Revenues up at Flutter and The Stars Group as firms prepare for 2020 mega merger

Flutter Entertainment and The Stars Group (TSG), the two gambling giants who agreed a blockbuster merger last month, both reported strong increases in revenue for the third quarter of 2019.

Revenue at Flutter, the umbrella organisation for brands Paddy Power and Betfair, jumped to £533 million, up by ten per cent compared to the same period last year, with strong performances from Sportsbet in Australia and FanDuel in the USA.

However, stripped out online revenue fell by one per cent and retail by nine per cent due to a combination of no World Cup football, the introduction of stronger responsible gambling measures and the impact of the reduction in maximum stakes on Fixed Odds Betting Terminals to £2 from £100.

Peter Jackson, Flutter’s chief executive, called the period “an important one” for the organisation following the announcement it would combine with TSG, owner of brands including Sky Bet and Betstars, eventually holding 54.64 per cent of the group.

Jackson said: “Q3 was an important quarter with revenues up ten per cent and the announcement of our combination with The Stars Group. We believe that this deal will accelerate delivery of all of our core strategic objectives and we are very excited about the international growth prospects for the combined group.

“Within PPB, both the Paddy Power and Betfair brands continued to make good progress in building more recreational customer bases through enhanced responsible gambling measures. While revenues in the quarter were impacted by this ongoing work, we remain confident that the changes being made will improve the sustainability of future growth and lead to a more diversified customer base for both brands.

“In our retail business, we have seen an improvement in gaming revenue trends month?on?month and this trend has accelerated since the start of the fourth quarter as competitors have started to close shops across the UK.”

Revenue at TSG climbed 8.8 per cent for the three months to the end of September, driven by strong growth in Australian and Britain. The Canadian firm expects the merger with Flutter to be completed in the second or third quarter of next year.

Rafi Ashkenazi, TSG chief executive, said: “Shortly after quarter end we announced an agreement to combine with Flutter to create a global leader in online betting and gaming, and we are working diligently to bring the proposed combination to closing.

"We remain excited about the opportunities in front of us as the combination will enhance and accelerate each company’s growth strategy by providing a diverse portfolio of leading brands and complementary best-in-class products with a broad geographic reach.

“Ahead of closing, we remain highly focused on our key strategic priorities of integration, execution and debt reduction. Not only have we largely completed the integration of Sky Betting & Gaming, but we currently expect to exit 2019 with a run-rate of the full $100 million of expected cost synergies and are beginning to execute on our plans for revenue upside through Sky Bet in Italy and Germany and our developing UK ecosystem.”

In response Analysts Regulus Partners said: "We continue to see the Stars-Flutter merger as strategically compelling in terms of reducing relative regulatory risk exposure and maximising the likelihood of strong operational delivery in key markets [especially US].

"We also see few fundamental anti-trust issues given the structurally highly competitive nature of the markets where Stars and Flutter combine to significant market share – though this is unlikely to preclude a detailed examination, in part due to the sensitivity of gambling.

"However, while the logic remains compelling on paper, the mixed performance across divisions of both groups demonstrates the extent to which scale and operational capability is required to overcome mounting regulatory risks in an increasingly challenging growth environment."

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