Sazka Showing Signs of Recovery

Czech gambling giant, Sazka Group, has announced that it is showing positive signs in the wake of the lockdown measures introduced to limit the spread of COVID-19. Sazka did experience a significant drop in its revenue and profit during the first half of the year caused by the outbreak of the novel coronavirus. The amounts of money wagered across its brands fell to €1.84 billion, a 28.8% decline compared to the first six months of 2019.

A bay in Greece on the Mediterranean.

The Sazka Group experienced declines in the revenue that it generated from the operator OPAP in Greece. ©moorpheus/Pixabay

During the three months leading up to the 30th of June this year, €1.19 billion was paid out to consumers as winnings from their bets. This figure is a 29.2% decline in the amount that was won by players over the same period of the previous year. The operator reported total gross gaming revenue of €651.9 million over the period, falling by 28.2% compared to the first half of 2019.

The Sazka Group has announced that despite the fall in revenue and profit, it was ultimately well placed to deal with the outbreak of the pandemic effectively. According to the executive of the company, the Sazaka Group’s wealth of expertise, as well as its wide portfolio of geographically diverse operations and sales channels allowed it to offset some of the losses it would otherwise have incurred.

According to the management of the Group, their highly experienced staff members also placed the operator in a good position to bounce back quickly from the issues caused by the pandemic. During the past few months, the operator has experienced a positive uptick in sales from various locations in which it conducts its business. The executive explained that in some areas, the Sazka Group has even begun to experience pre-pandemic or higher levels of use of its services.

During the first three months of the year, the most successful markets for the Sazka Group were in Greece and Cyprus. In these regions, OPAP did see its revenue decline by 34.8% to €507.9 million, however. The Sazka Group holds a 43.33% stake in the Greek operator. OPAP recently released its results for the first half and outlined how during the period, it experienced a drop in revenue across all of the verticals it offers to consumers.

The drop was less pronounced when the operator’s physical betting locations began to re-open. From the 11th of May onwards, OPAP’s retail locations returned after a long period of closure and ever since have exhibited very positive results.

The Sazka Group also conducts a large amount of its business in its native Czech Republic. Here, the government did not begin to ease restrictions until the middle of May. Despite this, during the lockdown, the operator kept more than 70% of its point of sale network in operation. Once the restrictions started to be lifted in full, this rose to 95% of the network.

The fact that the Sazka Group maintained this business in the Czech Republic meant that during the first half, the business experienced growth in the region. Overall, in the country, revenue grew to €144.0 million, an increase of 11.7%.

Breakdown of Revenue

When the revenue for the half is broken down on a vertical by vertical basis, the company had gross gaming revenue of €364.5 million from lotteries. This is a decline of 26.3%. Additionally, the operator’s instant win revenue also fell by 36.6% down to €43.8 million. Sports betting also experienced a decline in revenue to €130.0 million, a 33.2% drop. Additionally, the operator also saw a decline in the revenue generated from fixed-odds betting machines. This fell by 35.6% to €90.1 million.

The smallest contribution for the Sazka Group came from the online games that the operator but despite its size, the vertical did experience significant growth during the first half of the year. The Group stated that the growth was seen because consumers were largely confined to their homes during the lockdown period. Overall, the revenue from online products more than doubled. This vertical generated €23.5 million, an increase of 128.5%.

The operator seemed to take a positive view of the results it experienced during the period, seeing the positives even though revenue was down overall. The Sazka Group stated that the adversity that it experienced as a result of the pandemic allowed it to improve its strategy of increasing its output of online services to make iGaming revenue a bigger contribution to its business.

According to the executive of the Group, it has been planning to improve this area of business for some time now, and its long-term strategy had included improving its online offerings. The pandemic allowed the company to focus on this strategy earlier than it had initially planned.

In terms of the company’s spending during the first half of the year, the Sazka Group paid €223.1 million in taxes levied against it for its lotteries. After these were accounted for, the net revenue the operator reported was a total of €428.8 million, a 31.4% decline compared to the same period of the previous year.

The Group did record an additional €55.7 million in revenue from selling products in its retail locations. These products include things such as mobile top-ups. On top of this, the business also reported further income from other sources, such as the deferred taxes that OPAP owes to Greek authorities. This figure increased to €21.5 million over the period.

The operator paid a reduced commission to retailers as a result of the widescale shut down of the physical locations the Sazka Group operates. The amount paid to retailers fell by 33.3% to €133.7 million during the period as the business’s spending on materials and other services also dropped to €121.5 million.

The reduction in business during the period was also beneficial in terms of the spending on marketing for the Sazka Group. This figure fell to €35.3 million. The financial reports also detailed how the company was able to reduce its expenditure on personnel to €50.0million.

Despite these savings, the Group did have to pay nearly triple the operating expenses it paid during the first half of 2019. This amount increased to €31.2 million as a result of the increased financial support the company paid to sales agents. Additionally, OPAP incurred higher expenses during the period that contributed to these higher operating costs.

The Sazka Group’s net financial costs increased by 22.2% during the six months to €42.5 million. This was mainly a result of the operator taking precautions to protect its financial position after it agreed to new bonds and loans over the first half. The company was left with a profit of €55.7 million before tax as a result of this, which is a drop of 71.1%. Once a figure of €13.7 million was taken from this in the form of income tax, the net profit the group reported fell by 71.1% year-on-year to €42.0 million.

The Group was positive about the results so far from 2020, despite the obvious losses in revenue and profit compared to the first half of 2019. The executive of the conglomerate believes that the pandemic has actually left it in a strong position as restrictions are gradually lifted across the regions it operates in. Once the recovery of land-based operations is complete, the Sazka Group is expected to come back even stronger than it was before the outbreak of the virus.

Overall the operator will be happy to draw a line under the first half of the year, that has been marred with difficulties such as the pandemic, as well as large changes to the executive. In January, the company announced it was appointing a new CFO. The first six months of the year will not have been what Kenneth Morton was expecting but the results are overall positive despite the losses the company incurred.

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