Sky Betting & Gaming drives Stars Group growth in first half

12 August 2019

The Stars Group has cited the impact of its acquisition of Sky Betting & Gaming as the primary reason behind a 51.4% year-on-year increase in revenue in the first half, while the operator also saw its net earnings rocket by 140.1%.

Total revenue for the six months through to June 30, 2019 amounted to $1.22bn (£1.01bn/€1.09bn), up from $804.4m in the corresponding period last year.

The PokerStars operator's international business remains its primary source of income, but revenue from this arm slipped 9.5% year-on-year to $662.5m. Betting revenue was up 5.5%, but all other areas saw declines in the first half.

However, Stars was boosted by revenue growth from its UK operations, which comprises the Sky Betting & Gaming business. Revenue totalled $432.0m driven by $220.9m in betting revenue and $182.9m in gaming revenue.

Stars also saw its Australian business, comprising the CrownBet and former William Hill Australia assets, report a 74.4% year-on-year increase in revenue to $126.2m, again driven by betting revenue, which was up 71.7% to $124.3m.

In terms of spending, total adjusting items for the period stood at $432.1m, up from $343.3m last year. Depreciation and amortisation costs rocketed from $83.8m to $218.4m, while other costs climbed from $26.7m to $48.5m.

However, such was the impact of Sky Betting & Gaming on Stars and its revenue in the first half that the operator was able to turn a net loss of $80.5m in the first half of last year to net earnings of $32.3m. Gross profit excluding depreciation and amortisation was also up 37.6% to $881.5m.

Adjusted net earnings were down 9.9% year-on-year to $243.1m, but adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased 25.9% to $432.1m.

Stars was boosted by a positive performance in the second quarter, during which revenue hiked by 54.9% year-on-year to $637.6m. Again, this was mainly a result of the addition of Sky Betting & Gaming to the group, with online sports betting responsible for 36% of all revenue, compared to 20% last year.

Stars said 79% of consolidated revenues were derived from locally regulated or taxed markets in the three months to June 30, compared to 61% in the same period last year.

Aside from revenue, net earnings amounted to $4.6m in Q2, compared to a net loss of $154.8m last year, while gross profit increased 41.4% to $463.7m.

“The second quarter underpinned the success of last year's acquisitions, particularly with the record performance of Sky Betting & Gaming and our increasing product and geographic diversification, as we continue to transform and position the business to execute on our strategy for strong, sustainable future growth,” Stars’ chief executive, Rafi Ashkenazi, said.

“2019 has been and remains a year of integration, execution and debt reduction. We are committed to those key strategic priorities for the rest of the year while we also build our foundation and momentum to become a market leader in the US.

“We are confident that the actions we have taken over the last year, and are pursuing now, including to reassess our fixed cost base, put us in a strong position to deliver our mid-term growth targets from the end of 2019.”

However, despite posting growth in the first half, Stars has moved to lower its full-year guidance. Revenue projections have been cut from between $2.64bn and $2.77bn to a range of $2.5bn to $2.56bn.

Adjusted guidance has also been lowered from between $960m and $1.01bn to a range of $905m to $930m.