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Casino and poker growth contributes to record Q1 for Stars
The Stars Group has reported record revenue for the first quarter of 2020, as the novel coronavirus (Covid-19) outbreak led to significant increases in online poker and casino play.
The operator saw revenue for the three months to 31 March rise 27% to $735m (£592m/$679m).
“The Stars Group saw increased customer activity across its online poker and casino product offerings largely beginning in March, with year-over-year International revenue growth of approximately 44% for the month, which more than mitigated the disruption from the cancellation or postponement of sporting events during that time,” operator explained.
The UK, comprising the Sky Betting & Gaming business, accounted for $297m of the total, up 66%. Stars said that the significant growth was due to “strong operational momentum” and a high betting net win margin of 14.9%, almost three times the margin in 2018, though this was reduced by promotions for the Cheltenham Festival. Stakes during the quarter declined 18% to $1.23bn.
A further USD$61m in revenue came from BetEasy in Australia, down 2%. Constant currency revenue grew, but exchange rate changes negatively impacted the business. Stakes grew 5% in constant currency, but declined 3% in US dollars to $731m.
International revenue contributed just over half of the groups’ overall revenue, at $378m, up 11%. As much of its international business comes from the PokerStars brand, the Stars Group’s international stakes came to $254m, down 8%.
The group said the performance in the US of both Fox Bet and PokerStars was “in line with expectations”.
Operating income for the quarter is expected to be in the range of $140m and $149m, which would mean an increase of at least 125%. Operating income from the UK is expected to come in between $58m and $63m, the international business's contribution is expected to come between $116m and $123m.
Australia, on the other hand, is projected to report a loss in Q1, of between $5m and $7m.
Stars’ expected depreciation and amortisation costs from between these three regions will be in the range of $109m to $110m, level with 2019’s total.
Financial adjustments are expected to bring in up to $22m, at least seven times 2019’s total, while other income will decline to between $18m and $19m.
Expected earnings before interest, tax, depreciation and amortisation (EBITDA) for the group came is projected to range from $291m to $297m, a year-on-year increase of at least 51%.
The group will incur a further $25m to $26m in group-level depreciation and amortisation costs, up 34%, with interest costs expected between $58m and $59m. Its total tax outlay for the quarter is expected to reach $22m, meaning net profit for the period is expected in the range of $185m and $192m.
“With these encouraging trends, a well-diversified and cash-generative business, and our strong balance sheet, we believe that we remain well-positioned to navigate further headwinds related to the COVID-19 pandemic in 2020,” Stars chief executive Rafi Ashkenazi said.
The Stars Group’s planned merger with Flutter Entertainment, to make the world’s largest online gambling business by revenue, remains on track with Ashkenazi saying he expects the merger to close this quarter. Last month, the UK’s Competition and Markets Authority (CMA) gave its approval to the deal.
This morning, Flutter issued a Q1 update of its own, also posting double-digit a growth in revenue. The Paddy Power Betfair operator brought in £547m (€628m/$680m), meaning the two combined for revenue of $1.42bn.
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