Flutter Entertainment issues profit warning due to gambling revenue downturn

Flutter Entertainment, the parent company of Paddy Power and Betfair, has announced a downward adjustment in its full-year earnings expectations, attributing the change to the impact of “customer-friendly sports” such as the football World Cup on profit margins. The company revealed that its 2023 adjusted EBITDA for the entire group, excluding the US, is now likely to be around £1.44 billion (€1.65 billion), at the lower end of the previous range of £1.44 billion to £1.6 billion.

The announcement led to a 9.4% drop in Flutter’s share price to £124, marking its lowest point since mid-January. The company cited increased foreign exchange rate fluctuations and heightened investment in customer acquisition as factors contributing to the downward adjustment in earnings forecasts. Despite these challenges, Flutter has been actively pursuing acquisitions of well-performing betting and gambling companies in new markets, including the recent acquisition of Serbia’s MaxBet.

In addition, the company expects its US revenue for 2023 to fall at the lower range of the guidance, at £3.75 billion. This is within the company’s range of £3.6 billion to £3.9 billion. However, adjusted EBITDA for the US operations is likely to fall in the middle of the forecasted range at £140 million.

The company attributed the gloomy forecast to the impact of “customer-friendly sports” such as the FIFA World Cup last year and the Premier League on profit margins, leading to bigger-than-expected payouts. Additionally, Flutter noted challenges in the Australian horse racing market, which have been impacting profit margins and are expected to continue into 2024.

CEO Peter Jackson expressed confidence in Sportsbet, Flutter’s Australian subsidiary, despite the challenging market conditions. Flutter also anticipates the revision of the Indian Goods and Services Tax (GST) to impact profits for Junglee, its Indian multi-gaming platform, and bring down 2024 EBITDA by approximately £30 million.

In a strategic move, Flutter announced its plan to delist from Euronext Dublin and list on the New York Stock Exchange early next year, following in the footsteps of CRH and Smurfit Kappa. Despite the downward adjustment in earnings expectations, the company remains focused on navigating the challenges and positioning itself for future growth.