Stars Group lifted by UK and Australian acquisitions

27 February 2020

A strong performance in the UK and Australia helped The Stars Group (TSG) to big gains in 2019.

The PokerStars owner – which is in the process of merging with Flutter Entertainment - reaped the benefits of the acquisitions of UK-facing Sky Betting & Gaming and Australia’s BetEasy as it posted a 24.6% year-on-year increase in revenue and 17.9% rise in adjusted EBITDA for the year to 31 December 2019.

Total revenue for the Toronto-headquartered group was up year-on-year to $2.53bn from $2.03bn. This was aided by a 140.2% increase in UK revenue to $946.7m, following the Sky Betting & Gaming acquisition in July 2018.

Within that business, betting and gaming both grew by three-digit figures with the former leading the way in revenue terms at $528.1m. An increase in stakes was primarily driven by ongoing improvements to the segment’s products and promotions, particularly around in-play football, which drove growth in customer engagement and retention, TSG said.

Australian revenue grew by 39.3% to $274.4m with almost all of that from betting, which was worth $270.3m.

However, there was a drop in revenue from the International segment, of 8.9% to $1.31bn. TSG attributed this to adverse foreign exchange fluctuations and continued disruptions and regulatory headwinds in certain markets due to local restrictions on some methods of payment processing and on certain methods of downloading.

International poker revenue was down by 11.8% to $781.6m with the primary negative impact related to the closure of PokerStars in Switzerland in July 2019, together with tougher operating conditions in other markets such as Spain and Sweden, following regulatory changes in those countries.

Cost of revenue, excluding depreciation and amortisation, grew to $693.1m, leading to an overall gross profit of $1.84bn.

Outgoings increased across the board, with general and administrative costs surging above the $1bn mark to $1.16bn from $977m last year. Operating income came in at $264.2m, which was up by $4m on 2018.

UK adjusted EBITDA was up 217.9% to $324.6m. Outgoings were up across the board as it added a full year of Sky Betting & Gaming costs to its balance sheet.

Adjusted EBITDA in Australia, meanwhile, grew by 105.6% to $44.4m. The biggest outgoing was general and administration, although this fell by 5.3% year-on-year.

International general and administrative outgoings were down by 5.7%, which helped the segment to adjusted earnings of $604.9m, which was down 14.0% year-on-year.

The group recorded a net profit of $61.9m for the year, compared to a net loss of $109.0m in 2018.

“In 2019, we continued to execute on our strategy to deliver long-term sustainable growth and become the world’s favourite iGaming destination. We not only began to see the full-year benefits of our transformative 2018 acquisitions, but executed on delivering a landmark media partnership in the US, with the launch of FOX Bet, strengthening our position in this emerging market,” said Rafi Ashkenazi, TSG’s chief executive. “We also focused on creating shareholder value through efficient capital allocation, prepaying over $450m of debt during the year.

“In-line with our expectations, we exited 2019 with a strong fourth quarter with Constant Currency Revenue growth of 7% year-over-year driven primarily by the continued impressive underlying performance of our primary sports betting brands.

“With sports betting now our largest product vertical and 81% of our revenues coming from locally regulated or taxed markets, we are well positioned for diversified growth in 2020 and beyond.”

Today (27 February) Flutter Entertainment has reported a 14.3% year-on-year increase in revenue for 2019, with growth in the US and Australia offsetting declines in its online sports betting and retail businesses.