Paddy Power Betfair lifted the bottom end of its full year earnings guidance range today as a strong performance in its main online business outweighed a run of unfavourable sports results in the third quarter.
In August, it cut its forecast for underlying core earnings or EBITDA to £460-480m from £470-495m due to the introduction of additional taxes and losses from its growing US business.
The bookmaker narrowed that range, which excludes losses at its newly merged US sports betting business, to £465-480m after third quarter revenue grew by 12% and earnings were flat.
"Q3 was a good quarter for the group. In Europe, the encouraging momentum that we saw in Q2 accelerated further, with online revenue up 15 percent," the company's chief executive Peter Jackson said in a statement, crediting investments in products and marketing.
The group's main European online business had suffered from a lack of product investment, particularly in the fiercely competitive British market, following betting exchange Betfair's tie-up with Paddy Power in 2016.
However, analysts at Goodbody Stockbrokers said the update spelled a turnaround for the online business.
It added that there was a lot to like about the statement, including "some very positive signs" from customer activity in its US business.
Paddy Power Betfair agreed in May to merge its US business with fantasy sports company FanDuel to target a market set to open up in the coming years.
It said today that it was encouraged by the demand for regulated sports betting products and 30% market share captured by FanDuel.
Jackson added that the group's scale and strong balance sheet positioned it to face the significant regulatory and fiscal headwinds that will apply next year as betting taxes increase in its main markets of Britain, Australia and Ireland.
Paddy Power Betfair estimated that had the changes applied throughout 2018, the gross impact on EBITDA would have been approximately £115m.
In today's trading statement, the company said that its online revenues for the three month period were up 15%.
Revenues at its retail operations were down 4% - with revenues down 1% in its UK shops and by 6% in its Irish shops - as sports revenues were hit by weaker margins.
The company noted that sports results were marginally behind expectations with good football results offset by adverse horse racing results in July.
During the quarter, it opened one new shop in Ireland and closed two in the UK, taking its total estate to 628 shops - 265 in Ireland and 363 in the UK.
The company said that revenues at its Australian operations dipped by 2% with continued good underlying customer activity offset by adverse sports results.
Revenues at its USA operations soared 22% on the back of its recently started New Jersey sports betting revenues and after the merger of Betfair US with FanDuel in July.
The company said that the "exciting" potential of the sports betting opportunity and the strength of its strategic positioning has been evidenced by its experience so far in New Jersey.
Shares in the company moved higher in Dublin trade today.
