Coronavirus: Owner of Paddy Power, FanDuel, Betfair Fears £110m Loss

  • Flutter Entertainment estimates up to £110m drop in earnings over sporting event restrictions
  • Parent company provided update to Irish stock exchange on Monday
  • £30m monthly losses predicted if horse racing in UK, Ireland, and Australia also cancelled
graph showing revenue drop
Flutter Entertainment faces a drop in earnings of as much as £110m if sporting event restrictions and cancellations persist until August. [Image: Shutterstock.com]

Worrying times for the company

Flutter Entertainment, the parent company of Paddy Power, Betfair, and FanDuel, has updated shareholders that earnings could drop by up to £110m ($135.6m) if sporting event restrictions remain in place until August. The company, which plans to merge with the Stars Group, provided the update to the Irish stock exchange on Monday.

core business decimated due to the recent mass cancellation of sports events

Flutter has seen its core business decimated due to the recent mass cancellation of sports events to help stop the further spread of the coronavirus. It said these cancellations will lead to a material impact on revenue and earnings. In 2019, about 78% of all Flutter revenues came through sports betting.

The statement added, “Quantifying the precise earnings impact on the group is difficult at this point as we do not have visibility on the duration of restrictions on sporting events.”

Further cancellations would pose issues

Flutter Entertainment’s statement noted that a handful of sporting events are still going forward, such as certain sports in Australia and horse racing in Ireland, Australia, and the UK. The company was also buoyed by the Cheltenham Festival going ahead last week despite much consternation. 

EBITDA would fall by between £90m ($111m) and £110m ($135.6m)

However, if sports cancellations continue through to the end of August, earnings before interest, taxes, depreciation, and amortization (EBITDA) would fall by between £90m ($111m) and £110m ($135.6m). 

The estimate also makes the assumption that the company’s retail operations remain open across Ireland and the UK. It also assumes that the scheduled horse racing meetings in Australia, Ireland, and the UK will go ahead as planned, albeit behind closed doors.

If each of these regions ends up completely canceling horse racing events, there would be further decreases to Flutter’s EBITDA of about £30m ($37m) per month. 

Good results YTD

Before the announcement of the mass cancellation of sporting events, Flutter was having a strong year. Trading for the first quarter of 2020 was ahead of previous forecasts, thanks to favorable sports results and a lot of consumer momentum. 

The company still has a strong balance sheet that will allow it to withstand significant drops in earnings. It will also be looking at ways in which it can minimize the impact of these cancellations. 

Peter Jackson, Flutter Entertainment’s CEO says the company is focusing on protection shareholder value while these issues continue. Both the business and industry as a whole are facing challenges that are unprecedented in modern times. Flutter’s share price has dropped by more than 40% over the past number of weeks.

Jackson concluded, “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.”

Global gambling industry struggling

Stock markets have been tanking since the rapid spread of the coronavirus across western countries. Sports cancellations have eviscerated the share prices of companies such as Flutter and William Hill, which rely heavily on the revenues made from such events. 

Casino companies have also taken a big share price hit, with many casinos in the likes of Las Vegas and across the United States now closing their doors amid the pandemic. The WSOP Circuit is one of the latest in a series of poker events that have been cancelled in an effort to stem the COVID-19 spread.