Flutter Sees UK Tax Hike Squeezing Rivals as Sky Bet Recovers

Flutter Entertainment (NYSE: FLUT) believes higher UK gambling taxes could ultimately strengthen its competitive position, with the operator claiming some rivals are already retreating from the market.

The group said its scale should allow it to absorb the increased burden more effectively than smaller competitors. That could create opportunities to gain market share, even as the tax increase weighs on Flutter’s own earnings.

“We do think we’re beginning to see some of our competitors pulling back as we anticipated,” outgoing CEO Peter Jackson said during Flutter’s second-quarter earnings call.

Jackson added that the wider consequences of the tax change could work in Flutter’s favor over time. “We’ll be well positioned to capitalize on those,” he said.

“We’re adapting our approach around that, probably taking a little bit more focus on headcount savings rather than marketing because we want to maintain our posture in the market,” Jackson added.

Flutter said the UK tax increase, which took effect in April, contributed to a 45% decline in adjusted EBITDA during the second quarter. Planned investment in prediction markets and World Cup marketing also affected profitability.

However, management argued that Flutter’s product range, technology, and scale leave it better placed than many competitors to handle the increased costs.

Sky’s the Limit

The company also reported signs of recovery at Sky Betting & Gaming following problems related to the brand’s platform migration.

Jackson said customers had “adapted to the new interface post migration,” adding that Flutter had enjoyed a strong World Cup across its UK brands.

“We’ve had a very strong World Cup for all of our brands in the UK,” he said.

Sky Betting & Gaming’s performance had been affected by short-term disruption following the migration, which Flutter completed in April. The operator said results improved markedly in June as customers responded to a broader product offering.

“Performance recovered strongly in June as customers embrace a significantly expanded product offering,” Jackson said during the call.

Flutter also reported robust growth in its UK and Ireland operations, driven by the strength of its casino business. “We’ve got the new [UK and Ireland] operating model in place,” he said.

Management also suggested that the company’s ongoing cost-saving program should help offset inflationary pressures and higher taxation. Flutter is targeting an additional $500 million in gross savings by 2029 as part of the next phase of its group-wide transformation program.

The company expects those savings to support investment in growth while preserving margins across its more mature markets.