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Gambling giant Flutter warns of lower-than-expected profits

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Gambling stock image Copyright Canva/Hirurg
Copyright Canva/Hirurg
By Indrabati Lahiri
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Flutter has adjusted its full-year earnings expectations downwards, as “customer-friendly sports” such as the football World Cup cut into profit margins.

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Flutter Entertainment, the parent company of Paddy Power and Betfair, has revised its full-year earnings forecasts to the lower end of its previous forecast range, the gambling giant announced on Thursday.

This excludes the US market, which it recently entered.

Flutter’s share price tanked 9.4% to £124 following the news on Thursday morning, marking its lowest point since mid-January.

The company revealed that its 2023 adjusted EBITDA for the entire group, excluding the US, is now likely to clock in at around £1.44 billion (€1.65 billion). This is at the lower end of the previous range of £1.44 billion to £1.6 billion announced earlier in August.

Increased foreign exchange rate fluctuations have also impacted this number, Flutter said, adding that it has also recently been investing more in customer acquisition and marketing campaigns.

The company said it has been trying to acquire “Local Heroes” or other well-performing betting and gambling companies in new markets. It has bought Serbia’s MaxBet as part of this initiative.

US revenue forecasts for 2023 also came in at the lower range of the guidance, at £3.75 billion (within the company’s range of £3.6 billion to £3.9 billion). Adjusted EBITDA for the US operations are likely to fall in the middle of the forecasted range at £140 million (range £90 million to £190 million).

The gloomy forecast comes on the back of “customer-friendly sports” such as the FIFA World Cup last year and the Premier League drawing hoards of gamblers. The events led to a number of bigger-than-expected payouts, as more crowd favourites won.

These payments came up to almost £40 million in December 2022, according to Flutter.

The Australian horse racing market has also been lagging somewhat since Q2 2023, which has also spilled over to Q3, further eroding profit margins, the company said.

It has now announced that it expects this trend to continue into 2024 as well, with “an estimated mid-single-digit decline in the overall Australian market in 2024”.

CEO Peter Jackson also noted that Australian horse racing market conditions “remain challenging.” However, he is still confident that Sportsbet, Flutter’s Australian subsidiary, is still well positioned in the market, having increased its player base by 1.8 times since 2019.

Another challenging factor the company foresees for 2024 is likely to be the revision of the Indian Goods and Services Tax (GST).

The measure is likely to impact profits for Junglee, Flutter’s Indian multi-gaming platform, as well as bring down 2024 EBITDA by approximately £30 million.

Flutter has also revealed that it will be delisting from Euronext Dublin, in favour of the New York Stock Exchange early next year, following the likes of CRH and Smurfit Kappa.

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