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FTSE: PaddyPower owner Flutter Entertainment raises US guidance after strong quarter

Flutter Entertainment: Paddy Power logo is seen behind a keyboard and gambling dice.
Flutter Entertainment revealed that sports revenue rose by 26%, from £906m to £1.14bn over the period, while gaming climbed 40% to £748m compared to the year before. Illustration:Dado Ruvic/Reuters

Flutter Entertainment (FLTR.L) lifted its US revenue forecast on Wednesday despite a sharp cost of living crisis hitting consumers and households.

Here are some of the key figures from its latest trading update:

Q3 revenue: Rose 31% year-on-year to £1.89bn

US revenue: Up from $280m to $598m

EBITDA: Adjusted earnings (excluding US) is expected between £1.29bn and £1.39bn.

Average monthly players: At 9.6 billion, up from 7.8 billion

The owner of PaddyPower, Betfair and Sky Bet said it had seen little evidence of a slowdown so far this year, with third quarter revenue up 31% year-on-year to £1.89bn.

The gaming operator revealed that sports revenue rose by 26%, from £906m to £1.14bn over the period, while gaming climbed 40% to £748m compared to the year before.

US revenue in particular performed strongly, up from $280m to more than double at $598m. It now expects US revenue to come in at between $2.95bn and $3.2bn for the full-year, compared to the $2.85bn-$3.1bn range it predicted before.

Meanwhile, the UK and Ireland saw revenue rise 3.7% to $509m.

Flutter said that its total average monthly players totalled 9.6 billion, up from 7.8 billion the year prior – a rise of 23%.

Group adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), excluding the US, are still expected to land between £1.29bn and £1.39bn.

"We are really pleased with our performance in our US division since the start of the NFL in September, where we are now averaging over 1 million players on a regular NFL Sunday," Peter Jackson, chief executive, said.

"In addition, we are seeing an increase in customer retention rates, boosted by the start of the NBA season."

He added: “As we look ahead, our product and geographic diversification, as well as our recreational customer base, position us well for future growth."

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However, the group does expect a £280m charge in 2023 due to an increase in the cost of debt from 4.1% in quarter four to 5.6% next year.

Peel Hunt said in a note on Wednesday: “We estimate that this implies a 10% downgrade to the full year 2023 consensus for pre-tax profits and EPS. Given the movement in reference rates, this should have been expected but may take the edge off the recent rally.”

Shares were just 0.4% lower on the day in London, as the general mood across UK and Europe was slightly cautious.

Earlier this week, Flutter won an arbitration ruling related to media company Fox Corp's option to acquire just shy of a 19% stake in US arm FanDuel Group.

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Lara Martinez, analyst at Third Bridge, said: “Historically, economic downturns do not have a significant impact on gaming or sports betting wallets. However, a longer and deeper recession may inevitably hit customers’ disposable incomes.“

“Flutter’s successful US strategy is expected to continue but there's an evident gap in their offering of casino products.”

“The key challenge for Flutter is to maintain the current market share. Our experts expect the US market to be significantly more fragmented going forward. BetMGM or other operators may come up with a comparable product on sports.”

“The UK government’s Gambling Act white paper’s impact is expected to be lessened for Flutter due to its heavy skew towards recreational players vs VIPs.”

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