Flutter beats expectations, InterContinental returns to first half profit

“The FTSE 100 was struggling for direction like a new driver without their satnav on Tuesday morning as investors weighed a weak session on Wall Street overnight and slowing growth in UK consumer spending,” says AJ Bell financial analyst Danni Hewson.

“With the flood of big companies reporting on both sides of the Atlantic slowing to a trickle and with trading volumes seeing their usual summer lull there is a sleepy feel to the markets at present.

“However, previous experience suggests it might not take much to jolt investors awake, six years ago an August sell-off in China prompted a sharp correction around the globe.

“Mounting concern that the spread of the Delta variant might set back the Chinese recovery, after it became the first major economy to emerge from the pandemic, is a risk the world will be watching.”

Flutter Entertainment

“The owner of Paddy Power Betfair enjoyed a strong pandemic as the online gambling sector benefited from people being stuck inside with little to do – creating impetus for them to play poker or roulette on their smartphones.

“This created a hard act to follow as covid restrictions were lifted but credit to Flutter Entertainment, in the first half at least it has delivered.

“Flutter’s US business continues to perform very strongly – benefiting both from the opening up of sports betting in new states and from the successful fantasy sports franchise FanDuel – though the latter is unlikely to be profitable for some time yet.

“A potential IPO of FanDuel has been stalled for the time being given the departure of its CEO – but the strong performance may in the first half well revive the clamour for a separate listing of the business.

“Sports betting is benefiting from a return to a more normal sporting calendar after significant pandemic-linked disruption.

“The US betting market is competitive and Flutter cannot afford to rest on its laurels, the company to its credit has committed to investing in new products and further innovation.

“With MGM Resorts rumoured to be reviving its interest in Ladbrokes-owner Entain, after a failed bid at the start of 2021, there is a chance it could switch its attention to Flutter.”

InterContinental Hotels

“The owner of the Holiday Inn and Crowne Plaza chains, InterContinental Hotels is looking to move up in the world.

“InterContinental’s plans to launch a new luxury brand coming out of the pandemic suggest it reckons regular foreign travel might be dominated by wealthier holidaymakers in the future amid the extra costs and complexity of jetting overseas.

“InterContinental’s model should in theory leave it well positioned to rebound as the economy recovers, given it does not have lots of capital tied up in owning hotels. Instead operating an asset-light model with most of its premises managed on a franchise basis.

“With many independent hoteliers facing severe covid-related pressures InterContinental has been able to sign them up to its brands.

“However, InterContinental’s franchise model does arguably give it less control over the pace of growth with its hotel estate expanding much more slowly than that of rivals like Marriott and Hilton in the first half of the year.

“The company’s material footprint in the US and China could be a risk in the second half of the year as the Delta variant which has already swept through Europe begins to affect these markets.

“InterContinental’s Chinese business in particular had started to look like it had emerge from crisis mode in the first half with revenue per available room down relatively modestly on 2019 levels. A reversal here could be damaging to the company.”

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