Flutter cuts FY earnings guidance, cites unfavourable sports results

Paddy Power owner Flutter Entertainment reported a jump in third-quarter revenue on Tuesday but downgraded its earnings guidance for the year due to unfavourable sports results last month and its Netherlands exit.

In the three months to 30 September, group revenue rose 12% to £1.4bn, with sports revenue up 17% at £906m and gaming revenue 5% higher at £534m.

Revenue in the UK & Ireland dipped 5%, reflecting a busier, high-profile sporting calendar in the prior year. In Australia, revenue was 20% higher, boosted by stay-at-home Covid restrictions. International revenues fell 3%, while US revenues rose 85%.

Flutter downgraded its expectations for group 2021 adjusted earnings before interest, tax, depreciation and amortisation ex-US to between £1.24bn and £1.28bn from previous guidance of £1.27bn to £1.37bn. The company cited unfavourable sports results in first 24 days of October, which have impacted EBITDA by around £60m, and the expected £10m impact in the fourth quarter from its Netherlands exit.

Net revenue guidance for the US was unchanged at between £1.29bn and £1.43bn, but Flutter now expects an adjusted EBITDA loss of £250m to £275m versus previous of £225m to £275m. This includes a £15m impact from adverse sports results in October.

Chief executive officer Peter Jackson said: "Flutter delivered a strong third quarter performance, with double-digit growth in our global player base. This resulted in the group delivering revenue growth of 12% despite challenging comparatives including a concentration of key sporting events in the prior year.

"In the US we maintained our leadership position, with the quality of our product offering leading to high levels of customer engagement. As expected, the start of the NFL season saw a step-up in competitive intensity. We remained disciplined however, leveraging the broad set of high quality marketing assets at our disposal. The customer response has been very encouraging with FanDuel now regularly experiencing staking levels on Sundays that match its 2021 SuperBowl performance. Early engagement on NBA since the recent start of season has also been strong."

At 0845 GMT, the shares were down 7.6% at 12,965p.

Victoria Scholar, head of Investment at Interactive Investor, said: "The bar was set high in August when Flutter enjoyed a 28% surge in revenues. Today’s contrasting gloomier outlook will come as an unwelcome development to investors as the initial glow from the resumption of sporting events after Covid fades away.

"Not only is the Betfair owner temporarily exiting the Netherlands amid regulatory headwinds, but it also downgraded its full-year guidance, due to ‘unfavourable sports results’ in October. The Dutch exit is expected to cost £10mn in EBITDA in 2021 and £40mn in 2022. Nonetheless the US remains a bright spot with net revenue guidance unchanged and online revenue up 85% compared to a 5% decline in the UK and Ireland."