Flutter Entertainment released an update today regarding the impact on their operations with regards to the mass cancellations of sports events around the world, in a coordinated effort to halt the spread of the novel coronavirus /Covid-19/.
Sports Betting Revenue Vital
The owner of Paddy Power Betfair exchange and FanDuel sports book provider revealed that 78% of its 2019 revenue was generated through placed bets on sports events and with the current developments in the major sports competitions around the world the impact on Flutter’s financials would be “material”.
With no action in the top 5 professional football jurisdictions in Europe, England, Spain, Italy, Germany and France, and all Major Leagues’ events in the US, MLS, MLB, NBA, and NHL, already cancelled or postponed, the company is facing “unprecedented” times in its history and if the situation with the virus outbreak worsens and requires prolonging beyond the initial period, then the impact on Flutter’s financials would be totally unpredictable.
Flutter is going further in its examination of such a scenario, assuming the restrictions remain in place until end of August, including total suspension of Australian sports and the European Football Championship, Euro 2020, stating that their estimations show EBITDA for the Group to be reduced by approximately £90-110 million. And this number is valid only in case the company’s UK and Irish betting shops remain open and all scheduled horse racing fixtures in the UK, Ireland and Australia continue, even behind closed doors. Otherwise, another £30 million per month reduction on EBITDA can be expected.
“The challenge currently facing our business and the industry more widely is unprecedented in modern times. Our focus, first and foremost, is on protecting the welfare of our employees and our customers and we will leave nothing to chance in this regard. While our near-term profitability will be impacted by the essential measures being taken globally, the Board will remain focused on protecting shareholder value and managing the business through these turbulent times.”
Peter Jackson, CEO, Flutter Entertainment
Focus On Operation Improvements
Flutter Entertainment pointed out that the operational management of the business was successfully following the continuity plan, with all systems performing as expected, and prior to the implementation of the restrictions stemming from the coronavirus outbreak, trading in the quarter had been exceeding the company’s expectations, favoured by sporting results and good customer momentum.
The company completed the financial 2019 in a good position retaining a strong balance sheet ahead of the completion with its merger with TSG, its leverage ratio, net debt/EBITDA, 0.7x, well below its covenant level of 3.5x, and the management reiterated its stance that they continue to optimize operations where possible, looking to offset the virus outbreak impact.