The Business Post Podcast with Daniel McConnell and Peter O'Dwyer: Ep4 - Kevin Harrington, Chief Executive Officer Flutter UK and Ireland

[Music] Respect for Stuart Kenny, but the business has completely transformed since he was last involved in the business. [Music] Gambling was seen as a bit of a free hit. We've gone too far. [Music] Hello and welcome to the Business Post podcast with me, Danny McCullough. I'm Peter Oedewer. So we are post St Patrick's Day and obviously last week was a big week with Cheltenham and the Gold Co. And I guess this week for the podcast is Kevin Harrington who is the Ireland Head or the Ireland UK Head of Flutter, which is the supposed apparent company for Paddy Power, which is Salonmus, I suppose, with the Chelten Festival. But Peter, you might just give us the sense of the Flutter story and Kevin Harrington's story within that. Yeah, so I think the Paddy Power story is so well known in Ireland and it's branded so well known. Maybe in recent years the kind of Flutter story as it evolved into that wider group is maybe less well known. I think most people know that Paddy Power is originally founded in 1988, I believe, by three bookmakers who brought their 40 shops together, Stuart Kenny, David Power and John Gorker and really very quickly ate up a lot of the market share in what was the traditional betting shop market of the 80s, 90s and 2000s. But as Kevin touches on in the interview, it was very quick in terms of adapting digitally and becoming the first to go online to have apps, once iPhones and mobile phones became smart. And so it has kind of powered ahead over recent years. It bought or emerged with Betfair, which was a UK gambling exchange in 2015. It bought a business called Fandule in 2018, which was in the States. It was one of these fantasy sports companies and that has become a huge part of the Flutter story ever since. The same year, the big changing point for this group was that the US federal ban on sports gambling was overturned. From there, it just meant that this colossal market in the States was opened up and Flutter was in prime position to go after it. And it has been doing that ever since over the last seven, eight years. And that has been where the huge amount of its growth has come from, whilst also re-adapting and changing its business in the UK, Ireland, Australia and other parts of the globe. And Kevin's story alone is interesting. He's someone who's 13 years with the business, but yet, you know, is just over a year in his current role. But I think what was interesting, what lessons were heard from the podcast was when Phil and Thompson, who's our reporter who interviewed him, really pushed him quite hard about, you know, its share price performance, about its challenges in terms of regulation not only here, but in the UK. But also the focus of the company, the Flutter group now on the States and whether or not Ireland and the UK has become a bit of an afterthought. And I just thought from a story perspective, it's really quite interesting as to what next for Flutter. Well, it was a fantastic time to get this interview because Flutter is for the first time in a long, long time, really at a kind of critical crossroads and enduring some pain for the first time since its move into the States. Its share price over months now, over the last six months is down over 60%. I think over the last year, it's down around 50%. So things have really started to become more difficult in the States for Flutter and that is kind of weighing on the whole group. To the point of where the UK and Ireland is based within it, I think as Kevin touches upon, it is this kind of spiritual home, which where Patty Powers started, is where Betfair started with the UK. And for that reason, it will always be very important to the group. But certainly, it's an interesting perspective to hear Kevin talk about where it is positioned because all the fun, all the excitement and all the growth really has been focused on the States over the last little while. But he goes into some details around the figures in terms of revenues and profits to UK and Ireland, still contribute to the group and they're really significant. So it's in the one stage that the group has been re, it has been kind of changed its corporate structure. And that's where Fiona asks him about has the UK and Ireland been downgraded, which I think in some ways is a kind of a fair reading of it. But Kevin then goes into the detail as I say around the financials, which maybe paints a picture of it still being very, very important to Flutter. Peter, it came to the fore during the conversation and listeners will hear us between Kevin and Fiona about that tension between the traditional retail. The traditional retail arm of the business, which is obviously still very important here in Ireland in the UK and elsewhere in Italy. But that pure online business, that obviously is the future. And I just thought it was very interesting how Kevin explains their decision to close the number of shops here in the UK and Ireland. But yet, it still remains a very important part of their business. Yeah, I think like all high street brands betting shops are kind of becoming fewer and far between on the high streets. They're dealing with all the same kind of challenges that regular retail shops are dealing with as well. I think that story is kind of well known and I don't really see a change to that. I think it's going to continue that numbers of betting shops are going to reduce in both the UK and Ireland. What I thought was actually more interesting in terms of that retail aspect was when Kevin started speaking about new types of experiences that are opening both in Ireland. We see a few of them in Dublin with kind of indoor golf arena as or dart serene as and how they're trying to build on that sort of experience economy as he describes it and change the shops that remain into something very different to the old bookies that you and I would know. So he goes into kind of their strategy a little bit there. And I think that's one of the most insightful parts of the interview actually. Certainly is well enough from us, I think for now. But let's hear now is our interview with Phil Thompson and Kevin Harrington of Florida and we'll be back here for the post-match analysis. How are you getting on Kevin? Welcome to the podcast. Great to be here Phil. So we're sitting here actually on Child and Golden Cup Day. Yeah, it's obviously been a busy week for you then. Like I've been off doing many events. Yeah, so it's one of our busy weeks of the year. Generally the busiest week. Obviously we've got the World Cup later this summer, which will eclipse it. It's been a great week so far. It is Gold Cup Day today. Probably expecting about 2 million customers across our various brands in UK and Ireland to bet on the Gold Cup itself to really track the mass market. And it's a great showcase of the business and a week we all look forward to. Perfect, perfect. And obviously you've been in this role maybe just over a year now. So it's just been just over a year since we've been trying to get this interview, which is. How has really been year B? I was like, you have maybe like one bit where you've been quite excited or quite proud of what you've done and maybe one area where it has gone exactly the plan. Yeah, I guess I suppose I've been in the role over a year, but I've been in the organisation nearly 13 years. So I joined what was Betfair, PLC back in 2012. Obviously a few years later we joined and merged with Paddy Powers. That created what is the Flutter Group today. And over the years the businesses absolutely transformed. So it's very different to what I started and what I joined. But the essence of it is still the same. It's still things that I love. The intersection of maths, of sport, of technology and a BTC business is fascinating. So I'm really proud to kind of lead the organisation now and the UK and Ireland region as we call it today. Yeah, one thing I suppose over the last year that I've loved to get to know is different parts of our business that I was less familiar with. So we've been amazing Bingo business based in Sunderland called Tom Boller, which is slightly different customer base. So it's been great to kind of get to know those different parts of the business. As a question around what did I not enjoy? Probably was Rachel Reeves on budget day in the UK announcing major tax changes. So that was kind of the very high end of what we had expected or feared. I think personally they've gone too far in terms of pushing the tax rates too far and really given an open door to the UK. And I think even the UK government have admitted that so the OBR or the Office of Budget Responsibility even admitted that the tax rise that they've put in place. So going from 21% of revenue to 40% means that the UK government should take in another £1.6 billion in revenue or tax revenue. But they'll only get a billion and they admit that the other 600 will be leaked to the illicit market. So for those that don't know, those are operators who operate in the UK without a local license. Yeah, that was the surprise or the disappointment of the year. But overall I'm incredibly proud to lead the business. And as I said, it's an amazing place to work and a vibrant place. And we've got exciting moments like this where you can Cheltenham and many more to come over there as a year. I'm sure we'll get to the UK tax bit later because it has been major stories for your division over the year. But I was going to stroke you doing the research for this that you're an Irishman leading one of Flutter's key divisions. You started, you didn't start with Buddy Power, you started with a bad fair of you. You actually moved in from banking. That's right. How was that transition? How was it moving in from banking, I suppose, into bad fair, which is. I guess it's probably worth saying how I got there into banking. So I grew up in Westmeath, went CBS in Malagar, went to college in Trinity, and then joined Merrill Lynch, this kind of early 2000s. Banking to me at the time, really interesting, really exciting. I was kind of valuing trades and interest rates swaps in Merrill Lynch. That was a large global US-based business with a big Irish operation. That was great. Like many Irish people in 2008, I took the opportunity to move to the UK. Obviously we've gone through some economic troubles here, and I joined RBS. That was pre-crash, let's say, pre-the-global financial crisis. I was still working in the same sector, still looking at interest rate derivatives. I guess I was in RBS for another five years as we merged with ABN Amaro, so a huge amount of cultural change. I guess it got to point in 2012 where I was just looking for a change, and really familiar with Paddy Power, brand that's obviously iconic in Ireland. Some of my mates had gone through there from college, so I was familiar with the business. There were a few people in Betford at the time from Paddy Power, and it really peaked my interest. as I said earlier, that kind of intersection of sports, of maths, of technology. And I was really looking for a change in career at the time. So I took a gamble myself on myself and got a role in Betford at the time. Didn't know that two years later, we'd be merging with Paddy Power and I'd be coming back to Ireland, but really happy to be back here and have been back here for the last 10 years or so. And I built my career, I guess, in the organization. - And maybe when Paddy Power and Betford emerged then, then, not two years later, where you obviously accustomed to the welfare culture, I suppose. Was it a bit of a difference then when all the Paddy Power Lads kind of come in? - Yeah, I guess it was. I guess on the face of it, maybe externally people saw the cultures as something that was gonna be very similar, but the welfare was a very British company. And Paddy Power was very Irish. And obviously, I'm familiar with both cultures as we all are, and they are different. And so there were some culture clashes, I would say not because of the nationalities, but because of the culture of the organizations at the time, as led by Brian Corcoran, brilliant leader, he was kind of the visionary who thought about the economies of scale that you get from bringing gambling businesses together. So if you think about Cheltenham this week or probably the World Cup's a great example, you only need to calculate the probability of an event happening once. So if you've got your two teams, England versus, whoever they're playing, check for public. Or Ireland playing, check for public, great example. You only need one team to calculate the probability of Ireland winning, of Czech winning. And then you can then distribute that price to multiple businesses. So effectively, you can have one trading team. That's what we have today. So that was the genesis of the business. But yeah, the culture was slightly different. I tell you we have a few painful years, 2016-17. We took on some big transformational projects, those merging of teams, so a lot of people change, a lot of technology change as well, where we merged platforms. So we have the same core platform underlying today that powers multiple brands across the flutter. So for instance, our global trading rooms are in Melbourne, Dublin, and New Jersey. And we do a 24/7 follow the sun. And each of those centers will trade kind of a sport for the rest of the group. So here in Dublin, our soccer team will trade soccer basically for the whole group. So the Fangil Business in the US, the sports bet business in Australia, and all our businesses in between and Italy and elsewhere will all be taking the core price from the Dublin trading team. So that's something I'm kind of hugely proud of that we've got that skill both here in Dublin and that we're kind of powering the global business, not just the UK and I brands. I believe you guys got a flutter edge as this. We do, there's a great terminology here that we use in our kind of investor materials, the flutter edge, but I guess it's, and think of it as scale benefits, the economies of scale of doing things once and using the multiple times across many businesses. And it gives them the advantage versus our competition. Yeah. And so how was it being in bet fair during that time? Obviously you were saying it was difficult to see so many people changes and stuff, but what was your role in, what was supposed to flutter then, or a Paddy Power bet fair when it became in the restaurant? Yeah, so I was the UK commercial director. So I led the, I was in charge of the PNL for the UK business for bet fair, which is probably 70% of the business at the time, also had an international business as well. But I guess it's probably, we're taking a step back about what bet fair is. It started off in 2000 as an exchange, which is a peer-to-peer platform for betting. So very different to kind of the traditional bookmaker, where the bookmaker sets the odds and customers betting against the book. He bet for introduced the exchange in 2000 where I think of it as eBay versus Amazon. So it's a peer-to-peer platform where people can bet against each other. But then in 2012 when I joined, we were just launching a sports book. And when I joined, I took on a role as head of commercial for the sports book. So we were almost like an internal startup within bet fair. And at the time, we were taking on Paddy Power, William Hill, bet 365. And we were hugely successful. So I think when I joined the market cap of bet fair, it was 600 million pounds. And when we emerged with Paddy Power, I think it was close to 3 billion. So we'd kind of massively increased the value of the company, primarily from cross-selling or existing playerbase into our sports book product or the traditional bookie product. So as in charge of the kind of commercial team, or leading the commercial team, so they were amazing couple of years, kind of 2013, 14, 15. Then we emerged with Paddy Power in 2016. And as I said, whilst it was challenging, it was definitely the right thing to do. And the business has grown from strengths to strengths. And now effectively is a global leader in this sector. So something we were hugely proud of. And you moved quickly up the ranks as well. I see here as well. You became the chief commercial officer down of the International Branch of Florida, CEO of Poker Stars N in 2023. How does that-- How does those two roles-- Well, I guess it was another transformational merger, which happened in 2020 in the depths of COVID. I think in May 2020, we emerged with what was called the Stars Group. So Pokestars was the core of that, but it also included really high quality assets and businesses, like SkyBetting and Gaming, which a lot of people would know. It's a very UK-centric business. So businesses in Australia and the US. But yeah, so as part of that, I became chief commercial officer of Pokestars, always loved Poker. Learned the game while I was in college in Trinity. Some friends of mine taught it to me, and we played on campus and in spare time for low stakes, but great fun. And so I was hugely proud then to go on to lead the Pokestars business as well. At its core, it's a poker business, so quite a different property and proposition versus, let's say, Paddy Power or Betfair. But one that was a hugely valuable addition to our portfolio of brands, particularly during that time, it was kind of a really abnormal time for gambling. So in March 2020, obviously nearly all of sports stopped, all by Belarusian soccer and some table tennis somewhere in the world. But we were effectively-- the business was down-- some point 80% year and year, during some of those days in March until they got a sport restarted. Whilst Poker almost doubled overnight, so a billion dollar business in terms of annual revenue suddenly became a two billion dollar business, because people had more time in their hands. And that's one of the friction points of Poker is time that you need to spend time to play the game. There's different formats you can play, but the ones that people love to play, you don't know when you're going to finish, because you're entering a tournament. You might just enter for $10, but you don't know whether you're going to play for 10 minutes or two hours. And so time was obviously on people's-- in their hands during COVID. So yeah, the business was fascinating. And then it had some regulatory challenge as well. In different markets, what we've faced into those. And the business is on a great path now. We've merged the Italian Pokestars business with our Italian brands in C-Syland, Sni. And that business is going from strength to strength. And we're going to do the same next month, actually, with Fandals. So we'll be putting Pokestars onto the Fandals platform, which is our US business. That means our US customer base will have access to the iconic Pokestars brand at the poker tables, but also the brilliant Fandals, Sino and Fandals Sports but products as well. And was it different or was it a challenge maybe going in from a very traditional-- so you had your bad fare, which is exchange. Yep. Marish, I'm a party parer then. And that's from your traditional sports book. But then how do you then pivot into becoming the poker G for really? Is it poker different in that way? It is different. And the organization was different. People in different offices all over the world. So I guess the culture was quite different as well in terms of the leaders of the Star's Group previously. And again, it was challenging times. It was during COVID. I was appointed at some point in 2020. And I didn't meet my team in person until just over a year later, which is kind of aliens. He had to build relationships online. Now many people changed roles during COVID and had to do the same thing. But I guess that was a challenge. But at the core of it, it's a complimentary business to our other brands. And again, we're seeing the benefits of that in Italy today as a saying, the US will do the same in terms of UK brands as well. Do I want to say it's different? I guess if I go back to the Paddy Parabet Fair merger, there were aspects of that that having gone through it once, I knew some things that could work and that were the right things to do again. And other things, maybe that didn't work, that we would do differently. So I kind of took some lessons from 2016 and applied them to 2020. Even the Star's Group itself had gone through a different of the world as it had acquired SkyBetting and Gaming in 2018. So it was a poker business, buying a sports betting business. And they didn't understand the volatility, let's say, of the P&L of sports results. So one weekend, you could make whatever you make, and then the next weekend, you lose it all back. And that volatility of the P&L is something that is alien to running a poker business or an exchange business where you're just taking a commission on your revenue. Your revenue is generated by commission. So that was probably kind of a bit of a lesson I took from both from the merger and I already understood the product. So I had that as a strength. And I think that set us up well to kind of successfully merge the business into what is flutter today. OK, and then I suppose your big promotion really came in January of last year when you became the head of the UK and Ireland division. But before that, or as the move was happening, it was this reorganization where the sort of UK and Ireland maybe lost precedence. So there was before that the US, international UK and Ireland Australia. But then after this, it became US on the rest. Essentially everything else got kind of made into international. So when you took over from Ian Brown, say, what would the differences be really in the role between what Ian was doing as when UK and Ireland was its own separate division? As opposed to you're all now, you're reporting to Dante, there, but you're a part of this international group alongside other group heads. I guess you go back to the core of what flutter is and the economies of scale that we can get. I wouldn't say that the UK and Ireland lost precedence when we put it into international. It's worth understanding the context of the group at the time as well. So we were listing in New York, I think, in January 2024. So a couple of years ago. And that obviously shifting the listing to the US as our US business is becoming so significant as part the group, we then had to appeal to a US investor or audience, and I guess they want to understand the depth of our US business. And obviously, that's obvious why they would want to know. They know that market really well. And then they want to just understand the rest, but we need to almost give them as simple as possible in the explanation of what the rest is. So they don't need to know the dynamics necessarily of every up and down in the part of the business. They just want to understand the structural strength of the business. So bring an international together with the UK and Ireland being part of it. Also over the time we'd acquired two very significant businesses in Italy. So that's now a huge part of the Flutter Group. And there's huge parallels between both the Italian market and the UK market, which is the core of the UK and Ireland region. So I work closely with my counterparts for we call it Southern Europe and Africa, but at its core is Italy and Apex, so at its core is Australia, but also tapping into their Asian market and Pacific. And then colleagues from Central and Eastern Europe as well as Latin, where we've got a large Brazilian business. So the business was going through a lot of change, both from a listing perspective, from an M&A perspective, and there's huge strength in us being together as a leadership team. So I stood on the International Exco as the UK London representative, obviously leading the UK and Ireland business, but it's obviously part of a broader international business. And we're a large majority of the profit today, but obviously the US business is growing fast and is a significant part of the business as well. So there's multiple factors about where we've made those changes. And yeah, I guess the role is largely similar and there's a few additions to it in terms of the poke stars business is coming in. I kind of brought that with me, albeit I'm kind of dishing out parts of it too. We've already given kind of the Italian part to my Italian colleague and I'll give my North American part to an North American colleague in the month or two. Oh, perfect. Obviously during the year in Ireland, especially I suppose, was in October when you announced 28 store closures, just brought the number down from 224 to 196. At the time, we're talking about increased cost pressures and challenging market conditions. It was interesting for me, from that perspective, that 28 stores went to Ireland, but only 29 went to the UK where you've given more store count of the bigger population. But what does this kind of mean for the Irish market then? How do you come to this decision to say, okay, these 28 stores are not needed anymore? Where you confident that you had the customers there already pivoted online to ensure you didn't lose them? Yeah, I guess there's a few factors in that. Like every other business that has a retail presence, this pressure on the high street, as they say in the UK, I'd say our state is actually split roughly 50-50 in terms of shop numbers between Ireland and the UK. So whether UK is a bigger market and it's obviously a bigger population, which have fewer stores per capita. So we've only circa 300 stores in the UK and now as you just said, kind of over 200 in Ireland. So we closed 57 shops, I guess periodically we review a retailer state and we have seen some changing dynamics in retail like other sectors. I live in Dublin and I've seen many banks closed, there's fewer bank branches these days, there's many shops that are empty and retail is under pressure, costs are going up, minimum wage is going up, there's rate increases, etc. So we face those same pressures and then I guess is another one which is the customer demographic. So post-COVID, we definitely didn't see the footfall return in the same numbers to our stores in Ireland as we did in the UK, which you saw them return a little bit more in the UK than we did here. And then I guess younger people today are less inclined to go into a betting shop and more inclined to bet or engage with our products in an online fashion, which is kind of obvious as well. But they are looking for different experiences as well from a real life experience. So we're seeing the rise of amazing businesses like Flight Club that you'll see where people go and play darts or the bowling alleys Lane 7 and Dublin are phenomenal in terms of their kind of quality of experience. So people looking for experiential and different experience from the traditional retail shop as well. So we're kind of adapting some of our retail stores to appeal as well and we've got a brilliant format in the Hippodrome in London in Leicester Square where people go and watch sports so they think of it as more a traditional US style sports book where you go in and watch sport. So that would be packed this week. We don't do the same in Ireland we break partnership with the Camden. So there's hundreds of people there this week at Cheltenham. We did the same during the Dublin Racing Festival that day it was cancelled and it was rained off. People went to the Camden to watch other sport that was on that day. So yeah we I think retail is evolving but like any other sector we're adapting we'll constantly review the portfolio. And how did you come to the decision for these specific stores? Was this purely revenue per store? I guess we look at a balance of things in terms of falling the store and maybe the local environment as well in terms of what other stores or shops and what their kind of local footprint is but every kind of store is assessed on a case by case basis and then we make those decisions from a periodic review and I think it's the right responsible thing to do as a business leader. But obviously when it impacts colleagues we also make sure that we care for our colleagues in terms of ensuring that we support them as we're making those changes as well because that's obviously an impact that is regrettable but it's obviously something we're aware of. It's taken into consideration as well. It's not just a pure P&L view. Of course of course. Yeah but look what do you kind of see for the future then for retail as part of the party power branch? Like you know in five years do you see there being a party power still in every county? Do you still think it's this central part? I think if we go back to the origin of party power it was a retail business so three bookmakers in Ireland came together in 1988 and seeing that there was British bookmakers coming into Ireland to open up retail stores and they saw the economies of scale of having one brand, one business and they put their shops together so we grew retail significantly between 1988 and then in 2000 obviously there's been a shift in customer activity to online and that started to become the next big thing. That was obviously desktop and website led and then kind of with the advent of the smartphone and mobiles and iPhones in 2007/08 we were the first, the first, the first brand out with an iPhone app and we've obviously seen our business shift so I think the future of retail is an important one in terms of the heritage of party power but we're evolving with our customers and that means that we'll focus on the iPhone today as well as the smartphone so Android as well as kind of the primary channel and who knows what's next particularly with technology changing and so I think it's something that will always just keep under review. Of course yeah and this comes all down the context really of the new gambling regulator coming into Ireland after a long time. I think it's probably been about 20 years in the making since it was first announced and obviously the UK is had once since 2005. So I know party power and flutter have been very supportive on the face of it and saying listen we need regulation obviously you're not happy with everything that's coming especially with the stake and win limits. I know you guys have voluntarily introduced some of these measures yourself. How do you feel like this regulator is really going to change the field in Ireland? We've seen what happened with the doubling of the tax stake back in 2019 which you know I've talked to a lot of bookmakers about it and they say it absolutely decimating the entry but what do you think that this increased regulation will kind of prove for the Irish market? Yeah so first of all we really welcome the establishment is the GRI is the body sitting under justice and we've been calling for it as you say for well over 10 years and we've been calling for smart regulation as well. I think it's critical in terms of bringing regulation into a market to ensure that customers or consumers have the right level of protections. So where regulation is absent then you kind of you know the world west and you can have any type of bookmaker coming in. And obviously we're a responsible operator we've been as you say regulated in the UK in many of the markets for my own 20 years and we are responsible operators as well and we've been applying many of the requirements that we have in the UK let's say to the Irish market so you reference bringing in state limits credit card bans etc we've been applying but we're really looking really for a level playing field. I want the GRI to be successful we've had a great positive engagement with them so far they just opened the portal for the betting licenses to be for us to apply and our peers to apply as well but really looking for a level playing field and making sure that they get maximum activity into the regulated market. So as I said before kind of illegal operators or operators who don't have a license in a market kind of act at free will and they don't want adhere to advertising standards or state limits or responsible gaming kind of tools that we would personally put in or ourselves decide to put in. So we have to have a target for our safer gaming tools that we want 75% of our customer base to engage in these safer gaming tools today where it's 60% there's no requirement for us to do that in Ireland today but we're doing that voluntarily and we want those types of protections to be pushed by the GRI. You reference the stake and win limits and that's probably one area of legislation that I do have some concerns with. The regulator might be bringing in win limits of 3,000 euros for gaming products which I just think is questionable. Why would you restrict how much a customer can win? You don't do it in the national lottery. I don't know why we would do it in online gaming as well. And then stake limits we brought in a voluntary stake limit of 10 euros on slots but you kind of have to understand the nuances of the products. So for poker for instance I don't think a 10-year-old limit makes sense. Again you might want to enter a tournament for 50 or 100 euro and play for it. You know multiple hours you might want to play in person at the Irish poker open. Happening in a couple of weeks at Easter in the RDS. So there's some challenges there are some nuances but overall broadly very supportive and even pushed for some changes in the central self-exclusion register. So we really do need a one-stop shop where customers who have a problem with gambling can go and exclude themselves from all gambling operators, all of the licensed gambling operators. We've been successful in the UK for many years and in many other markets as well. And yeah the GRI have pushed the right changes through there. So really supportive of them and looking forward to the successful launch of the market later this year. And have you been in contact with the GRI or with our Marie Carfield? that's the CEO, like do you know what's. So actually coming when they're actually. Yeah, they've been great in terms of their communications. They've been very clear around the timings and the detail. And as I said, there's some areas that we're still in discussions with and hopeful that we get some positive traction on, but overall very supportive. And yeah, it's been really great in terms of communication so far between our teams and the GREI. And obviously, you have the UK tax bill. You mentioned it at the start there with Rachel Reeves. It's a pretty barganjual hit to earnings, as he says. You know, it was about 540 million hit to earnings. Like, did you expect this to happen? Were you kind of surprised about how high, like there was a near doubling in the open? So they doubled the gaming taxes, as I said earlier, from 21% to 40%. And that comes into force on the first of April this year. And then they've increased the sports betting tax from 15% to 25% with exclusion for UK horse racing. So total is 540 million extra tax that we have to pay in the UK, of which we've said will mitigate 40% as well. So it is, it was at the very high end of our expectations. We were aware the government had announced in the previous budget a consultation in terms of reviewing and potentially harmonising the rates of both betting and gaming. But they came out with this rise. And as I said at the beginning, I think it's, they've gone too far. I think it will reshape the market. And I think we're best positioned in terms of the scale that we have. But it will be interesting to kind of see how it affects the market over the coming months and years. And as I said, I think it's opening a door for illegal operators to have an unfair advantage in the market. It's why I think you do need a blend of smart regulation and sensible taxation rates. I'm like, it's gambling, like tax and gambling is a rare. It sort of enjoys bipartisan support. It's like the one thing that Moish, you know, is labour and conservative together in terms of they see it as the thing that you can and short tax. Like what do you think gambling is seen as a sort of cash care that they can just go and tax will? Yeah, I guess like any other business, we owe our fair share in terms of paying taxes. I believe that today we already pay a large amount and a significant amount. But the government took a position. And there are obviously, I think, again, you kind of look at the macro picture of the UK government. There was confusion going into that budget, whether the government were in a 30 billion deficit, a 20 billion deficit. The OBR, we're releasing the budget statement 45 minutes early by accident. So there's kind of a lot of things going on. And I think gambling was seen as a bit of a free hit. But I guess I'd urge the government to kind of reconsider and have a think about the consequences of it. And that's one thing that we'll be monitoring is the rise of the legal market. We've seen it treble over the last couple of years. Probably represents about 9% of the UK market today. And I know that I want consumers to be gambling in the regulated market where we'd have the safe protections and the standards that we have and the safety standards that we have as a cross-hour branch. Obviously, it's all Stewart Caini, the Paddy Perro co-founder, who's for a parliamentary committee saying that gambling companies were scared, mongering in quotation marks there. Is that something you agree with? So I'd say I respect for Stewart Caini in terms of-- he's one of the founders of Paddy Perro, but I think the business has completely transformed since he was last involved in the business. I think it's over 10 years since he was on the board. We've grown up. Regulation has evolved. We've led the way in terms of transforming that regulation both in the UK in terms of what we've implemented there, growing above and beyond at times, and also applying that back to the Irish market as well. So yeah, I'm confident in our business today that we're doing all we can to have the best products. I know we've got the best people and that we also do it in the safest way possible. So do you see then UKI becoming this dominant player again? I know it gives a lot of the revenues of floater and stuff, but taxes are high. They've grown higher, but the US is even higher. Like, in New York, it's 51%. It is, yes. So how do you see the next few years going then? Do you think that UKI can be calm this as important, maybe as the American-- I think we already are. We're the origin, obviously, of floater. It's where it started, where most of the brands did start in Paddy Power, obviously, here in Ireland, bet for in the UK. So I think it's already a critical part of floater. I'd say we're probably about a quarter of the revenue today, a quarter of the players. I think over the world, we have 16 million average monthly players, 4 million of which are in the UK. We're put over a third of the profit as well. So we are kind of-- and have been a profit engine, which has allowed us to invest in the likes of the US and become the number one bookmaker and gaming provider over there as well. So I think we are still a critical part of floater today. And I know that will be the case for the future as well. It was just-- I was surprised to see in the yearly results there. UKI's revenue fell 9%. Like, are you gaming at a nice 11% bump there, but sports book down 20%. Yeah, so that goes back to the volatility point I talked about. We had a very favorable for the bookmaker period in Q4 of the prior year, which kind of boosted those revenues. Also, there was a euros that year as well. So that always gives a major boost as does the world cup. So there's always factors, and that's kind of why we're set up well, both from a portfolio perspective. We've got the scale whereby one part of the business and sports betting can not do so great, and maybe the punters win loads. And other parts can compensate for it. So that's the beauty of the business today. So obviously, there's been a lot of talk, and we've done a lot of reporting on floater share price. And it seems to be a lot of that is driven by what's happening in the US. Listen, I know you're UKI. But a lot of this is coming from prediction market. Calche, polymarket, very young, mobile, upstart. To me, it seems like that's better. It is. Yeah, with the original prediction market, Betfair founded in 2000. We call it the Betfair Exchange, but it is in essence the same as what they're doing in the US today. So we've got the expertise. We've got the technology. We've got the know how. And in fact, we have obviously announced Fangils moving into that space in the last couple of months. We launched Nationwide in January. And I'm confident in terms of our position and our ability to compete in the market. Because to me, it seems like something that Patti Paira will be all over. It's some of the marketing stuff that Calche or polymarket are doing where they look at their saying, this we're not making much money off this political predictions or anything like that. But I remember talking when Patti Paira was doing odds on the next Pope or anything like that. And it just seemed to me that the sportsbook is really what's generating the revenue, but it is the sort of highly publicized. And so why haven't really this idea of prediction market has taken hold of the UKIs and why is it such a big thing over the US? I guess you have to understand a regulatory landscape in the US. So as I said earlier, we're number one for sports betting, and I gaming in a state in which it's regulated. But online bookmaking is only regulated on a state-by-state basis, whereas prediction markets are now under financial regulations by the CFTC. And that's federal. So if you take a state like California, you can't bet in California online, but you can use prediction markets. So I guess it's a bit of regulatory arbitrage that's happening in the US, that the likes of Polymarket and Calshire taking advantage of. And yes, we are launched, and we have the know how the scale to go after it. I'd be hopeful that it actually encourages states like California to actually open up to online sports betting and I gaming, which kind of the core strength of our business. But I'm really confident in our ability to compete in that space. It's quite exciting. I guess it's a bit of a replay of $2,000 over again. I can see they're making some of the same mistakes that were made 25, 26 years ago, even the CFTC coming out with new guidance today on market manipulation, which is at a risk in markets like this. I think some of those brands are stepping into geopolitical events that we wouldn't, and are your reference, Paddy Paradouin, bets on the next Pope. I think it's a bit of fun, but we're not getting involved in selecting and we're not lighting the fire for the white smoke. So yeah, I think there's some lessons that are being learned again. But it's an interesting space and a dynamic space, so one, we're competing. But as we're worried then that UKI can lose this relevance, like we, you know, it flutter started as this merger between an Irish and a UK gambling company, a great big merger. It's grown a lot through this move to the US. How do you maintain the relevance of UKI considering it was? Well, first of all, I'd kind of go back to, we've got significant scale in terms of the brands that we operate here. Another brilliant point though, is that part of our US success has been driven by some people who've learned their trade in the UK and Ireland and Italy and elsewhere. And they've moved over. So there's brilliant Irish people running our US business today. And they've got everything that they learned either from. Dublin, trading in Patti Power, or maybe they were in Betfair previously. And they've gone over and made the Fangil Business Success well, along with their American counterparts as well. So we're kind of a core part of not only the success in the UK and Ireland, but also our success across the water. OK, so it's almost like a training round for the US. US girls. It is. Yeah, we've kind of almost seen the future as a reference on prediction markets. We kind of saw the same challenges they're facing today 26 years ago. And we've got all that experience that, again, go back to the Flutter Edge is one of the things that we have. We've got people who can move across the world and build their careers within Flutter. So it's a brilliant place to be. But obviously with this share price so determined by what's happening in the US, like obviously staff are given share basis compensation. They must be thinking, listen, we're doing well. Like we're growing our revenues year on year, but yes, our share price is down to 2/3 in the past six months. How do you sort of arrest that slide while you're trying to sort of grow the UKI when it's so determined by what's happening in the US? Yeah, I can understand that the focus on the share price. I guess what we try to do is focus on what we can control. So we think about that both from a sporting perspective. We can't obviously control sporting results, but we can control what we do. And I really like the cards that we're holding. I know Warren Buffett of famous saying about the stock market is a short term. It's a voting machine, but the long term it's a weighing machine. So we're really thinking about making sure we create long term sustainable value. We've been doing that for a number of years, and that's where we're concentrating our efforts and not reacting to any short-time volatility that I know many other stocks are seeing, many other commodities are seeing day to day. OK, I think that's everything we have time for today, Kevin. I'm going to let you enjoy the rest of your Chelt and Gold Cup day. Really appreciate you coming out today. It was a great chat. Yeah, really appreciate it. Thanks. It was a long time common, but I think we did it well. We got it over the line. All right. - Okay, thanks so much. - Thanks a lot, bye. (upbeat music) - And welcome back, Daniel McLeod and Peter Wier here. Peter, that was a really interesting insight to the gambling worlds, the world of Flutter, previously Paddy Power and Betfair, Kevin Harrington, I suppose, as he said in that interview with Fiona Thompson, giving his story, his journey, his journey up to corporate ladder and his exposure to different aspects of the business. But as you said in the introduction, we got him on a very interesting time at a time when the share price is not doing particularly well and it's facing some real pain. - Yeah, I mean, it's a critical juncture for Flutter at the moment. It is enduring some pain, largely as a result of the prediction markets that have really grown in states at the moment. So as Kevin explains, they're not subject to the same legal framework as sports betting is in the states. And so it's allowing competitors like Calci and like Poly-Marcus to the biggest ones to really push Flutter in a way that they probably haven't felt that sort of competitive dynamic today in the states. albeit there are big sports betting platforms that they have been heavily competing against since moving into it. What I think is really curious about Flutter's position here is that they're having to react to the likes of Calci and Poly-Marcus. But as was touched upon in the interview, Calci and Poly-Marcus are essentially just a version of Betfair. So like Flutter has this or should at least have this inside and framework and technological basis to hit the ground running with the prediction markets. But it seems like they've been slower to the plate than their competitors have been and they're having to play catch up a little bit. And also then as he discusses, there are certain states where they have opened their sports books and they're happy with that product and therefore not launching the prediction markets into those states as well. So it's a fine cut of balancing act, but if it would be one thing, if they didn't have any background in these kind of exchanges, but they actually do, it's the core of what Betfair was before, got subsumed into the wider group. Yeah, and I thought one of the most interesting aspects of the interview was he wasn't shy in giving Rachel Reeves a good kicking of better taxation policy. And essentially saying the gambling was seen as a free hit by the British government. And also as well as was he hitting out the fact that by even their own projections, they seemed to have overcooked the goofs there that the Volvo's gone too heavy on them. Yeah, I mean, he says explicitly at one point that they've just gone too far here. It was a potential, this betting tax, before the last UK budget, that this is going to come down the tracks, but as he says, it was right at the up end of ultimately, the hit that was going to come. And for Flutter, they're expecting off to an $860 million hit to their business over that period. Now Kevin explains that there are different mitigation that they can do there. They can reduce marketing spends. They can reduce what he calls their kind of generosity around their pricing and special offers. But what was really interesting was when he was talking in response to Fion's question, which I thought was a very well put one, about what his said and kind of corporate speak to be second round mitigation effects. You know, what are those? That's essentially easing up the smaller guys as they struggle. And Kevin had a kind of a more detailed explanation of it, but it was pretty clear that yes, it's not necessary that other smaller bookies will fail, but he says as they struggle to serve their customers in whatever way you can read between the lines there, Flutter as a big behemoth in the industry is going to be ready to take up some of their customers and some of their market share. It's a real negative in the first instance, but I think they feel like they have the firepower to write it out and go down the line a couple of years that ultimately there could be some opportunities for them here as well as others really struggle with it. - Kevin Harrington hasn't done a huge number of interviews since he's taking the job. And I think this is probably first big major podcast interview. What was your overall impression of him? - I think he's a good speaker. I think he came across well. And I think his background, both vegetables in not starting in the gambling industry and the first instance and being a banking kind of gives him a slightly different perspective than maybe some of the lifers in the industry have, but also the fact that he started with Betfair rather than with Paddy Power, again, gives him that sort of broader perspective. And it was interesting that he was quite frank in saying like I saw some of the things that went well and some of the things that went badly with that merger back a number of years ago and I'm implementing those lessons now. So I think he's a guy who has clearly climbed the ladder in there. He's now in a big position as one of the regional heads. I think he might be positioning himself for a bigger job down the line. If he sticks with it, the UK and Ireland businesses gone through a couple of leaders over a relatively short space of time. So it'd be interesting to see if he sticks it out and can do it. And he's not afraid to have so much air bellyboats, as opposed to the question around Stuart Kenney, one of the founders. He was pretty robust in how he answered that. - Stuartney was, I was just gonna ask you about that in terms of, you know, it was not quite a polite Stuart name of arms. Like, you know, weren't everyone in the business here? And for those who were aware, like Stuart Kenney's status as a founder of Paddy Power. I mean, he looms hugely. And I think if anyone has read our colleague, Aaron Rogan's book, we'll just know how important Stuart Kenney is to the Paddy Power story. - Yeah, all the people in Paddy Power love Aaron Rogan, I think that's good. I understand from this. But yeah, I think like people who are articulate and can send a message are gonna be really important to Flutter over the next while because, obviously, the UK and Ireland has the talent challenges and stuff that Kevin is working through. But when you think bigger picture, we've discussed our share price travails. They've got this new kind of wave of competition with the prediction platforms. I think before too long, you're gonna see the worm turn a little bit in the States in terms of the Regtree landscape as well. You see more and more reporting and coverage of problem gambling, which is something that Flutter is very keen to stress how important it is that it gets a handle on that and it has measures for people to be protected with state limits and sometimes it moves ahead of the Regtree environment that is working in like in Ireland. But it's, you know, the FT had a piece just this week about the US's growing problem with sports betting. I think that growth period, which they're still in in the States, was always going to be somewhat of a honeymoon period. And I think ultimately no matter where gambling is and whatever you think of it, there are people who unfortunately become quite severe addicts to it. And even if Flutter is doing absolutely everything I can, which some people would argue it isn't, but certainly Flutter says it is, even if they're being very responsible in how they're looking after people or trying to look after people, it's inevitable that some will fall into gambling addiction. And I think with the scale of the US market, that's something that over the next five, 10, 15 years is going to be a big topic in Regtree and legislative terms in the States. So people who can articulate Flutter's clear view, I think it's gonna be very important with the company. And just on that point, how convincing was he to you on that whole issue of due diligence and kind of duty of care to their clients and customers because as you said, there are probably many people who feel that big companies like that don't do enough to protect those who are using their serves. - Yeah, I think certainly the big operators have improved over the years. I also take Kevin's points that there are unregulated entities and what he keeps saying is that he wants a level playing field and I think that's a perfectly legitimate point. I think it's also fair that Flutter has moved ahead with implementing some things that let's say are in place in the UK already, but not yet in place in Ireland. So all of that is in its credit column. I think gambling companies know that their products cause harms to a certain cohort of their users and that's always going to be a difficult narrative to explain away or to comment upon. Like they will point to other kind of vice industries like drinking or anything like that. And that's fair. People are adults and they have their own decisions to make as to what they do, but they know inherently that their products are harmful to some people. And so I think it's always kind of fighting against the tide a little bit to express their point of view. And some people would just never want to hear it because they know the harm that has been encountered by some people. - Indeed, well listen, it was a really interesting interview conducted by Film Topps in our reporter with Kevin Harrington of Flutter. That's it for now for episode four of the Business Post Podcast from me, Danny McCartle. - And we Peter O'Dwer. - Talk to you next week. We've Danny McCoy in the heart. He will us next week talking to us everything around Paddy's Day and the Washington Circus. I think that everything will go along with that. So we let Danny, we're interesting chat next week. But for now, thanks for listening and bye bye for now. (upbeat music)