Nobody was happier than Peter Jackson, the chief executive of Flutter Entertainment, when Chloe Kelly struck the winning penalty in the Women’s World Cup on Monday. It meant that England would stay in the football competition until Saturday, at least, in turn helping to keep the betting company’s tills ticking over. Flutter owns Paddy Power and Betfair in Britain, which have been kept busy by the men’s Ashes Test cricket series and the women’s netball World Cup, in addition to the summer regulars of Wimbledon and golf’s Open Championship.
The group is developing ever more inventive ways to separate punters from their cash, while staying within gambling responsibility guidelines, of course. Today, for example, Flutter’s FanDuel, the premier online gaming company in North America, will integrate its “sportsbook” into IMG Arena’s golf event centre for the first time with the start of the FedEx St Jude Championship. Fans will be able to track each shot in real time and to view hole profiles, course maps and a live leaderboard. Betting on events during play is booming in all sports.
Flutter is becoming increasingly an American business with British and Australian add-ons. At the company’s half-year results yesterday, Jackson, 47, understandably wanted to concentrate on the group’s first profit in the United States, which he called a pivotal moment. Group revenue rose by 42 per cent to £4.8 billion and earnings before interest, tax and other charges were up by 76 per cent at £765 million. Earnings per share turned from a negative 64.7p to a positive 73.8p. The average number of monthly players across the group grew from 9.6 million to 12.3 million.
Within that, America turned a £132 million loss into a £49 million profit. FanDuel made a $100 million profit, implying losses elsewhere, and its share of the online market, known as igaming, across the Atlantic rose to 23 per cent. The US accounted for 38 per cent of worldwide revenues, outshining the 25 per cent for each of the UK and Ireland and international divisions.
The next step is a New York listing, scheduled for the turn of the year, but Jackson was shy of answering whether this would mean quitting London, saying only that “we are working through the implications of the US listing for other listings”. While a Wall Street quote will improve the marketability of Flutter’s shares, and should push up demand, investors should bear in mind the effects of the stock leaving London altogether. It will be subject to shareholders’ approval.
Outside America, profits swelled by 24 per cent, but investors were bothered by a 1 per cent revenue slippage in Australia despite a 7 per cent increase in the number of players. Part of that was down to tougher taxes, as well as the comparison with a post-Covid boost last year, and was confined mainly to horse racing. However, just as the company can claim credit for its US success, it must accept some blame for the problems in Australia and it will be instructive to see what solutions it offers.
In Britain, last April the government published a white paper on the industry, proposing tighter regulations and stake limits. That has yet to turn into legislation, but more can be expected from the Gambling Commission and little or none of it will be good news for Flutter. That is in sharp contrast with the state-by-state liberalisation in the US, which can only increase the company’s desire to pivot towards that market.
Flutter is on track to double last year’s £908 million pre-tax profit, but its shares have paused since hitting a year’s high of £167.25 in May. They will get a fillip in the run-up to its US debut, but may have further to fall in the next few months.
ADVICE Hold
WHY The shares have run ahead of events and may be due a further correction before moving ahead again
Hiscox
Everything seems to be going right for Hiscox — and that’s an ominous sign for an insurer, even one as widely spread as this one. In the nature of the beast, insurance is exposed to unpredictable events and to competitors driving premiums down.
While Covid and the Ukraine invasion delivered a rocky time from 2020 to 2022, disasters recently have been more manageable and the latest half-year figures show perhaps the best market conditions that the company could expect. That can’t last.
From being primarily a Lloyd’s insurer, Hiscox has broadened out to cover small businesses in the United States, Britain and Europe, as well as offering professional indemnity and employers’ and public liability.
Net insurance contract written premiums for the six months to the end of June rose by 11.4 per cent in constant currency terms to $1.95 billion. Rising interest rates helped investments to a $122 million contribution, compared with a $214 million loss in the same period last year. These swings had a powerful impact on pre-tax profits, taking them up more than tenfold from $25 million to $265 million in the first half. In London, premiums rose by 9 per cent, a trend the business expects to persist.
Yet the turnaround was not enough for the stock market, which drove down Hiscox shares by an alarming 6.3 per cent at one stage yesterday. There was a similar reaction to the full-year 2022 results in March before a recovery, so maybe investors have difficulty at first understanding what is a complex business. That has not been helped by IFRS 17, a new accounting standard, that has led to numbers being restated and comparisons being made more difficult.
A longer-term issue for insurers, including Hiscox, is climate change triggering more floods and fires. The group is examining the implications, which surely must mean higher premiums for those in territories deemed vulnerable.
For the full year, the company suggests that the first-half gains will be maintained. That should translate to a 22.4 price to earnings ratio and a 40 cent dividend, providing a 3 per cent yield.
ADVICE Hold
WHY Worries about forthcoming headwinds
