Bookmakers and gaming company Flutter Entertainment PLC (LON:FLTR), GVC Holdings (LON:GVC) and William Hill PLC (LON:WMH) have laid bare their expected multimillion-pound monthly losses resulting from the cancellations of major sporting events.
With at least two weeks of games already cancelled by the organisers of the Premier League and the English football league, along with sometimes longer postponements for continental European competitions, and many other sports, the betting giants said they had deployed business continuity plans to cope with the loss of business.
Sports betting is not the be-all and end-all for these groups but it is a very larger part, to a varying degree.
Paddy Power and Betfair owner Flutter last year generated roughly 78% of its revenues through bets placed on global sporting events, William Hill's sportsbook generated 53% of its 2019 revenue, while Ladbrokes owner GVC said 45% of group net gaming revenue was generated from sporting events last year.
In the current year, Flutter said it expects a £90-110mln reduction in underlying profits (EBITDA) in a scenario where the sports shutdown remains in place until the end of August, including suspension of all Australian sports and the cancellation of the Euro 2020 football tournament, but with UK and Irish shops remaining open and scheduled horse racing continuing to run, but behind closed doors.
If UK, Irish and Australian horse racing shuts down from April to August, this would subtract another £30mln from EBITDA per month, or £150mln under the five-month scenario for a potential total of £240-260mln damage for Flutter.
Under a less onerous scenario given by GVC, where no football is played until July and the Euros are postponed until 2021, but most horse racing continues behind closed doors and its betting shops remain open, it would face a £130-150m EBITDA reduction for 2020 before taking any mitigating action.
If its Ladbrokes and Coral shops in the UK are closed, GVC said it would take another £45-50mln hit to EBITDA per month, meaning a three month closure could add £150mln for a total hit of £300mln.
Over at William Hill, if UK and international resumes in August, apart from the Euros, UK retail shop closures for just one month, but US sports resume in time for the new NFL season in September, it warned of a £100-110mln hit to EBITDA.
If horse racing and its betting shops are both shuttered this is expected to result in £25-30mln gouged out of EBITDA per month.
Cash and debt levels
To preserve cash, William Hill said it was suspending the dividend “until further notice”, meaning the 2019 final dividend will not be proposed for last year.
Hill's had net debt of £535.7mln at the end of last year, but said it an undrawn committed revolving credit facility of £425mln and is "working closely with our banking partners to enhance our liquidity position".
Flutter, which had £162mln net debt at the end of December, insisted it has “a strong balance sheet”, though this was based on a leverage ratio of net debt versus last year’s EBITDA, which is likely to be a lot lower this year. Last year ended with a debt to EBITDA ratio of 0.7 times versus a bank covenant level of 3.5x.
“We will continue to explore ways to mitigate the impact of cancellations through multiple measures,” Flutter said.
GVC also was bullish about its balance sheet, with accessible cash of £260mln and an undrawn bank credit facility of £550mln.
As of December its net debt/EBITDA ratio was 2.7 times versus a bank covenant test of 4 times, which it noted only occurs if the facility is drawn by 35% or more at the end of a financial quarter.
Flutter shares, having already fallen by a third since the start of the year, tumbled 19% to 5,198p in early trading on Monday.