Paddy Power Betfair Lowers Full-Year Operating Earnings Outlook

Paddy Power Betfair (PPB.L), the British gambling firm, early Wednesday cut its full-year operating earnings outlook because of a planned introduction of taxes in Australia and the need to absorb losses from its FanDuel acquisition, and as adjusted net income fell in the first half.

Underlying earnings per share fell to 173.6 pence (224.8 cents) in the six months to June 30, from 181.1 pence a year ago, even as turnover jumped by 7% on a constant currency basis as sales climbed to 867 million pounds from 827 million pounds, the company said in its earnings statement.

In Europe, product enhancements and improved cross-sell rates led to stronger gaming revenue growth, but the improvements were accompanied by a jump in the cost of sales, which widened to 201 million pounds in the first half from 189 million pounds a year earlier, and a surge in total operating costs to 440 million pounds versus 419 million pounds.

State governments in Australia, where the firm’s strategic priority is to invest to grow market share, are said to have confirmed their intentions of introducing “point of consumption” taxes, creating an additional cost of about 13% of revenues from 2019, Paddy Power warned.

The company, which completed the merger of Betfair US with FanDuel in July with a view to targeting the “nascent” US sports betting market, said it anticipated absorbing “losses from the FanDuel daily fantasy sports business”.

As a result, the underlying earnings before interest, tax, depreciation, and amortization for the full-year 2018 is now expected to come in a range of 460 million pounds and 480 million pounds, from a previous forecast in May of 470 million pounds to 495 million pounds.

In addition to Australian taxes and product fees and FanDuel losses, Paddy Power said its outlook reflected continued weakness in exchange horse racing revenues, offsetting the recent trading momentum from better-than-expected performance in gaming and a strong conclusion to the World Cup.