The Stars Group /TSG/ 2019 financial results report released today showed the company had a strong performance in two specific geographic markets, Australia and the UK.
The Stars Group, the company that is currently merging with owner of FanDuel and Paddy Power Betfair, the US-based Flutter Entertainment, showed a 24.6% year-on-year increase in revenue and 17.9% rise in adjusted EBITDA for the year ending 31 December 2019, but these results were achieved mainly through two of the markets where the group operates.
The Acquired Business Makes Its Mark
In the UK, the online poker giant posted 140% increase in revenue to $946.7 million, with adjusted EBITDA up 217.9% to $324.6 million, mainly due to the full year of operation since the acquisition of Sky Betting & Gaming, contributing to the total revenue of the group to $2.53 billion, up year-on-year from $2.03 billion.
Australia, the market where the Toronto-based operator acquired the final 20% stake in BetEasy last year, showed revenue growth by 39.3% to $274.4 million with almost all of that coming from sports betting that posted revenue of $270.3 million, with adjusted EBITDA going up by 105.6% to $44.4 million.
Some Revenues Drop
Alongside the positives, there are areas in the report that pose some concerns, as international revenue dropped by 8.9% to $1.31 billion and international poker revenue was down by 11.8% to $781.6 million, but the company explained the former by adverse fluctuations in the foreign exchange markets, continued disruptions and headwinds from regulatory actions in some of the markets, and the latter with the closure of PokerStars in Switzerland, together with tougher operating conditions in Spain and Sweden.
The overall gross profit for the group of $1.84 billion was achieved after the cost of revenue grew to $693.1 million.
Costs Surging
General and administrative costs for the company, except for its international business where these were down by 5.7%, grew across the board, to $1.16 billion from $977 million in 2018, bringing operating income to $264.2 million, $4 million up compared to the previous year.
As a result, TSG posted a net profit of $61.9 million for the year, compared to a net loss of $109.0 million the year before.
“In 2020, we plan to further enhance the global appeal of the PokerStars brand, including by launching the PokerStars Sports brand,leveraging the operational capabilities of our Sky Betting & Gaming business, and launching television advertising for PokerStars Casino… we remain focused on our key strategic priorities of integration, execution, and debt reduction”, Rafi Ashkenazi, Chief Executive Officer, The Stars Group.
Results Alongside Expectations
The group CEO also emphasized that it achieved the full expectation rate of $100 million of cost synergies from the acquisition in the UK, helping it prepay $100 million of debt to further reduce the overall debt level ahead of the merger with Flutter Entertainment.