Shares in Paddy Power and Betfair owner Flutter Entertainment (FLTR) sank 8.5% to £128.45 on Tuesday after the company lowered its full-year earnings guidance.
Despite reporting a strong third quarter to September, the company suffered unfavourable sports results in the first 24 days of October which impacted EBITDA (earnings before interest, taxes, depreciation, and amortisation) by around £60 million.
In addition, the firm faces a drop of £10 million in EBITDA this quarter and up to £40 million next year as the business temporarily exits the Netherlands as the country legalises gambling. Flutter will re-enter the Dutch market in the third quarter of 2022.
As a result, the company lowered the midpoint of its full-year EBITDA guidance (excluding the US) by around 4.5% to between £1.24 billion and £1.28 billion.
The downgrade was partly mitigated by a 5% increase in the midpoint of its adjusted US EBITDA guidance to between £250 million and £275 million, but investors took the news badly.
STRONG QUARTER
Third quarter revenues grew 12% to £1.44 billion with Australia and the US the standout performers growing 20% and 85% to £370 million and £280 million respectively.
In the US, fantasy sports business FanDuel generated 94% of total revenues and continued to lead the market with a 42% share of online sports betting against an 18% share of online gaming.
Revenues in the UK and Ireland fell 5% to £491 million due to tough year-on-year comparisons with 2020 seeing a condensed sporting calendar including premium sporting fixtures.
International markets saw a 3% drop in revenues to £299 million impacted by product and tax changes in Germany.
EXPERT VIEWS
Paul Leyland, analyst at gambling consultancy Regulus Partners commented: ‘Flutter continues to demonstrate that where it has mass market betting-led strength it is a sustainable sector leader.
‘What happens where these characteristics do not apply, either because of the nature of the market or Flutter’s own offer, remains an open question currently delivering lacklustre performance.’
AJ Bell investment director Russ Mould said, 'Ultimately, Flutter’s story remains focused on the US where there are plenty of growth opportunities. Competition is growing in this space, but Flutter is holding its own in the market.’
Striking a note of caution, Mould continued: ‘Regulatory and political pressure on the gambling sector remains intense and in a world where ESG (environmental, social and governance) factors are now on the boardroom agenda, gambling companies need to do even more to stop vulnerable people getting into financial trouble through betting.'
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Disclaimer: The author and the editor of this story both own shares in AJ Bell Limited, the owner and publisher of Shares magazine
