Flutter Entertainment has reported a 37% year-on-year rise in revenue to £6.04bn for full-year 2021 as its recreational player base increased by 23% in line with corporate strategy.

Group EBITDA fell by 6% during the period to £723m while the FTSE 100 operator’s share price also dropped in wake of the results by more than 12% to £94 at the time of writing.

Sports contributed more than half of 2021 revenue at £3.77bn as gaming revenue came in at £2.26bn.

The rise in annual revenue was attributed to benefits resulting from Flutter’s 2020 purchase of PokerStars owner The Stars Group, while the EBITDA decline was driven by increased investment in the US business led by FanDuel and regulatory impacts across the firm’s International portfolio.

Excluding the US, adjusted EBITDA came in 10% lower than 2020 as strong top line growth in Australia, driven by Sportsbet, was offset by headwinds elsewhere, including challenging Covid comparatives, International regulatory changes, UK & Ireland safer gambling costs and customer friendly sports results.

In 2021, Russia accounted £41m in revenue contribution while Ukraine contributed £19m. Flutter said it was monitoring the situation closely with that contribution likely to reduce rapidly due to the ongoing war in the region.

Flutter CEO Peter Jackson said: “2021 was another strong year for the group as we made good progress against our strategic objectives and grew our recreational customer base to more than 7.6 million customers.”

Broken down by geography, the US division achieved annual revenue of £1.39bn amid an operating loss of £289m. International, including PokerStars, generated revenue of £1.29bn during 2021, as did Australia, while £2.06bn was provided by the UK & Ireland.

In 2021, Flutter said FanDuel became the first large scale online brand to generate a positive in-year contribution from sports betting and gaming in the US at £9m, with the business on track to become EBITDA positive in 2023, according to management.

“In the US, we delivered over $1.9bn in revenue, leveraging our differentiated product proposition to remain the number one sportsbook in the market with a 40% share,” said Jackson.

“Despite our scale, we retain a challenger mindset; this year we launched a number of new features to our market-leading same-game parlay product, maintaining our competitive advantage in sports.

“I’m also pleased to see the progress on our path towards profitability; FanDuel sportsbook and gaming business delivered positive contribution in 2021 for the first time, a significant milestone for the brand,” he added.

In the UK & Ireland, Flutter claimed a full-year market share of 29%, resulting in online revenue growth of 3%. An unprecedented run of customer-friendly sports results in 2021 cost the division £232m in revenue year-on-year, with £149m of that damage done in Q4.

It was the easing of Covid-19 restrictions during 2021 that caused a reduction in revenue for Flutter’s International division, combined with the well-documented adverse changes to regulation in both Germany and the Netherlands.

In International, investments made since acquiring PokerStars have put it on a more sustainable footing and while this has resulted in reduced profitability, the necessary foundations for future growth are now in place,” said Jackson.

“Notwithstanding regulatory changes in Germany, Netherlands and elsewhere, we saw good momentum across key markets such as Brazil, Canada and Georgia.

“In addition, the announcement of our acquisition of Sisal will further enhance both the quality and shape of our International division.

“Overall, I am pleased with the progress we have made during 2021 and believe Flutter is exceptionally well positioned for future growth,” he added.

After the reporting period, trading during the first seven weeks of 2022 has climbed 2% year-on-year.

Commenting on the full-year performance, Regulus Partners analyst Paul Leyland said: “With these headwinds, the extent to which lockdowns have reduced fiscal, business and consumer headroom to cope with other crises may be brutally exposed, especially for digital entertainment businesses which benefited from significant policy-led distortions to land-based competition and consumer time/disposable income.

“Flutter has the scale, diversification and competence to handle these challenges, in our view. A much greater focus on sustainability is also critical to longevity, which management is effectively delivering.

“However, a combination of mounting external pressures and a responsible approach to their mitigation is potentially decoupling sustainability from growth. This will be tough to deliver and perhaps even tougher to explain,” he added.

Elsewhere, Flutter provided an update on its legal arbitration process with FOX over its option to acquire an 18.6% stake in FanDuel, saying it would continue to “vigorously defend” its position.

It said that while discussions between both parties had been productive and were at an advanced stage, it remains unclear as to whether a settlement can be reached.

As a result, the arbitration is proceeding in parallel with a court hearing date now set for 20 June 2022, which should result in a binding decision by the arbitrator in Q3 2022.

Amid the share price decline, Peel Hunt analyst Ivor Jones reiterated his Buy rating and £145 target price for Flutter stock.

“Trading momentum will accelerate through the year and, today, we have learned that there may be a negotiated settlement in relation to FOX,” he said.

“The exposure to Russia/Ukraine adds an element of uncertainty but with the Sisal deal due to complete and diversify the group into a leading position in Italy, along with strong market leadership in the US, we believe the shares, after a period of decline, represent good value.”

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