VLT growth offsets H1 lottery and betting decline for Sazka

16 September 2019

Czech lottery and gaming giant Sazka Group has reported a 6% year-on-year increase in gross gaming revenue to €908.5m for the first half of 2019, while profit for the period was boosted by the sale of its Croatian business to Emma Capital.

Amounts wagered for the six months to 30 June, 2019 rose 3.8% to €2.59bn. Of the business' €908.5m GGR, the majority came from numerical lotteries, comprising draw-based and passive lottery games. While draw-based games reported a 2.7% increase in revenue to €468.0m, passive lottery revenue fell 9.9% to €26.8m, resulting in total numerical lottery GGR declining marginally year-on-year. 

The sports betting vertical also declined compared to the prior year, which included the group stage matches at the 2018 Fifa World Cup. Sportsbook revenue was down 4.7% to €194.5m.

However, the lower lottery and sports betting revenue was offset by a strong performance from Sazka's video lottery terminals and gaming machine operations, which saw revenue jump 63.7% to €146.6m. Digital revenue also grew strongly, though from a low base, with revenue from the channel soaring 335.5% to €10.3m. 

The company paid out €283.2m in lottery taxes, leaving net gaming revenue of €625.3m, up 6.8% year-on-year, while its revenue from the sale of goods and services and other operating income declined 3.9% a combined €65.6m.

The company’s operating expenses totalled €461.2m, down 2.2% year-on-year. Agents’ commissions increased 2.2% to €200.3m, while costs for materials, consumables and services fell 4.9% to €152m. Marketing costs increased slightly to €45m, while personnel expenses rose 8.7% to €52m. Other operating expenses decreased 49.5% to €11.9m, while Sazka also received an additional €57.0m in income from investments.

This left operating earnings before tax, depreciation and amortisation (EBITDA) of €286.6m, up 24% year-on-year.

Depreciation and amortisation costs increased 22.9% to €59.4m, bringing profit from operating activities to €227.1m, up 24.4%. Interest income more than tripled to €3.7m, while financial income fell 39.1% to €1.3m and financial costs declined 9.4% to €39.7m. Sazka’s pre-tax profit rose 35.2% year-on-year to €192.4m, and its net profit from continuing operations increased 38.6% to €145.1m.

In March, Sazka — which was 75% is owned by KKCG and 25% by Emma Capital — divided its assets between the two investment groups. Following the deal, KKCG held 100% Sazka Group shares and all of the shares Sazka Group holds in the Greek OPAP lottery (which the operator is set to acquire outright), the Italian Lotto Italia and Casinos Austria. Emma Capital, meanwhile, received Sazka’s Croatian operation, including sportsbook company SuperSport.

The sale to Emma Capital was counted as a €274.7m profit, while Sazka group also made €15.6m from the Croatian subsidiary during the period, resulting in a net profit of €435.4m for H1 2019.