Thanks to ‘favourable sporting results’ during the last months of the year, operating profits for the year to 31 December will be in the range of £143m to £148m compared with a Bloomberg consensus of £130m.
STRONG UK GROWTH, US TO HIT BREAK EVEN
The ‘beat’ was driven by the retail business which generated operating profits above internal forecasts of £50m to £70m due to ‘particularly favourable’ sports results in December, which were above the long-term gross win margin range.
UK online revenues grew in line with the market for the third quarter running, with weaker net gaming revenues offset by the strong sporting result.
International online revenues were mixed with the fourth quarter expected to be flat on last year. In contrast to the UK, gaming revenues were better thanks to a strong performance from Mr Green while sports book revenues were weaker.
The US business – which investors are pinning their hopes on for future expansion – experienced ‘strong growth’ in the final quarter and is now expected to break even instead of making losses of up to $20m.
Despite the upbeat report, shares were up just 1% at 186p by mid-morning.
Shore Capital analyst Greg Johnson is expecting further progress this year supported by Euro 2020, synergies from last year’s Mr Green acquisition and further tech-roll outs in the online business.
He remains excited about the prospects for the US expansion. ‘The merger between Eldorado and Caesars could be a game-changer on this front, initially bringing additional sports books across the US.
We see little in the current valuation for US sports betting in what could eventually be a $20bn revenue market (retaining a 5-10% market share long-term could be worth more than the current market capitalisation).’