Paddy Power parent says Covid-19 disruption could cost it £110m

Earnings at the parent company of bookmaker Paddy Power could fall by up to £110 million (€122 million) should the Covid-19 pandemic continue to mean restrictions on sporting events until August, the company has said.

Flutter Entertainment provided an update to Euronext Dublin, which is the Irish stock exchange, on Monday regarding the cancellation and/or postponement of multiple sports fixtures globally.

It noted that many national governments and sports authorities around the world have in recent days made the decision to postpone or cancel high attendance sports events in an effort to delay the spread of the Covid-19 virus.

“This will obviously have a material impact on the revenue and earnings of the group which, in 2019, generated approximately 78 per cent of its revenues through bets placed on global sporting events,” said Flutter.

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“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.

“While most major global sports have been suspended/cancelled, there are some exceptions where events are now being scheduled to take place behind closed doors. These include some Australian sports as well as Irish and Australian horse racing.”

Restrictions

Flutter said that in a scenario where restrictions remain in place until the end of August (including full suspension of Australian sports and the cancellation of Euro 2020), earnings before interest, taxes, depreciation, and amortisation (ebitda) would be reduced by approximately £90-£110 million.

The estimate assumes that its UK and Irish shops remain open and that scheduled UK, Irish and Australian horse racing fixtures continue to run, albeit behind closed doors.

The challenge currently facing our business and the industry more widely is unprecedented in modern times

Should horse racing be cancelled in the three regions and UK and Irish shops be closed, Flutter said this would incrementally reduce group ebitda by approximately £30 million per month.

“In terms of the operational management of our business, we successfully deployed our business continuity plan last week during what was a very busy week for the group, with all systems performing well,” it said.

“Prior to the announcement of cancellations, trading in the quarter had been running ahead of our expectations, assisted by good customer momentum and favourable sporting results.”

Mitigate

The group retains a strong balance sheet with a leverage ratio (net debt/ebitda) of 0.7 times as at December 31st, 2019. It said it would continue to explore ways to mitigate the impact of cancellations through multiple measures.

Flutter chief executive Peter Jackson said the board would focus on protecting shareholder value during the crisis.

“The challenge currently facing our business and the industry more widely is unprecedented in modern times,” he said.

“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.”