reflecting additional investment in customer retention, partly offset by synergies of £5m as we moved to a single brand ahead of the Spring Carnival. Other operating costs increased by 14%, reflecting ongoing investment in our technology platforms to increase capacity, with Sportsbet processing double the volume of bets in 2020 compared with 2019. Operating cost synergies were delivered towards the end of 2020 and had limited impact on the 2020 cost base.  Adjusted EBITDA almost doubled to £318m, reflecting excellent momentum and operating leverage. 

 

PokerStars4,9

 

 

FY

FY

 

CC

 

 

2020

2019

Change

Change

 

Pro forma

£m

£m

%

%

 

 

 

 

 

 

 

Sportsbook stakes

748

755

-1%

+1%

 

Sportsbook net revenue margin

8.5%

7.5%

+100bps

+100bps

 

 

 

 

 

 

 

Sports revenue

64

57

+12%

+13%

 

Gaming revenue

1,161

961

+21%

+24%

 

Total revenue

1,225

1,018

+20%

+23%

 

 

 

 

 

 

 

Cost of sales

(282)

(217)

+30%

+29%

 

Cost of sales as a % of net revenue

23.0%

21.3%

+170bps

+100bps

 

 

 

 

 

 

 

Gross profit

943

801

+18%

+22%

 

 

 

 

 

 

 

Sales and marketing

(206)

(144)

+43%

+46%

 

Contribution

737

657

+12%

+16%

 

 

 

 

 

 

 

Other operating costs

(191)

(154)

+24%

+21%

 

 

 

 

 

 

 

Adjusted EBITDA1,2

545

503

+8%

+15%

 

Adjusted EBITDA margin

44.5%

49.4%

-490bps

-340bps

 

 

 

 

 

 

 

Depreciation and amortisation

(47)

(42)

+13%

+14%

 

 

 

 

 

 

 

Adjusted1 operating profit

498

461

+8%

+15%

 

 

 

 

 

 

 

 

 

 

 

 

 

PokerStars

Q1

Q2

Q3

Q4

FY 20

 

 

 

 

 

 

Average monthly players '000s

1,469

  1,981

  1,501

  1,558

1,627

 

 

 

 

 

 

Average monthly players5 YoY%

+5%

+57%

+25%

+26%

+28%

 

 

 

 

 

 

PokerStars includes PokerStars, PokerStars Casino, PokerStars Sports and Full Tilt brands which collectively offer online poker, casino and sports betting products. Excludes PokerStars US business.

PokerStars grew revenue by 23% to £1,225m in 2020 with EBITDA growth of 15% to £545m. This performance was driven by 28% growth in average monthly players. Player engagement with the brand initially increased in Q2 following the introduction of lockdown restrictions in many jurisdictions and was supplemented by our increased investment in customer retention and marketing in H2. For example, in H2 promotional generosity as a percentage of gross revenue increased to 28%, double the rate in 2019.

Gaming revenue increased by 24% year on year, with casino and poker growing 37% and 17% respectively:

· In H1, gaming revenue grew 43% (Poker +38%, Casino +51%) driven by elevated player volumes as customers sought alternative forms of home entertainment during Covid restrictions

· During H2, underlying customer activity on Poker was encouraging, as we increased player generosity and marketing spend, driving greater customer engagement. Around 30% of players acquired / reactivated in Q2 continued to play in Q4. Net revenue declined 6% in H2 as a result of the compliance measures taken to improve the sustainability of the business.

· Casino continued its strong performance with revenue up 24% in H2, benefitting from cross-sell and direct casino customer volumes. The quality of the PokerStars casino proposition and increased investment in generosity has resulted in strong month on month customer retention rates.

Sports revenue increased by 13% to £64m, benefitting from favourable sports results across the year. Cost of sales as a percentage of revenue grew one percentage point to 23.0% due to the higher direct costs associated with casino games which accounted for a larger proportion of revenue in 2020.

Sales and marketing costs increased 46% to £206m, with H2 marking a significant step-change in investment behind the brand to address historic underinvestment. H2 marketing spend was £43m higher than H1 and £55m above H2 2019. This investment supported the new 'I'm in' brand campaign and the direct acquisition of casino customers.

Other operating costs increased 21% as we commenced the programme to improve PokerStars technology and operating capabilities. This multi-year investment includes additional technology resources, with headcount exiting 2020 20% higher than the start of the year, and technology infrastructure improvements to address the foundational capabilities required to stabilise the business.

 

US4,9

 

FY

FY

 

CC

 

 

2020

2019

Change

Change

 

Pro forma

£m

£m

£

US$

 

 

 

 

 

 

 

Sportsbook stakes

4,411

2,396

+84%

+86%

 

Sportsbook net revenue margin

4.6%

4.3%

+30bps

+30bps

 

 

 

 

 

 

 

Sports revenue

458

325

+41%

+42%

 

Gaming revenue

237

61

+288%

+292%

 

Total revenue

695

386

+80%

+81%

 

 

 

 

 

 

 

Cost of sales

(319)

(124)

+157%

+160%

 

Cost of sales as a % of net revenue

46.0%

32.2%

+1,380bps

+1,390bps

 

 

 

 

 

 

 

Gross profit

376

262

+43%

+44%

 

 

 

 

 

 

 

Sales and marketing

(348)

(168)

+107%

+110%

 

Contribution

28

94

-70%

-71%

 

 

 

 

 

 

 

Other operating costs

(198)

(175)

+13%

+14%

 

 

 

 

 

 

 

Adjusted EBITDA1,2

(170)

(82)

+108%

+115%

 

Adjusted EBITDA margin

-24.4%

-21.1%

-330bps

-380bps

 

 

 

 

 

 

 

Depreciation and amortisation

(37)

(29)

+28%

+30%

 

 

 

 

 

 

 

Adjusted1 operating profit

(207)

(110)

+87%

+92%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US

Q1

Q2

Q3

Q4

FY20

 

 

 

 

 

 

Average monthly players '000s

765

  455

  1,176

  1,490

  972

 

 

 

 

 

 

Average monthly players5 YoY%

+57%

+18%

+111%

+55%

+62%

 

 

 

 

 

 

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

Revenue grew by 81% to £695m reflecting the diversified product portfolio offered in the US, as well as additional state openings.  During the year we launched the FanDuel online sportsbook in 4 additional states (Colorado, Illinois, Iowa and Tennessee) and online gaming in Pennsylvania in January. FOX Bet also added Colorado.

Sports revenue increased by 42% reflecting sportsbook growth of 101% and combined daily fantasy sports and racing growth of 15%. The profile of revenue growth for each product varied significantly quarter to quarter due to sports cancellations. The increased prominence of US horse racing led our TVG business to generate record customer volumes during the year with average monthly players growing 60% over 2019.  Conversely daily fantasy was materially impacted by the reduced number of sports events during the year.

Sportsbook staking grew 86%, with the return of sport and new state launches driving growth in H2 of 124% year on year.  Net revenue margin increased by 30 basis points reflecting structural increases arising from risk and trading improvements and a greater demand for higher margin products such as parlays as well as bookmaker friendly results. These margin benefits helped to offset the significant level of investment we made in generosity during the year as we continued to focus on new customer acquisition in both new and existing states.

Gaming revenue grew 292% to £237m with the launch in Pennsylvania in January augmented by a shift in wallet share from sports to poker and casino in H1 as the sporting calendar was disrupted. Launch of the FanDuel proprietary account and wallet in July boosted cross-sell performance in H2 through an improved customer journey. The launch of live casino in November in Pennsylvania has also proven popular with customers. 

Cost of sales increased as a percentage of revenue by 1,390 basis points due to the increase in the proportion of revenue generated by our higher cost of sales sportsbook and gaming businesses.

Marketing more than doubled to £348m, increasing as a percentage of revenue to 50%. This reflects three factors: (i) new state launches, (ii) the continued strong customer acquisition in existing states and (iii) additional investment to re-engage customers following the return of sport.

Other operating costs increased 14% year on year but reduced as a percentage of revenue as we leverage our scale to increase efficiency. The increase of £22m was primarily driven by investment in our technology and teams to support the migration to our proprietary platforms as well as new state launches.

The US business generated an EBITDA loss of £170m, in line with previous guidance. 

 

Synergies

We now expect our combination with TSG to yield £170m in annualised cost synergies for the Group versus guidance of £140m upon announcement of the transaction. The additional savings arise primarily from the move to a single brand in Australia. The synergy figure is net of re-investments in certain parts of the business. For example, we have reallocated certain technology teams from duplicate systems work to support PokerStars technology improvements and Group functions required strengthening to support a Group of our scale.

 

FY

FY

FY

FY

 £m

2020

2021

2022

2023

 

 

 

 

 

Synergy by year

25

90

140

170

 

In addition to the above cost synergies, we also expect to achieve £20m in Capex synergies annually. This saving will be achieved by leveraging Flutter's proprietary Global Betting Platform for the provision of sports betting across the Group and lower infrastructure costs in Australia.

We have also taken steps to realise finance cost synergies through refinancing the Group debt. This has already seen the weighted average cash cost of our debt decrease to 4.18% in December from 4.90% on a pro forma basis in March 2020. The step down in the make-whole costs in July 2021 for the $1bn Senior Unsecured Notes is an opportunity to refinance and reduce our debt cost further.  Additionally, the TLB is currently priced above the level we would expect for a credit of the quality of Flutter and we will look to refinance this debt, considering prevailing credit market conditions and our expectations around our credit rating.

 

 

Cash flow and financial position

 

FY

 

2020

Pro forma

£m

 

 

Adjusted EBITDA

1,231

Capex

(252)

Working capital

310

Corporation tax 

(93)

Adjusted free cash flow

1,197

Cash flow from separately disclosed items (SDI)

(120)

Free cash flow

1,077

Interest cost

(177)

Other borrowing costs

(24)

Settlement of swaps

(36)

Lease liabilities paid and other

(23)

Net increase in cash before equity raises & FanDuel consideration

817

Proceeds from equity raises

1,921

Acquisition of further interest in FanDuel

(1,546)

Net increase in cash

1,192

 

 

Net debt at start of year

(3,827)

Foreign currency exchange translation

(20)

Change in fair value of hedging derivatives

(159)

Net debt at 31 December 2020

(2,814)

 

 

 

The net increase in cash of £1,192m during the period primarily relates to strong free cash flow of £1,077m.

Capital expenditure of £252m, reflects the on-going investment in Group-wide product and technology development, as well as expansion into the US.

Working capital continues to be positively affected by enhanced scale and the strong financial performance of the Group, particularly in Q4. Creditors have increased significantly, principally in relation to direct costs where point of consumption taxes and product fees are generally paid one quarter after revenue is generated. The overall working capital benefit in 2020 is expected to partially unwind in 2021.  

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

Interest costs were £48m lower than 2019 on a pro forma basis from the repayment of debt following the Group's equity raise in May and the reduction in weighted average cost of debt following agreement of more favourable financing terms post completion.

As discussed earlier, the Group's financial structure has evolved significantly during 2020. The increase in debt following the combination with TSG was partly offset by an equity raise of £0.8bn in May. A further equity raise in December of £1.1bn was used to partly fund the additional interest acquired in FanDuel.

The Group has cross currency swap agreements in place as part of its strategy to hedge the impact of currency fluctuations on its leverage ratio. Changes in the fair value of these hedging derivatives are reflected in net debt.

As at 31 December 2020, the Group had net debt of £2,814m, excluding customer balances, representing a leverage ratio of 2.3 times.

 

 

 

Separately disclosed items

 

FY

FY

 

2020

2019

 

£m

£m

 

 

 

Amortisation of acquisition related intangible assets

(432)

(113)

Acquisition fees and associated costs

(33)

(18)

Restructuring and integration costs

(96)

  -

Impairment

(23)

  -

VAT refund

11

  -

Operating profit impact of separately disclosed items

(573)

(131)

 

 

 

Financial Income

79

  -

Financial Expense

(71)

  -

Profit before tax impact of separately disclosed items

(565)

(131)

 

 

 

Tax credit on separately disclosed items

58

19

Total separately disclosed items

(507)

(112)

 

 

 

 

Separately disclosed items do not relate to business as usual activity of the Group and therefore are excluded from adjusted profits.

During 2020 the primary driver of these costs was the combination with TSG.

The uplift in amortisation of intangibles to £432m was due to the 2020 combination with TSG, with ongoing amortisation related to the acquisition of Betfair in 2016, the combination of the Group's US assets with FanDuel in 2018 and the 2019 acquisition of Adjarabet.

The Group also incurred transaction fees and associated costs of £33m in connection with the TSG combination and the acquisition of the Group's additional 37.2% stake in FanDuel in December 2020. This does not include any professional fees incurred by TSG prior to the date of the combination.

Restructuring and integration costs primarily relate to the delivery of integration and synergies associated with the TSG combination.

During the year, the Group recognised impairments of £23m relating to certain property assets, retail licenses and capitalised development expenditure incurred by the TSG business.

The Group received a VAT refund in respect of a historical VAT overpayment in relation to retail gaming machines in the UK.

Financial income and expense items reflect gains and/or losses in respect of the Group's debt financing, principally related to embedded derivatives, accelerated accretion on debt repayments and foreign exchange. The expense line also includes additional contingent consideration payable for HRTV, now part of TVG of £22m.

For further details in relation to separately disclosed items, see note 6 of the financial statements. 

Current trading/Outlook

2021 has seen a continuation of the strong momentum enjoyed by the Group. Growth in player volumes remains encouraging across all divisions, while sports results have also been favourable relative to expectations, particularly in the UK and Ireland. These factors have resulted in an increase in Group revenue of 36% in the first 7 weeks of the year (to Feb 21) versus the comparable period in 2020.

Covid restrictions continue to impact our retail business in the UK and Ireland. The latest Government guidelines suggest that our UK shops may re-open in mid-April while it looks like it could be May at the earliest before we are able to reopen our Irish shops. For each month that our UK estate is shut, we anticipate an EBITDA loss of £5m while in Ireland, the monthly loss is expected to be £4m.

In Germany, there are proposals to introduce a 5.3% turnover tax on online poker and slots from July 1st this year. While the tax is yet to be ratified, if it does come into force we believe it would effectively make the German online gaming market commercially unviable for regulated operators, with the taxes being equivalent to significantly greater than 100% of gross revenue. The financial impact of such a change would depend on how it is implemented and what, if anything, we could to do to mitigate the charge, but our initial estimate is that the contribution impact could be between £15m and £25m in 2021 if it comes into effect on July 1.

Overall, we are very pleased with the momentum in our business as we continue to build our recreational player base globally and look forward to the future with confidence.

_____________________________________________________________________________________

1 The "Adjusted" measures exclude separately disclosed items, that are not part of the usual business activity of the Group and have been therefore reported as "separately disclosed items" (see note 6 to the financial statements).

2 EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure. The Group uses EBITDA, Adjusted EBITDA and Adjusted operating profit to comment on its financial performance. These measures are used internally to evaluate performance, to establish strategic goals and to allocate resources. The directors also consider that these are 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. These are non-GAAP financial measures and are not prepared in accordance with IFRS and, as not uniformly defined terms, these 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.

3 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 12-month period in both 2019 and 2020. The pro forma numbers include a 12-month contribution from Adjarabet in 2019 (completion date: 1 Feb 2019). See Appendix 4 for a reconciliation of pro forma results to statutory results.

4 Growth rates in the commentary are in local or constant currency12 except reported numbers which are in nominal currency.

5 Monthly Players are the total number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month. The average number of monthly players are taken to derive the measure per reporting period.

6 Total market share of Flutter brands in UK and Australia based on internal estimates.

7 Online sportsbook market share is the GGR market share of FanDuel and FOX Bet for Q4 in the states in which FanDuel was live using published gaming regulator reports in those states. During Q4 FanDuel was live in 8 states; Colorado (CO), Indiana (IN), Iowa (IA), Illinois (IL), New Jersey (NJ), Pennsylvania (PA), Tennessee (TN) and West Virginia (WV). During Q4 FOX Bet was live in 3 states; Colorado (CO), New Jersey (NJ) and Pennsylvania (PA). Online gaming market share reflects the combined NJ and PA market share of the FanDuel, FOX Bet, PokerStars and Betfair brands during Q4. Total online share refers to our share of both sportsbook and gaming markets combined as defined above.

8 The leverage ratio is calculated using pro forma Adjusted EBITDA for the 12-month period to 31 December 2020.

9 A full reconciliation of previously reported financials to presented pro forma financials can be found in Appendix 3.

10 Reported revenue and cost of sales exclude SDIs which relate to a £15.9m refund of VAT from the HMRC, based on the historic incorrect application of VAT to UK gaming machines.

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

12 Constant currency ("cc") growth throughout the Business Review and Operating & Financial Review is calculated by retranslating the non-sterling denominated component of FY 2019 at FY 2020 exchange rates (see Appendix 5).

13 The 2019 earnings per share figures have been restated to incorporate the 1,312,260 new Flutter ordinary shares that were issued in May 2020 as payment of the 2019 final dividend. The weighted average number of shares in issue during the period was adjusted to include these bonus shares as if they were issued 1 January 2019.

14 Net debt at 31 December 2020 is the principal amount of borrowings plus associated accrued interest, minus cash & cash equivalents plus/minus carrying value of debt related derivatives. This comprised of the principal amount of borrowings plus associated accrued interest of £3,231m plus debt related derivatives of £186m less gross cash of £603m at 31 December 2020 (see Appendix 6).

15 Differences due to rounding unless otherwise stated.

 

 

 

 

 

Appendix 1: Divisional Key Performance Indicators FY20

 

 

Pro forma basis1

 

£m

PPB3

SBG

PokerStars

Australia

US

Group

 

 

FY
 2020

FY
2019

%
Change

FY
 2020

FY
2019

%
Change

FY
 2020

FY
2019

%
Change

CC2 % Change

FY
2020

FY
2019

%
Change

A$ % Change

FY
 2020

FY
2019

%
Change

US$ %
Change

FY
 2020

FY
2019

%
Change

CC2 % Change

 
 

Sportsbook stakes

5,847

6,983

-16%

4,173

4,578

-9%

748

755

-1%

+1%

9,713

6,751

+44%

+46%

4,411

2,396

+84%

+86%

24,892

21,463

+16%

+17%

 

Sportsbook net revenue margin

10.5%

9.3%

+120bps

13.6%

9.1%

+450bps

8.5%

7.5%

+100bps

+100bps

11.1%

10.1%

+100bps

+100bps

4.6%

4.3%

+30bps

+30bps

10.1%

8.9%

+120bps

+120bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sports revenue

813

896

-9%

590

442

+34%

64

57

+12%

+13%

1075

681

+58%

+59%

458

325

+41%

+42%

3,000

2,400

+25%

+25%

 

Gaming revenue

481

427

+13%

385

295

+31%

1161

961

+21%

+24%

-

-

-

-

237

61

+288%

+292%

2,264

1,743

+30%

+32%

 

Total revenue

1294

1323

-2%

975

736

+32%

1225

1018

+20%

+23%

1075

681

+58%

+59%

695

386

+80%

+81%

5,264

4,144

+27%

+28%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

(382)

(355)

+8%

(278)

(203)

+37%

(282)

(217)

+30%

+29%

(520)

(299)

+74%

+76%

(319)

(124)

+157%

+160%

(1,782)

(1,198)

+49%

+49%

 

Cost of sales as % of net revenue

29.5%

26.8%

+270bps

28.5%

27.6%

+90bps

23.0%

21.3%

+170bps

+100bps

48.4%

43.9%

+450bps

+450bps

46.0%

32.2%

+1380bps

+1390bps

33.8%

28.9%

+490bps

+480bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

912

968

-6%

697

533

+31%

943

801

+18%

+22%

555

382

+45%

+47%

376

262

+43%

+44%

3,483

2,946

+18%

+20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales & marketing

(287)

(248)

+16%

(160)

(156)

+3%

(206)

(144)

+43%

+46%

(129)

(124)

+4%

+5%

(348)

(168)

+107%

+110%

(1,130)

(840)

+34%

+36%

 

Contribution

625

720

-13%

537

377

+43%

737

657

+12%

+16%

426

258

+65%

+66%

28

94

-70%

-71%

2,353

2,105

+12%

+13%

 

Other
Operating Costs

(354)

(330)

+7%

(146)

(124)

+18%

(191)

(154)

+24%

+21%

(108)

(96)

+12%

+14%

(198)

(175)

+13%

+14%

(997)

(880)

+13%

+13%

 

Corporate costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(125)

(137)

-9%

-9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

271

390

-31%

391

253

+55%

545

503

+8%

+15%

318

161

+97%

+98%

(170)

(82)

+108%

+115%

1,231

1,089

+13%

+16%

 

Adjusted EBITDA margin

20.9%

29.5%

-850bps

40.1%

34.4%

+570bps

44.5%

49.4%

-490bps

-340bps

29.6%

23.7%

+590bps

+570bps

-24.4%

-21.1%

-330bps

-380bps

23.4%

26.3%

-290bps

-240bps

 

Depreciation & amortisation

(94)

(93)

+1%

(28)

(22)

+28%

(47)

(42)

+13%

+14%

(30)

(30)

+1%

+2%

(37)

(29)

+28%

+30%

(241)

(220)

+10%

+10%

 

Adjusted operating profit / (loss)

176

297

-41%

364

232

+57%

498

461

+8%

+15%

288

131

+119%

+119%

(207)

(110)

+87%

+92%

990

869

+14%

+18%

 

 

1 Flutter's combination with TSG completed on May 5 2020. The pro forma numbers presented show Group financials with TSG included for a full 12-month period in both 2019 and 2020. The pro forma numbers include a 12-month contribution from Adjarabet in 2019 (completion date: Feb 1 2019).

2 Constant currency ("cc") growth is calculated by retranslating non-sterling denominated component of FY 2019 at FY 2020 exchange rates (see Appendix 5)

3 For split of PPB between Online and Retail, please see the KPIs section of our investor relations website.

 

 

 

 

 

 

 

 

Appendix 2:  Divisional Key Performance Indicators FY20 - Average Monthly Players

 

Monthly Players are the total number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month. The average number of monthly players are taken to derive the measure per reporting period.

 

 

Pro forma basis1

 

Average Monthly Players (in thousands)

PPB

SBG

PokerStars

Australia

US

Group

 

 

2020

2019

%
Change

2020

2019

%
Change

2020

2019

%
Change

2020

2019

%
Change

2020

2019

%
Change

2020

2019

%
Change

 
 

Full Year

1,410

1,327

+6%

1,564

1,525

+3%

1,627

1,275

+28%

794

629

+26%

972

598

+62%

6,367

5,354

+19%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

H1

1,232

1,411

-13%

1,459

1,557

-6%

1,725

1,328

+30%

596

580

+3%

610

437

+40%

5,622

5,314

+6%

 

H2

1,588

1,243

+28%

1,670

1,493

+12%

1,530

1,221

+25%

992

678

+46%

1,333

760

+75%

7,113

5,395

+32%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1

1,358

1,350

+1%

1,621

1,560

+4%

1,469

1,396

+5%

581

535

+9%

765

488

+57%

5,793

5,327

+9%

 

Q2

1,107

1,472

-25%

1,297

1,554

-17%

1,981

1,261

+57%

611

626

-2%

455

387

+18%

5,451

5,301

+3%

 

Q3

1,457

1,198

+22%

1,574

1,409

+12%

1,501

1,204

+25%

876

632

+39%

1,176

557

+111%

6,584

5,001

+32%

 

Q4

1,719

1,287

+34%

1,766

1,577

+12%

1,558

1,239

+26%

1,109

724

+53%

1,490

962

+55%

7,642

5,788

+32%

 

 

1 Flutter's combination with TSG completed on May 5 2020. The pro forma monthly player data presented show Group players with TSG included for a full 12-month period in both 2019 and 2020. The pro forma data includes a 12-month contribution from Adjarabet in 2019 (completion date: Feb 1 2019).

 

Appendix 3:  Reconciliation of previously reported TSG results to Flutter pro forma results

Financial Year 2019, unaudited

 

 

TSG Reported (US$m)

Adjustments
(US$m)

Per Flutter policies (US$m)

Legacy TSG pro forma (£m)

 

Legacy Flutter pro forma* (£m)

Total Flutter pro forma (£m)

 

FY 2019

1

2

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

 

 

 

 

 N/A

PPB*

 1,323

 1,323

Cost of sales

 

 

 

 

 

(355)

(355)

Gross profit

 

 

 

 

 

 968

 968

Total operating costs

 

 

 

 

 

(578)

(578)

Adjusted EBITDA

 

 

 

 

 

 390

 390

 

 

 

 

 

 

 

 

 

 

 

UK

Total revenue

 947

-

(8)

 -

 939

 736

SBG

 N/A

 736

Cost of sales

(292)

-

 32

 -

(260)

(203)

(203)

Gross profit

 655

 -

 24

 -

 679

 533

 533

Total operating costs

(330)

-

(24)

(2)

(357)

(280)

(280)

Adjusted EBITDA

 325

 -

 -

(2)

 322

 253

 253

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL

Total revenue

 1,312

(12)

 -

 -

 1,300

 1,018

POKERSTARS

 N/A

 1,018

Cost of sales

(297)

 12

 7

 -

(278)

(217)

(217)

Gross profit

 1,015

(0)

 7

 -

 1,022

 801

 801

Total operating costs

(410)

 37

(7)

(0)

(382)

(298)

(298)

Adjusted EBITDA

 605

 37

 -

(0)

 641

 503

 503

 

 

 

 

 

 

 

 

 

 

 

AUSTRALIA

Total revenue

 274

-

 25

 -

 300

 235

AUSTRALIA

 446

 681

Cost of sales

(104)

-

(45)

 -

(150)

(117)

(182)

(299)

Gross profit

 170

 -

(20)

 -

 150

 118

 264

 382

Total operating costs

(126)

-

 20

(1)

(107)

(84)

(137)

(221)

Adjusted EBITDA

 44

 -

 -

(1)

 43

 34

 127

 161

 

 

 

 

 

 

 

 

 

 

 

US

Total revenue

 N/A

 12

 -

 -

 12

 10

US

 376

 386

Cost of sales

(12)

 2

 -

(11)

(8)

(116)

(124)

Gross profit

 0

 2

 -

 2

 1

 261

 262

Total operating costs

(38)

(2)

(19)

(59)

(47)

(297)

(343)

Adjusted EBITDA

(38)

 -

(19)

(57)

(45)

(36)

(82)

 

 

 

 

 

 

 

 

 

 

 

CORPORATE

Total revenue

(5)

 -

 5

 -

 -

 -

CORPORATE COSTS

 -

 -

Cost of sales

 -

 -

 -

 -

 -

 -

 -

 -

Gross profit

(5)

 -

 5

 -

 -

 -

 -

 -

Total operating costs

(48)

 2

(5)

(55)

(106)

(82)

(55)

(137)

Adjusted EBITDA

(53)

 2

 -

(55)

(106)

(82)

(55)

(137)

 

 

 

 

 

 

 

 

 

 

 

GROUP

Total revenue

 2,528

 -

 23

 -

 2,551

 1,999

GROUP

 2,145

 4,144

Cost of sales

(693)

 -

(5)

 -

(698)

(546)

(652)

(1,198)

Gross profit

 1,835

 -

 18

 -

 1,854

 1,453

 1,493

 2,946

Total operating costs

(914)

 -

(18)

(77)

(1,010)

(790)

(1,067)

(1,857)

Adjusted EBITDA

 921

 -

 -

(77)

 844

 663

 426

 1,089

Adjustments:

1.  TSG US financials: These were previously reported within TSG International and 'Corporate', they have now moved to Flutter's US division. This increases the profitability of International and increases the loss in the US. The net EBITDA impact of this change is nil.

2.  Accounting treatment adjustments: reclassifications with nil net impact on Adjusted EBITDA at a Group level.

Revenue recognition: The most material change here is in Australia where TSG reported revenue excluding Goods and Services Tax ("GST"). Flutter includes GST within revenue with a corresponding deduction in the cost of sales line.

UK Intercompany transactions: Certain costs and revenues that had been removed at a consolidated Group level, via the corporate cost centre, are now consolidated within SBG per Flutter policies. Separately TSG previously recorded an 'Other income' line in each of its divisions, which has been reallocated to sports or gaming as appropriate. This is not visible in the table above.

Expense allocation: Reallocation of expenses between cost of sales and operating expenses, principally relating to treatment of affiliates, licensing, streaming, and other costs.

3.  Accounting treatment adjustments - separately disclosed items:

Applying Flutter accounting policies in relation to separately disclosed items results in certain items previously added back to Adjusted EBITDA within TSG now being reported as ongoing expenses. These include share-based payments, non-recurring professional/legal fees and certain other costs. The application of Flutter policy to TSG 2019 reported earnings would have been -$77m at the EBITDA line in FY20.

* Note PPB 2019 results are pro forma for Adjarabet, acquired in February 2019 as well as combining the legacy PPB Online and Retail divisions.

 

 

Appendix 4: 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 Preliminary Results, as they best represent the Group's underlying performance. The 2019 pro forma numbers also include a 12-month contribution from Adjarabet in 2019, completed on 1st Feb 2019.  The difference between the Statutory and Pro forma results is inclusion of the results of TSG and Adjarabet in the period prior to completion as per the table below. Adjusted EBITDA and revenue are reconciled by division below to Note 5 of the financial statements.

 

Pro forma results

TSG & Adjarabet results pre-merger completion*

Statutory results (Adjusted)

 

FY

FY

FY

FY

FY

FY

£m

2020

2019

2020

2019

2020

2019

 

 

 

 

 

 

 

Sports revenue

3,000

2,400

275

734

2,725

1,667

Gaming revenue

2,264

1,743

592

1,270

1,673

473

Total revenue

5,264

4,144

866

2,004

4,398

2,140

 

 

 

 

 

 

 

Cost of sales

(1,782)

(1,198)

(243)

(548)

(1,539)

(650)

Cost of sales as a % of net revenue

33.8%

28.9%

28.0%

27.3%

35.0%

30.4%

 

 

 

 

 

 

 

Gross profit

3,483

2,946

624

1,456

2,859

1,490

 

 

 

 

 

 

 

Sales and marketing

(1,130)

(840)

(139)

(375)

(991)

(465)

Contribution

2,353

2,105

484

1,081

1,868

1,025

 

 

 

 

 

 

 

Other operating costs

(997)

(880)

(113)

(335)

(884)

(544)

Corporate costs

(125)

(137)

(29)

(82)

(95)

(55)

 

 

 

 

 

 

 

Adjusted EBITDA1,2

1,231

1,089

342

663

889

425

Adjusted EBITDA margin

23.4%

26.3%

39.5%

33.1%

20.2%

19.9%

 

 

 

 

 

 

 

Depreciation and amortisation

(241)

(220)

(28)

(75)

(213)

(145)

 

 

 

 

 

 

 

Adjusted1 operating profit

990

869

314

588

676

281

 

 

 

 

 

 

 

Revenue by division

 

 

 

 

 

 

PPB

1,294

1,323

-

5

1,294

1,318

SBG

975

736

290

736

685

PokerStars

1,225

1,018

468

1,018

757

Australia

1,075

681

87

235

989

446

US

695

386

22

10

673

376

 

 

 

 

 

 

 

Adjusted EBITDA by division

 

 

 

 

 

 

PPB

271

390

-

1

271

389

SBG

391

253

117

253

274

PokerStars

545

503

264

503

281

Australia

318

161

11

34

307

127

US

(170)

(82)

(22)

(45)

(148)

(36)

Corporate costs

(125)

(137)

(29)

(82)

(95)

(55)

 

* 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 5: 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 FY 2019 at FY 2020 exchange rates as per the table below.

 

 

 

 

 

FY

FY

CC

 

FY

FY

%

2019

2019

%

£m, pro forma

2020

2019

Change

FX impact

CC

Change

 

 

 

 

 

 

 

Sports revenue

3,000

2,400

+25%

(6)

2,394

+25%

Gaming revenue

2,264

1,743

+30%

(33)

1,710

+32%

Total revenue

5,264

4,144

+27%

(39)

4,105

+28%

 

 

 

 

 

 

 

Cost of sales

(1,782)

(1,198)

+49%

4

(1,194)

+49%

Cost of sales as a % of net revenue

33.8%

28.9%

+490bps

29.1%

+480bps

 

 

 

 

 

 

 

Gross profit

3,483

2,946

+18%

(35)

2,911

+20%

 

 

 

 

 

 

 

Sales and marketing

(1,130)

(840)

+34%

8

(833)

+36%

Contribution

2,353

2,105

+12%

(28)

2,078

+13%

 

 

 

 

 

 

 

Other operating costs

(997)

(880)

+13%

(2)

(881)

+13%

Corporate costs

(125)

(137)

-9%

 

(137)

-9%

 

 

 

 

 

 

 

Adjusted EBITDA

1,231

1,089

+13%

(29)

1,060

+16%

Adjusted EBITDA margin

23.4%

26.3%

-290bps

25.8%

-240bps

 

 

 

 

 

 

 

Depreciation and amortisation

(241)

(220)

+10%

1

(219)

+10%

 

 

 

 

 

 

 

Adjustedoperating profit

990

869

+14%

(28)

840

+18%

 

 

 

 

 

 

 

Revenue by division

 

 

 

 

 

 

PPB

1,294

1,323

-2%

(5)

1,318

-2%

SBG

975

736

+32%

-

736

+32%

PokerStars

1,225

1,018

+20%

(26)

992

+23%

Australia

1,075

681

+58%

(6)

674

+59%

US

695

386

+80%

(3)

383

+81%

 

 

 

 

 

 

 

Adjusted EBITDA by division

 

 

 

 

 

 

PPB

271

390

-31%

(4)

386

-30%

SBG

391

253

+55%

-

253

+55%

PokerStars

545

503

+8%

(28)

475

+15%

Australia

318

161

+97%

(0)

161

+98%

US

(170)

(82)

+108%

3

(79)

+115%

Corporate costs

(125)

(137)

-9%

-

(137)

-9%

  

 

Appendix 6: 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

 

FY

FY

 

FY

£m

2020

2020

 

2020

 

 

 

 

 

Adjusted EBITDA

1,231

342

 

889

Capex

(252)

(33)

 

(219)

Working capital

310

(8)

 

318

Corporation tax

(93)

(3)

 

(89)

Adjusted free cash flow

1,197

298

 

899

Cash flow from separately disclosed items (SDI)

(120)

-

 

(120)

Free cash flow

1,077

298

 

779

Interest cost

(177)

(64)

 

(113)

Other borrowing costs

(24)

-

 

(24)

Settlement of swaps

(36)

-

 

(36)

Lease liabilities paid and other

(23)

1

 

(24)

Net increase in cash before equity raises & FanDuel consideration

817

235

 

582

Proceeds from equity raises

1,921

 

1,921

Acquisition of further interest in FanDuel

(1,546)

 

(1,546)

Net amounts drawn down / (repaid) on borrowings

(923)

(923)

Cash acquired in TSG

445

445

Net increase / (decrease) in cash

1,192

235

(478)

479

 

 

 

 

 

Net (debt)/cash at start of year

(3,827)

(3,563)

372

108

Foreign currency exchange translation

(20)

37

(17)

Change in fair value of hedging derivatives

(159)

159

Net debt at 31 December 2020

(2,814)

(3,328)

89

603

 

 

 

 

 

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 and payment of contingent deferred consideration.

3 Working capital includes increase in trade and other receivables, increase / (decrease) in trade, other payables and provisions, employee equity-settled share-based payments expense before separately disclosed items, 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 net of the historic VAT refund in respect of an historic claim in relation to retail gaming machines in the UK.

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

6 Lease liabilities paid and other includes payment of lease liabilities and lease interest, proceeds from the issue of shares on exercise of employee options, dividends paid to non-controlling interest, release of cash from restricted cash and proceeds from the disposal of assets.

7 Net amounts repaid on borrowings includes proceeds from GBP First Lien Term Loan A, net amounts drawn down on previous GBP revolving credit facility, repayment of USD and EUR First Lien Term Loan B and old GBP Term Loan facility and amounts repaid on overdraft 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.

 

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

Year ended 31 December 2020

 

 

 

 

 

 

 

 

 

Note

 

Before separately disclosed items

2020

£m

 

Separately disclosed items

(Note 6) 2020

£m

 

 

 

 

Total

2020

£m

 

Before separately disclosed items

2019

£m

 

Separately disclosed items

(Note 6) 2019

£m

 

 

 

 

Total

2019

£m

Continuing operations

 

 

 

 

 

 

 

Revenue

5

4,398.0

15.9

4,413.9

2,140.0

-

2,140.0

Cost of sales

5

(1,539.0)

(2.7)

(1,541.7)

(650.2)

-

(650.2)

Gross profit

 

2,859.0

13.2

2,872.2

1,489.8

-

1,489.8

 

 

 

 

 

 

 

 

Operating costs excluding depreciation, amortisation and impairment

 

 

5

 

 

(1,969.8)

 

 

(130.8)

 

 

(2,100.6)

 

 

(1,064.4)

 

 

(17.6)

 

 

(1,082.0)

EBITDA 1

 

889.2

(117.6)

771.6

425.4

(17.6)

407.8

 

 

 

 

 

 

 

 

Depreciation and amortisation

5

(213.2)

(432.3)

(645.5)

(144.8)

(113.1)

(257.9)

Impairment

5

-

(22.6)

(22.6)

-

-

-

Operating profit

 

676.0

(572.5)

103.5

280.6

(130.7)

149.9

 

 

 

 

 

 

 

 

Financial income

7

1.4

78.5

79.9

1.0

-

1.0

Financial expense

7

(111.2)

(71.1)

(182.3)

(15.2)

-

(15.2)

Profit/ (loss) before tax

 

566.2

(565.1)

1.1

266.4

(130.7)

135.7

 

 

 

 

 

 

 

 

Tax (expense) / credit

8

(94.2)

58.4

(35.8)

(42.4)

18.6

(23.8)

 

Profit/ (loss) for the year

 

 

472.0

 

(506.7)

 

(34.7)

 

224.0

 

(112.1)

 

111.9

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the Company

 

521.7

(483.8)

37.9

238.4

(94.4)

144.0

Non-controlling interest

 

(49.7)

(22.9)

(72.6)

(14.4)

(17.7)

(32.1)

 

 

472.0

(506.7)

(34.7)

224.0

(112.1)

111.9

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

  Restated2

(Note 9)

Basic

9

 

 

£0.293

 

 

£1.802

Diluted

9

 

 

£0.285

 

 

£1.793

 

1

EBITDA is defined as profit for the year 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.

2

The 2019 earnings per share figures have been restated to incorporate the 1,312,260 new Flutter ordinary shares that were issued in May 2020 as payment of the 2019 final dividend. The weighted average number of shares in issue during the period was adjusted to include these bonus shares as if they were issued 1 January 2019.

 

Notes 1 to 22 form an integral part of these condensed consolidated financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

Year ended 31 December 2020

 

 

 

 

2020

£m

 

2019

£m

 

 

 

(Loss)/ profit for the year

(34.7)

111.9

 

 

 

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

  (280.4)

2.6

Fair value of foreign exchange cash flow hedges transferred to income statement

   267.8

(0.3)

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

 

61.5

 

(33.1)

Financial assets at FVOCI

(0.4)

-

Other comprehensive income/ (loss)

48.5

(30.8)

Total comprehensive income for the year

13.8

81.1

 

 

 

Attributable to:

 

 

Equity holders of the Company

93.8

120.7

Non-controlling interest

(80.0)

(39.6)

 

13.8

81.1

 

1 Foreign exchange gain on translation of the net assets of foreign currency denominated entities is presented net of an income tax charge of £5.1m which relates to the tax effect on foreign exchange activities with respect to the Group's hedging activities. A corresponding tax credit of £5.1m in relation to the same is recognised in the Consolidated Income Statement such that there is no overall impact on the Consolidated Statement of Financial Position.

 

 

Notes 1 to 22 form an integral part of these condensed consolidated financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

 

 

 

Note

31 December 2020

£m

31 December 2019

£m

Assets

 

 

 

Property, plant and equipment

 

361.9

298.2

Intangible assets

 

5,527.8

558.5

Goodwill

10

9,516.7

4,120.3

Deferred tax assets

 

7.4

11.9

Non-current tax receivable

 

15.3

-

Derivative financial assets

17

16.9

-

Investments

12

3.0

0.1

Other receivables

12

75.2

50.4

Financial assets - restricted cash

13

6.9

-

Total non-current assets

 

15,531.1

5,039.4

Trade and other receivables

12

139.5

64.6

Current tax receivable

 

47.5

-

Financial assets - restricted cash

13

587.9

189.1

Current investments - customer deposits

13

82.8

-

Cash and cash equivalents

13

603.4

108.1

Total current assets

 

1,461.1

361.8

Total assets

 

16,992.2

5,401.2

Equity

 

 

 

Issued share capital and share premium

 

2,481.7

428.3

Merger reserve

 

7,982.9

-

Treasury shares

18

(40.7)

(40.7)

Shares held by employee benefit trust

18

(5.8)

(6.1)

Cash flow hedge reserve

 

(10.3)

2.3

Other reserves

 

152.3

61.4

Retained earnings

 

405.0

3,539.5

Equity attributable to owners of the parent

 

10,965.1

3,984.7

Non-controlling interest

18

30.8

204.9

Total equity

 

10,995.9

4,189.6

Liabilities

 

 

 

Trade and other payables

14

1,033.0

369.6

Customer balances

 

643.4

179.2

Derivative financial liabilities

17

150.9

20.4

Provisions

15

14.3

2.9

Current tax payable

 

41.0

20.0

Lease liabilities

 

48.3

38.4

Borrowings

16

50.8

255.0

Total current liabilities

 

1,981.7

885.5

Trade and other payables

14

14.6

11.5

Derivative financial liabilities

17

102.3

0.7

Provisions

15

145.0

1.1

Deferred tax liabilities

 

500.9

65.0

Non-current tax payable

 

18.0

-

Lease liabilities

 

145.7

132.1

Borrowings

16

3,088.1

115.7

Total non-current liabilities

 

4,014.6

326.1

Total liabilities

 

5,996.3

1,211.6

Total equity and liabilities

 

16,992.2

5,401.2

 

Notes 1 to 22 form an integral part of these condensed consolidated financial statements.

On behalf of the Board

Peter Jackson

Chief Executive Officer

Jonathan Hill

Chief Financial Officer

1 March 2021

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December 2020

 

 

Note

2020

£m

2019

£m

Cash flows from operating activities

 

 

 

Loss / (profit) for the year

 

(34.7)

111.9

Separately disclosed items

6

506.7

112.1

Tax expense before separately disclosed items

 

94.2

42.4

Financial income before separately disclosed items

7

(1.4)

(1.0)

Financial expense before separately disclosed items

7

111.2

15.2

Depreciation and amortisation before separately disclosed items

5

213.2

144.6

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

 

52.1

17.1

Foreign currency exchange (gain)/ loss

 

(31.6)

1.5

(Gain)/ loss on disposal of property, plant and equipment and intangible assets

 

(0.2)

0.2

Cash from operations before changes in working capital

 

909.5

444.0

Decrease in trade and other receivables

 

18.1

13.1

Increase in trade, other payables and provisions

 

280.1

56.1

Cash generated from operations

 

1,207.7

513.2

Tax paid

 

(89.4)

(41.3)

Net cash from operating activities before acquisition fees, restructuring costs and legacy tax assessments

 

 

1,118.3

 

471.9

Acquisition fees, restructuring and integration costs paid, net of VAT refund received

 

(119.9)

(12.9)

Amounts paid in respect of legacy Greek and German tax assessments

 

-

(39.6)

Net cash from operating activities

 

998.4

419.4

Purchase of property, plant and equipment

 

(59.3)

(44.0)

Purchase of intangible assets

 

(53.2)

(33.7)

Capitalised internal development expenditure

 

(99.6)

(53.1)

Proceeds from disposal of assets

 

12.5

-

Proceeds from disposal of investment

 

-

2.3

Purchase of businesses

11

-

(102.0)

Cash acquired from acquisitions

11

445.2

0.2

Payment of contingent deferred consideration

11

(7.2)

(4.8)

Interest received

 

1.3

0.9

Change in restricted cash

13

(4.8)

-

Net cash from / (used in) investing activities

 

234.9

(234.2)

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

18

1,920.8

-

Proceeds from the issue of new shares on exercise of employee stock options

18

34.3

3.6

Acquisition of further interest in subsidiary

11

(1,546.0)

-

Dividends paid to Non-controlling interest

18

(15.2)

-

Dividends paid

19

-

(156.2)

Payment of lease liabilities

 

(45.7)

(36.4)

Payment of lease interest

 

(5.7)

(5.0)

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

16

950.0

250.0

Net amounts drawn down on Previous GBP Revolving Credit Facility

16

(117.2)

(167.2)

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

16

(1,751.0)

-

Amounts repaid on overdraft facility

16

(5.0)

-

Interest paid

 

(114.1)

(7.1)

Settlement of derivatives

17

(35.6)

-

Financing fees in respect of borrowing facilities

 

(24.4)

(0.8)

Purchase of own shares including direct purchase costs

 

-

(86.8)

Net cash used in financing activities

 

(754.8)

(205.9)

Net increase / (decrease) in cash and cash equivalents

 

478.5

(20.7)

Cash and cash equivalents at start of year

 

108.1

123.7

Foreign currency exchange gain on cash and cash equivalents

 

16.8

0.1

Net Cash and cash equivalents at end of year

13

603.4

103.1

Bank Overdraft

 

-

5.0

Cash and cash equivalents at end of year

13

603.4

108.1

Non-cash transactions during the year included an all share Combination with The Stars Group Inc (See Note 11). 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2020

 

 

 

 

 

 

 

Number of ordinary

 shares in

 issu e

millions

#

 

 

Issued

 share

 capital and share premium

£m

 

 

 

 

 

Merger

 reserve

£m

 

 

 

Foreign

 exchange translation

 reserve

£m

 

 

 

 

Cash flow hedge reserve

£m

 

 

 

 

Financial assets at FVOCI

£m

 

 

 

 

 

Other

reserves

£m

 

 

 

 

 

Treasury

 shares

£m

 

 

Shares

 held by employee benefit trust

£m

 

 

 

Share-

based

 payment

 reserve

£m

 

 

 

 

 

Retained

 earnings

£m

Total

 Equity attributable to shareholders of the Company

£m

 

 

 

 

Non-controlling interest

£m

 

 

 

 

 

 

Total Equity

£m

Balance at 1 January 2020

80.3

428.3

-

(21.5)

2.3

-

2.3

(40.7)

(6.1)

80.6

3,539.5

3,984.7

204.9

4,189.6

Total comprehensive income for the year:

Profit/ (loss) for the year

-

-

-

-

-

-

-

-

-

-

37.9

37.9

(72.6)

(34.7)

Foreign exchange translation (Note 7)

-

-

-

74.0

-

-

-

-

-

-

-

74.0

(7.4)

66.6

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

 

(280.4)

 

-

-

-

-

-

-

 

(280.4)

 

-

 

(280.4)

Fair value of cash flow hedges transferred to the income statement

-

-

-

-

 

267.8

 

-

-

-

-

-

-

 

267.8

 

-

 

267.8

Financial assets at FVOCI

-

-

-

-

-

(0.4)

-

-

-

-

-

(0.4)

-

(0.4)

Current taxes

-

-

-

(5.1)

-

-

--

-

-

-

-

(5.1)

-

(5.1)

Total comprehensive income/ (loss)

-

-

-

68.9

(12.6)

(0.4)

-

-

-

-

37.9

93.8

(80.0)

13.8

Transactions with owners of the Company, recognised directly in equity:

Shares issued on equity placement (net of issuance costs) (Note 18)

 

16.1

 

1,933.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(12.4)

 

1,920.8

 

-

 

1,920.8

Shares issued as consideration for the combination with TSG (Note 18)

 

65.3

 

5.1

 

6,189.5

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

6,194.6

 

-

 

6,194.6

Acquisition of non-controlling interest in TSG Australia (Note 18)

 

0.8

 

79.7

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

79.7

 

-

 

79.7

Present value of FanDuel put liability with Fastball up to termination of option

 

-

 

-

 

-

 

-

 

-

 

-

 

(846.0)

 

-

 

-

 

-

 

-

 

(846.0)

 

-

 

(846.0)

Unwind of put option on option termination

-

-

-

-

-

-

846.0

-

-

-

-

846.0

-

846.0

Acquisition of non-controlling interest in FanDuel Group (Note 18)

 

11.7

 

1.0

 

1,793.4

 

2.2

 

-

 

-

 

-

 

-

 

-

 

-

 

(3,263.7)

 

(1,467.1)

 

(78.9)

 

(1,546.0)

Deal fees on acquisition of FanDuel

-

-

-

-

-

-

-

-

-

-

(9.3)

(9.3)

-

(9.3)

Shares issued on exercise of share options

1.5

34.3

-

-

-

-

-

-

-

-

-

34.3

-

34.3

Exercise of share options (Note 18)

-

-

-

-

-

-

-

-

-

(107.7)

107.7

-

-

-

Equity-settled transactions - expense in income statement

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

70.2

 

-

 

70.2

 

-

 

70.2

Equity-settled transactions - vesting

-

-

-

-

-

-

-

-

0.3

(0.3)

-

-

-

-

Tax on share-based payments

-

-

-

-

-

-

-

-

-

-

5.4

5.4

-

5.4

Dividend paid to non-controlling interest

-

-

-

-

-

-

-

-

-

-

-

-

(15.2)

(15.2)

Dividends to shareholders (Note 19)

1.3

0.1

-

-

-

-

-

-

-

-

(0.1)

-

-

-

Issue of replacement options (Note 11)

-

-

-

-

-

-

-

-

-

58.0

-

58.0

-

58.0

Total contributions by and distributions to owners of the Company

 

96.7

 

2,053.4

 

7,982.9

 

2.2

 

-

 

-

 

-

 

-

 

0.3

 

20.2

 

(3,172.4)

 

6,886.6

 

(94.1)

 

6,792.5

Balance at 31 December 2020

177.0

2,481.7

7,982.9

49.6

(10.3)

(0.4)

2.3

(40.7)

(5.8)

100.8

405.0

10,965.1

30.8

10,995.9

                               
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2019

 

 

 

 

 

 

 

 

 

Number of

 ordinary

 shares in

 issue

millions

#

 

 

Issued

 share

 capital and share premium

£m

 

 

 

Foreign

 exchange translation

 reserve

£m

 

 

 

 

Cash flow hedge

 reserve

£m

 

 

 

 

 

Other

 reserves

£m

 

 

 

 

 

Treasury

 shares

£m

 

 

 

Shares

 held by

 employee benefit trust

£m

 

 

 

Share-

based

 payment

 reserve

£m

 

 

 

 

 

Retained

 earnings

£m

 

Total

 Equity attributable to shareholders of the Company

£m

 

 

 

 

Non-controlling interest

£m

 

 

 

 

 

 

Total equity

£m

 

Balance at 1 January 2019

 

81.4

 

424.8

 

4.1

 

-

 

2.2

 

(40.7)

 

(8.6)

 

86.1

 

3,530.1

 

3,998.0

 

213.3

 

4,211.3

Total comprehensive income for the year:

Profit for the year

-

-

-

-

-

-

-

-

144.0

144.0

(32.1)

111.9

Foreign exchange translation (Note 7)

-

-

(25.6)

-

-

-

-

-

-

(25.6)

(7.5)

(33.1)

Net change in fair value of cash flow hedge reserve

 

-

 

-

 

-

 

2.3

 

-

 

-

 

-

 

-

 

-

 

2.3

 

-

 

2.3

Total comprehensive income/ (loss)

 

-

 

-

 

(25.6)

 

2.3

 

 

-

 

-

 

-

 

144.0

 

120.7

 

(39.6)

 

81.1

Transactions with owners of the Company, recognised directly in equity:

Shares issued

0.3

3.6

-

-

-

-

-

-

-

3.6

-

3.6

Business combinations

-

-

-

-

-

-

-

-

-

-

31.2

31.2

Own shares acquired by the Group

(1.4)

(0.1)

-

-

0.1

-

-

-

-

-

-

-

Equity-settled transactions - expense

recorded in income statement

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

17.1

 

-

 

17.1

 

-

 

17.1

Equity-settled transactions - vesting

-

-

-

-

-

-

2.5

(2.3)

(0.2)

-

-

-

Tax on share-based payments

-

-

-

-

-

-

-

-

1.5

1.5

-

1.5

Transfer to retained earnings on exercise of share options (Note 18)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(20.3)

 

20.3

 

-

 

-

 

-

Dividends to shareholders (Note 19)

-

-

-

-

-

-

-

-

(156.2)

(156.2)

-

(156.2)

Total contributions by and distributions to owners of the Company

 

(1.1)

 

3.5

 

-

 

-

 

0.1

 

-

 

2.5

 

(5.5)

 

(134.6)

 

(134.0)

 

31.2

 

(102.8)

 

Balance at 31 December 2019

 

80.3

 

428.3

 

(21.5)

 

2.3

 

2.3

 

(40.7)

 

(6.1)

 

80.6

 

3,539.5

 

3,984.7

 

204.9

 

4,189.6

 

 

Notes 1 to 22 form an integral part of these condensed consolidated financial statements.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.  General information

 

Flutter Entertainment plc (the "Company") and its subsidiaries (together referred to as the "Group") is a global sports betting and gaming group, whose headquarters are in Dublin, Ireland. Following a combination with The Stars Group ("TSG") the Group operated during 2020 across five divisions; (i) PPB which included both the PPB online and retail product offerings, under the Paddy Power, Betfair and Adjarabet brands; (ii) PokerStars which included online poker, gaming and betting product offerings under the Pokerstars, BetStars and Full Tilt brands; (iii) Sky Betting and Gaming which included betting and gaming product offering  (iv) Australia, consisting of Sportsbet, the market leader in the fast-growing Australian online betting market; and (v) the US, consisting of FanDuel, FOX Bet, TVG and Betfair online Casino.

 

During the year, the Company completed an all share Combination with TSG (the "Combination") through an acquisition of all of the issued and outstanding share capital of TSG by the Company. TSG is a provider of technology- based product offering in the global gaming and interactive entertainment industries, with millions of registered customers globally and a leader in online and mobile betting, poker and gaming-related offerings. TSG owns or licenses gaming and related consumer businesses and brands, including PokerStars, PokerStars Casino, BetStars, Full Tilt, FOX Bet, Sky Bet, Sky Vegas, Sky Casino, Sky Bingo, Sky Poker and Oddscheckers. The results of TSG prior to completion of the Combination are not included in these consolidated financial statements.  See Note 11 for further information on the Combination.

 

On 30 December 2020, the Group completed the acquisition of an additional 37.2% of its 57.8% owned subsidiary FanDuel, bringing the Group's holding in FanDuel to 95%. FanDuel's results and financial position had been previously consolidated into the Group . See Note 11 for further detail.

 

The Company is a public limited company incorporated and domiciled in the Republic of Ireland and has its primary listing on the London Stock Exchange under the symbol FLTR and a secondary listing on the Irish Stock Exchange under the symbol FLTR.IR.  

 

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 European Union ("EU") together with an unqualified audit report thereon under Section 391 of the Companies Act 2014, will be annexed to the annual return and filed with the Registrar of Companies.

 

The consolidated financial statements of the Group for the year ended 31 December 2020 comprise the financial statements of the Company and its subsidiary undertakings and were approved for issue by the Board of Directors on 1 March 2021.

 

2. Recent accounting pronouncements

 

Adoption of new accounting standards

The IASB have issued the following standards, policies, interpretations and amendments which were effective for the Group for the first time in the year ended 31 December 2020:

· Amendments to References to Conceptual Framework in IFRS Standards;

· Amendments to IFRS 3: Definition of a Business;

· Amendments to IAS 1 and IAS 8: Definition of Material;

· Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform; and

· Amendment to IFRS 16: Covid-19 Related Rent Concessions.

 

The Group applied Amendments to IFRS 3: Definition of a Business to business combinations whose acquisition dates are after 1 January 2020 in assessing whether it had acquired a business or a group of assets. See also Note 11 Business combinations, for details on the Groups acquisitions during the year.

 

The Group applied the interest rate benchmark reform amendments retrospectively to hedging relationships that existed at 1 January 2020 or were designated thereafter and that are directly affected by interest rate benchmark reform. These amendments also apply to the gain or loss accumulated in the cash flow hedging reserve that existed at 1 January 2020.

 

The adoption of the remaining new standards and interpretations did not have a significant impact on the Group's consolidated financial statements.
 

2. Recent accounting pronouncements (continued)

 

Adopted IFRS not yet applied

The following IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the Group's consolidated financial statements, other than IBOR reform which is disclosed in more detail below:

· Amendments to IFRS 9, IAS 39 and IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2 (effective date 1 January 2021);

· Amendments to IAS 37: Onerous contracts - Cost of Fulfilling a Contract (Effective date 1 January 2022);

· Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use (effective 1 January 2022);

· Amendment to IFRS 1, IFRS 9 and IAS 41: Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022);

· Amendments to IFRS 3: Reference to the Conceptual Framework (effective 1 January 2022);

· Amendments to IAS 1: Classification of Liabilities as Current or Non -current (effective 1 January 2023);

· IFRS 17 Insurance Contracts (effective date 1 January 2023); and

· Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective date to be confirmed)

 

IBOR Reform

In July 2017, the Financial Conduct Authority ("FCA"), which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organised the Alternative Reference Rates Committee ("ARRC"), which identified the Secured Overnight Financing Rate as its preferred alternative rate for USD-LIBOR in derivatives and other financial contracts. Other benchmark rates including GBP-LIBOR and the EURIBOR are also impacted by this reform. The European Central Bank has identified the Euro Short Term Rate as its preferred alternative rate for EURIBOR in derivatives and other financial contracts. The GBP-LIBOR benchmark rate is expected to be replaced by SONIA at the end of 2021.

 

The Group is monitoring, evaluating and preparing for the implications of adopting the IBOR reform, which encompasses changes to systems, processes, risk and valuation models, as well as managing related tax and accounting implications. It currently anticipates that the areas of greatest change will be amendments to the contractual terms of its IBOR borrowing facilities and IBOR indexed interest rate swaps for risk free rates (RFRs) and updating hedge accounting designations.

 

In September 2019, the IASB issued amendments to IFRS 9, IAS 39, and IFRS 7 in order to provide relief in respect of the potential impacts to hedge accounting following the uncertainties arising from the impact of the Interbank offered rate ("IBOR") reform on the timing and amount of designated future cash flows. The amendments provide exceptions to the requirements of hedge accounting during this period of uncertainty with the impact being that existing and new hedge accounting designations will be unaffected by the above noted uncertainties. The Company has adopted the IASB amendments beginning 1 January 2020. Adopting these amendments allowed the Group to continue hedge accounting during the period of uncertainty arising from interest rate benchmark reforms. The relief provided by the amendments in the application hedge accounting are applied by the Group to the Swap Agreements (as defined below). For all other derivative instruments held by the Group, it does not apply hedge accounting.

 

In August 2020, the IASB issued Phase 2 relief of IBOR reform 'Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16'. The amendments provide a practical expedient when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities to require the effective interest rate to be adjusted and reliefs from discontinuing hedge relationships. The Phase 2 Amendments are effective for annual periods beginning on or after 1 January 2021 and early application is permitted. Given that none of the derivatives (hedging instruments) or loans (hedged items) of the Group have been amended for IBOR reform during the period, the Group will not be early adopting the Phase 2 Amendments.

 

The Group is not able to predict when USD-LIBOR or EURIBOR will cease to be available or when there will be sufficient liquidity in the alternative markets. Any changes adopted by the FCA or other governing bodies in the method used for determining USD-LIBOR, GBP-LIBOR and EURIBOR may result in a sudden or prolonged increase or decrease in reported USD-LIBOR, GBP-LIBOR and EURIBOR. If that were to occur, the Group's interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if USD-LIBOR, GBP-LIBOR and EURIBOR were to remain available in their current form.

 

The Group's GBP First Lien Term Loan A is indexed to GBP-LIBOR, its USD First Lien Term Loan B, and certain of its cross-currency interest rate swaps are indexed to USD-LIBOR, and its EUR First Lien Term Loan B is indexed to EURIBOR. See

 

2. Recent accounting pronouncements (continued)

 

Notes 16 and 17 for details of the borrowings and hedging derivatives notional amounts. The Group is monitoring and evaluating the related risks, which include interest payments on its borrowings, and amounts received on certain of its cross-currency interest rate swaps. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur. The fair value of the financial instruments tied to USD-LIBOR, GBP-LIBOR and EURIBOR could also be impacted if USD-LIBOR, GBP-LIBOR and EURIBOR are limited or discontinued. Additional risk exists as the method of transitioning to an alternative reference rate may be challenging and requires agreement

with the respective counterparty about how to make the transition.

 

If the Group's contracts are not transitioned to alternative reference rates and USD-LIBOR, GBP-LIBOR and EURIBOR are discontinued, the impact on our indexed financial instruments is likely to vary by contract. If USD-LIBOR, GBP-LIBOR and EURIBOR are discontinued or if the methods of calculating USD-LIBOR, GBP-LIBOR and EURIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected.

 

In October 2020, ISDA published its LIBOR Fallbacks Supplement and IBOR Fallbacks Protocol enabling market participants to incorporate standard fallback transition provisions to RFRs into their derivative trades. The Group is still in consultation as to whether it will adhere to the protocol.  In December 2020, regulators signalled that they may extend LIBOR transition for certain USD LIBOR legacy contracts another 18 months from the end of 2021 to the middle of 2023. This could extend the time needed for the Group to transition its existing derivatives and loans to RFRs.

 

The Group will continue to apply the amendments to IFRS 9/IAS 39 until the uncertainty arising from the interest rate benchmark reforms with respect to the timing and the amount of the underlying cash flows that the Group is exposed ends. The Group has assumed that this uncertainty will not end until the Group's contracts that reference IBORs are amended to specify the date on which the interest rate benchmark will be replaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment.

 

3.  Basis of preparation and summary of significant accounting policies

 

The condensed consolidated financial statements are prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Republic of Ireland's Financial Regulator. The condensed consolidated financial statements are prepared on the historical cost basis except for derivative financial instruments  (which includes 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 share-based payments).  The consolidated financial statements are presented in pounds sterling   and are rounded to the nearest 0.1 million.

 

Further to IAS Regulation (EC1606/2002, 'Accounting standards adopted for use in the EU'), EU law requires that the annual consolidated financial statements of the Group be prepared in accordance with International Financial Reporting Standards ("IFRS") adopted by the European Union ("EU").  These consolidated financial statements have been prepared on the basis of IFRS adopted by the EU and effective for accounting periods ending on or after 1 January 2020. 

 

The Group has introduced new accounting policies or expanded existing policies as a result of the Combination. These policies do not impact the Group's reported revenue, operating profit, or amounts reported in the statement of financial position in 2019.

 

The accounting policies applied in the preparation of these consolidated financial statements have been applied consistently during the year and prior year, except as noted above and in Note 2 'Recent accounting pronouncements'.

 

Going concern

The Group reported a loss after tax of £34.7m for the year.  This includes a significant amount of non-cash related charges against profit. The net cash generated from operating activities during the year was £998.4m. The balance sheet at 31 December 2020 reported a net current liability position of £520.6m. The Directors have considered the available financial resources which, at 31 December 2020, included £603.4m of cash and cash equivalents and a £450m Revolving Credit Facility with undrawn capacity of £377m (see Note 16).   Whilst there are certain loan repayments due within the next 12 months of £50.8m, the Group's lending facilities primarily fall due in 2025 and 2026 as set out in more detail in Note 16. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. 

 

 

 

3.  Basis of preparation and summary of significant accounting policies (continued)

 

The Group's forecasts for 2021 and beyond indicate that it will,  have significant financial resources, continue to settle its debts as they fall due and operate well within its banking covenants as outlined in Note 16 for at least a period of 12 months from the date of these 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 15), and enhanced regulation have also been considered in respect of these forecasts. In the event that it were 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 consolidated financial statements, and therefore they continue to adopt the going concern basis of accounting in preparation of its consolidated financial statements.

 

Basis of consolidation

The Group's financial statements consolidate the financial statements of the Company and its subsidiary undertakings based on accounts made up to the end of the financial year. A subsidiary is an entity controlled by the Company.  The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated on consolidation except to the extent that unrealised losses provide evidence of impairment.

 

4. Judgements and estimates

 

The preparation of Annual 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 the course of preparing these Consolidated Financial Statements, the significant judgements in applying the Group's accounting policies and the key sources of estimation uncertainty are detailed below:

 

Kentucky proceedings

Prior to the Combination, the Commonwealth of Kentucky filed legal proceedings in 2010 - 2011 against various operators including certain companies that later became subsidiaries of The Stars Group ("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 judgment 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 judgment interest. In 2018, this ruling was vacated in its entirety by the Kentucky Court of Appeals.

 

On 17 December 2020, the Kentucky Supreme Court reinstated the full 2015 award of damages, including post judgment interest, against SIHL and REEL. A rehearing petition was filed before the Kentucky Supreme Court on 6 January 2021 and the Group is awaiting a decision. Together with its legal advisers, Flutter strongly disputes the basis of this judgment and is currently reviewing its position. Flutter is confident that any amount it is ultimately liable to pay will be a limited proportion of the reinstated judgment. No liability was previously recognised by either TSG or Flutter prior to this judgment.

 

Based on the opinion and views of legal counsel and advisers as to the likely payout outcomes, the Group has recognised a provision of US$100m (£73m) as part of TSG combination fair value acquisition accounting in respect of this litigation, which reflects the value of the supersedes bond in place since February 2016. This assessment relies on estimates and assumptions and involves a series of judgments about future events.

 

4. Judgements and estimates (continued)

 

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 20 - Commitments and Contingencies for further detail.

 

FOX equity option

As part of the Combination, the Group acquired the following agreement in relation to TSG's US business.

 

On 8 May 2019, TSG and FOX Sports ("FOX Sports"), a unit of Fox Corporation, announced plans to launch FOX Bet, the first-of-its kind national media and sports wagering partnership in the United States and entered into a commercial agreement of up to 25 years. As part of the transaction, FOX Sports will receive certain brand license, integration and affiliate fees. In addition, during the term of the commercial agreement, TSG has agreed to a minimum annual advertising commitment on certain FOX media assets. Prior to the tenth anniversary of the commercial agreement, and subject to certain conditions and applicable gaming regulatory approvals, FOX Sports has the right to acquire up to a 50% equity stake in TSG's U.S. business. In accordance with IFRS 2, Share-based payment based on the judgment of management, this right granted to FOX Sports is considered a contingently cash-settled share-based payment because FOX Sports, subject to receiving regulatory approvals and meeting certain other conditions, has discretion to exercise the right. During the year ended 31 December 2020, the Group recorded £6.6m to sales and marketing expense in relation to the commercial agreement and at 31 December 2020 the total fair value liability due was £4.0m.

 

Management has made certain judgments in the recognition and measurement of liabilities in relation to this commercial agreement and associated right of FOX Sports 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. 

 

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.

 

Acquisition accounting and value of acquired assets and liabilities

The acquisition method of accounting is used to account for all business combinations. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Judgement and estimation are required in particular in the identification and valuation of separable intangible assets, future cashflows, appropriate discount rates and determining appropriate useful economic lives for these assets. The discount rates used ranged from 8.45% to 12.25% for the various segments and the terminal growth rates were between 1.75% and 2.75%.  If the purchase consideration exceeds the fair value of the net assets acquired, then the difference is recognised as goodwill.

 

The Group has one year from the acquisition date to re-measure the fair values of the acquired assets and liabilities and the resulting goodwill if new information is obtained relating to conditions that existed at the acquisition date. Acquisition related costs are expensed as incurred. The business combinations entered into during the year are disclosed in Note 11.

 

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

The Group reviews the carrying value of goodwill for impairment annually (or more frequently if there are indications that the value of goodwill may be impaired) by comparing the carrying values of these cash generating units with their recoverable amounts (being the higher of value in use and fair value less costs to sell).

 

The impairment review is performed on a "value-in-use" basis, which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. Certain of 4. Judgements and estimates (continued)

 

these estimates and assumptions are subjective in nature.  

 

The retail cash generating units ("CGUs") were impacted significantly due to the temporary suspension of the activities of shops for a period leading to shorter term impacts such as social distancing as well as longer term uncertainty in respect of customer behaviours.  

 

For the Group's various Online CGUs which generate income from sportsbook, the impact of COVID-19 has not been as significant due to greater substitution possibilities and they also benefit from the ongoing retail to online migration.  While no impairments have arisen in the Group's Online CGUs during the year ended 31 December 2020, there is economic uncertainty in the global economy due to the ongoing COVID-19 global pandemic and this could be a potential future risk.

 

Valuation of tax provisions and liabilities and associated receivables

Taxation within the Group includes both Income Taxes and Gaming Taxes. Judgement and estimation are required to interpret international tax laws and the way these taxes interact within each jurisdiction, to identify and value provisions in relation to gaming and income taxes as applicable.  The liabilities for uncertain tax positions reflected within current tax payable and provisions in the Consolidated Statement of Financial Position are comprised of a number of individually immaterial uncertain tax positions relating to the risks assessed in various jurisdictions by Management. Uncertainties have been measured using the best estimate of the likely outcome. This assessment relies on estimates and assumptions and may involve a series of judgements about future events.

 

New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the income tax or gaming tax expense in the period in which such a determination is made. Management uses in-house tax experts, professional firms and previous experience when assessing tax risks and the Group believes that the accrual for all tax liabilities at 31 December 2020 is adequate and the tax receivables are recoverable for all uncertain tax positions based on its assessment of the range of factors outlined above. Further information in relation to the judgement relating to the disputed legacy German and Greek tax assessments is outlined in Note 12.

 

Valuation of Embedded Derivative on Senior Notes

The Senior Notes (as defined in Note 16) include certain embedded features allowing the Group to redeem the Senior Notes or allowing the holders to require a redemption of the Senior Notes. These features were bifurcated from the carrying value of the Senior Notes. Management used estimates, including an implied credit spread of 2.77% as at 31 December 2020 (5 May 2020 - 5.1%), in determining the fair value of the Embedded Derivative. The implied credit spread represents Management's estimate of the Group's creditworthiness as implied by the market value of the Senior Notes. During the year ended 31 December 2020 a gain of £78.5m was recorded through financial income in relation to the re-measurement of this Embedded Derivative.

 

 

 

5. Operating segments

 

Reportable business segment information

Subsequent to the Combination, the Group's reportable segments during 2020 were as follows:

 

· PPB;

· PokerStars;

· Sky Betting and Gaming;

· Australia; and

· US

 

These reportable segments reflect the way financial information was reviewed by the Group's Chief Operating Decision Maker (the Board of Directors, "CODM") subsequent to the Combination during 2020. The Group has restated the operating segment information for the year ended 31 December 2019 accordingly.

 

As a result of internal restructuring and integration initiatives, the Group expects to move into a four segment operating model in 2021:

· UK & Ireland;

· International;

· Australia; and

· US

The previous reportable segments of PPB Online and PPB Retail have been aggregated in the PPB segment due to the similar products, markets and regulatory environment that both segments operate in.

 

The PPB segment derives its revenues primarily from sports betting (sportsbook and the exchange sports betting product) and gaming (games, casino, bingo and poker) services for the Paddy Power and Betfair brands and some business-to-business ("B2B") services globally. Services are delivered through the internet and through licensed bookmaking shop estates in the UK and Ireland with a small proportion delivered through the public telephony system.

 

The PokerStars segment derives its revenues primarily from poker, gaming and sports betting for the PokerStars, BetStars, Full Tilt and their related brands mainly via the internet.

 

The Sky Betting and Gaming segment derives its revenues primarily from sportsbook and gaming (games, casino, bingo and poker) for Sky Bet and its related brands via the internet as well as from Oddschecker, the UK's leading odds comparison website.

 

The Australia segment comprising the Sportsbet and BetEasy brands earns its revenues from sports betting services provided to Australian customers using primarily the internet with a small proportion using the public telephony system.

 

The US segment comprising the FanDuel, TVG, Betfair, PokerStars and FOX Bet brands earns its revenues from sports betting, daily fantasy sports and gaming services provided to US customers using primarily the internet with a proportion of US sports betting services also provided through a small number of retail outlets.

 

Corporate administrative costs (Board, Finance, Legal, Internal Audit, HR, Property and other central functions) cannot be

readily allocated to individual operating segments and are not used by the CODM for making operating and resource allocation decisions. These are shown in the reconciliation of reportable segments to Group totals.

 

Assets and liabilities information is reported internally in total and not by reportable segment and, accordingly, no information is provided in this note on assets and liabilities split by reportable segment.

 

 

 

5. Operating segments (continued)

 

Reportable business segment information for the year ended 31 December 2020:

 

 

 

 

PPB

 

 

PokerStars

 

 Sky Betting and Gaming

 

 

Australia

 

 

US

 

 

Corporate

 

 

Total

 

£m

£m

£m

£m

£m

£m

£m

Revenue from external customers before VAT refund

1,293.9

757.0

685.4

988.8

672.9

-

4,398.0

Cost of sales

(382.2)

(186.2)

(199.7)

(468.7)

(302.2)

-

(1,539.0)

Gross profit

911.7

570.8

485.7

520.1

370.7

-

2,859.0

Operating costs excluding depreciation and amortisation

(640.9)

(289.7)

(211.8)

(213.2)

(519.0)

(95.2)

(1,969.8)

Adjusted EBITDA 1

270.8

281.1

273.9

306.9

(148.3)

(95.2)

889.2

Depreciation and amortisation

(94.4)

(31.6)

(19.5)

(28.2)

(34.8)

(4.7)

(213.2)

Adjusted reportable segment profit / (loss) before separately disclosed items

176.4

249.5

254.4

278.7

(183.1)

(99.9)

676.0

Amortisation of acquisition related intangible assets (Note 6)

(51.2)

(206.2)

(127.5)

(18.7)

(28.7)

-

(432.3)

Impairment

(12.1)

(4.4)

-

(2.0)

-

(4.1)

(22.6)

VAT refund (Note 6)

11.2

-

-

-

-

-

11.2

Reportable segment profit / (loss) after amortisation of acquisition related intangibles, impairment and VAT refund

124.3

38.9

126.9

258.0

(211.8)

(104.0)

232.3

Acquisition fees & associated costs2

 

 

 

 

 

 

(32.7)

Restructuring and integration costs2

 

 

 

 

 

 

(96.1)

Operating profit

 

 

 

 

 

 

103.5

 

 

Reportable business segment information for the year ended 31 December 2019:

 

 

PPB

 

  PokerStars

 Sky Betting and Gaming

 

Australia

 

US

 

Corporate

 

Total

 

£m

£m

£m

£m

£m

£m

£m

Revenue from external customers

1,317.9

-

-

445.8

376.3

-

2,140.0

Cost of sales

(352.9)

-

-

(181.5)

(115.8)

-

(650.2)

Gross profit

965.0

-

-

264.3

260.5

-

1,489.8

Operating costs excluding depreciation and amortisation

(575.9)

-

-

(136.8)

(296.7)

(55.0)

(1,064.4)

Adjusted EBITDA1

389.1

-

-

127.5

(36.2)

(55.0)

425.4

Depreciation and amortisation

(92.9)

-

-

(23.8)

(23.8)

(4.3)

(144.8)

Adjusted Reportable segment profit/ (loss) before separately disclosed items

296.2

-

-

103.7

(60.0)

(59.3)

280.6

Amortisation of acquisition related intangible assets (Note 6)

(77.2)

-

-

-

(35.9)

-

(113.1)

Reportable segment profit/ (loss) after amortisation of acquisition related intangibles

219.0

-

-

103.7

(95.9)

(59.3)

167.5

Acquisition fees and associated costs

 

 

 

 

 

 

(17.6)

Operating profit

 

 

 

 

 

 

149.9

 

1

Adjusted EBITDA which is a non-GAAP measure in the above segment note is defined as profit for the period before separately disclosed items, 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.

2

The Group does not allocate acquisition fees and restructuring and integration costs to reportable segments.

5.  Operating segments (continued)

 

Reconciliation of reportable segments to Group totals:

 

 

2020

2019

 

£m

£m

Revenue

 

 

Total revenue from reportable segments, being total Group revenue before VAT refund

4,398.0

2,140.0

VAT refund

15.9

-

Total revenue from reportable segments, being total Group revenue

4,413.9

2,140.0

Profit and loss

 

 

Operating profit

103.5

149.9

Unallocated amounts:

 

 

Financial income

79.9

1.0

Financial expense

(182.3)

(15.2)

Profit before tax

1.1

135.7

 

Disaggregation of revenue under IFRS 15

 

Group revenue after the VAT refund (see Note 6) disaggregated by product line for the year ended 31 December 2020:

 

 

 

PPB

 

PokerStars

 Sky Betting and Gaming

 

Australia

 

US

 

Total

 

£m

£m

£m

£m

£m

£m

Sports revenue1

812.8

45.5

421.3

988.8

457.0

2,725.4

Gaming revenue2

497.0

711.5

264.1

-

215.9

1,688.5

Total Group revenue

1,309.8

757.0

685.4

988.8

672.9

4,413.9

 

Group revenue disaggregated by product line for the year ended 31 December 2019:

 

 

 

PPB

 

 PokerStars

 Sky Betting and Gaming

 

Australia

 

US

 

Total

 

£m

£m

£m

£m

£m

£m

Sports revenue1

895.9

-

-

445.8

325.0

1,666.7

Gaming revenue2

422.0

-

-

-

51.3

473.3

Total Group revenue

1,317.9

-

-

445.8

376.3

2,140.0

 

1 Sports revenue comprises sportsbook, exchange sports betting, daily fantasy sports and pari-mutuel betting.

2 Gaming revenue includes Games, Poker, Casino and Bingo and in PPB includes the VAT refund (see Note 6).

 

 

5.  Operating segments (continued)

 

 

Group revenues after the VAT refund (see Note 6) disaggregated by geographical segment for the year ended 31 December 2020:

 

 

 

PPB

 

PokerStars

 Sky Betting and Gaming

 

Australia

 

US

 

Total

 

£m

£m

£m

£m

£m

£m

UK

873.4

60.2

678.0

-

-

1,611.6

Australia

-

-