(Alliance News) - Flutter Entertainment PLC on Thursday reported a much lower half-year profit due to amortisation of intangible assets relating to various mergers and acquisitions.
The Dublin-based gaming operator's profit for the six months ended June 30 fell 70% to GBP24.0 million from GBP81.0 million.
This resulted largely from separately disclosed items, unrelated to usual business activity, which multiplied to GBP194.3 million from GBP58.8 million.
These costs in the first half of 2020 included GBP128 million of amortisation of intangible assets recognised on accounting for the merger of Paddy Power and Betfair in 2016, as well as the 2018 combination of Flutter's US assets with FanDuel, its 2019 Adjarabet buy, and its 2020 combination with Canada's Stars Group.
As well, transaction fees and associated costs of GBP26 million were recorded for the Stars Group combination.
Excluding separately disclosed items, pretax profit was GBP218.3 million, up 56% from GBP139.8 million the year prior.
Revenue was 51% higher at GBP1.54 billion from GBP1.02 billion the previous year following the combination. Pro forma, including Stars Group financial for a full six month period in 2019 and 2020, as well as a six-month contribution from Adjarabet in 2019, revenue was up 22% in the first half.
Pro forma adjusted earnings before interest, tax, depreciation and amortisation was GBP684 million, up 35% year-on-year, while reported adjusted Ebitda was up 59% at GBP342 million from GBP216 million. Adjusted figures exclude separately disclosed items.
Flutter described trading in its second half to date as "encouraging", helped by "condensed football fixtures, favourable sports results and ongoing resilience of gaming" but noted that the outlook is still very uncertain as more Covid-19 disruption and regulatory changes are possible.
Assuming normalised net revenue margins and no more disruption of sporting events or shutdown of retail operations, Flutter forecasts a pro forma adjusted Ebitda of between GBP1.18 billion and GBP1.33 billion excluding the US for 2020.
Flutter is expecting an Ebitda loss in the US of between GBP140 million and GBP160 million, assuming online launches in Michigan and Tennessee plus continued mobile registration in Illinois.
In 2019, the company's pro forma adjusted Ebitda was GBP386 million.
As per Flutter's prior guidance, no interim dividend was declared, compared to a 67 pence per share interim dividend in 2019.
Chief Executive Peter Jackson said: "While maintaining strong trading momentum, we have also made good progress since May on the integration with [Stars Group]. All four regional CEOs have been appointed and most key leadership roles have now been filled. Important decisions are progressing on our technology plans and we are aligning our regulatory and responsible gambling approach across the expanded group. In Australia, integration is particularly well advanced and we will migrate BetEasy customers over to Sportsbet imminently. We plan to provide a more detailed strategic update, as well as a synergy update, at the time of our full year results in March 2021.
"The second half has started well, with good sports betting performance following the return of major sport events, whilst gaming performance has remained resilient. Looking ahead, we have identified promising opportunities to increase investment across the group and, while the outlook with respect to Covid-19 remains highly uncertain, the diversification of our group means we approach the future with confidence."
Flutter also said Rafi Ashkenazi stepped down as a non-executive director on Thursday. Ashkenazi was CEO of Stars Group and joined the Flutter board back in May when the merger was completed.
Shares in Flutter were up 1.4% at 12,760.00p in London on Thursday morning.
By Anna Farley; annafarley@alliancenews.com
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Flutter Entertainment (FLTR)