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Large jackpots fuel Atlantic Lottery growth in 2018-19


Atlantic Lottery reported a net profit of CAD$422.2m, up 0.7% year-on-year and ahead of the company’s target of CAD$419.4m for the fiscal year ending 31 March, 2019, thanks to a high level of rollover MaxMillions jackpots.

The company reported CAD$764.8m ($575.7m) in net revenue, up 1.1% on the previous year, thanks to the strong performance of its draw-based, instant win and online games.

These successes offset a 4.2% decline in revenue from video lottery terminals (VLTs) to CAD$420.9m from 6,276 terminals.

The success of draw-based games games, which took in revenue of CAD$175m, CAD$24m above budget, was due mostly to a high number of MaxMillions draws, which occur when a jackpot of at least CAD$50m is not won. The 2018-19 year saw 26 MaxMillions jackpots, up from 14 in 2017-18.

LottoMax, which includes the MaxMillions feature, remained the company’s most popular draw game product, bringing in CAD$65m, an increase from CAD$50m in 2017-18. Lotto 649 brought in CAD$7m, down 4.1% from 2017-18, while Tag brought in CAD 27m, up 17.4%.

Scratchcards brought in CAD$80m in revenue, and Crossword remained the company’s top performer in the category, despite seeing revenue decline marginally to CAD$24m.

Other instant win games accounted for a further CAD$52.3m in revenue. 50 cent and one dollar breakopen games were the most popular formats within that vertical, taking in CAD$22m and CAD$20m in revenue respectively, down from CAD$23m and CAD$22m last year. The company’s online games, also included in the instant win vertical, took in CAD$8m.

The company’s Red Shores racetrack and casino chain took in CAD$19.1m in revenue, down 3.1% year-on-year. The land-based casinos earned $14m (down 3.8%), while racetrack revenue fell 4.8% to CAD$2m and food and beverage revenue from the facilities fell 3.1% to CAD$3.1m.

Sports betting revenue declined from $14.3m in 2017-18 to $14.2m in 2018-19.

In terms of total ticket sales, the company received CAD$757.8m from its 2,948 lottery terminals, up 6.8% on 2017-18. This resulted in total sales of CAD$1.18bn, up 2.6% year-on-year.

The company paid out 57% of its ticket sales revenue in prizes, resulting in net ticket sales of CAD$324.9m.

The largest portion of the company’s revenue came from Newfoundland and Labrador, which took in CAD$247.8m. However, revenue from the province climbed by less than 0.1%, as Nova Scotia closed the gap by taking in CAD$239.8m, up 1.3%. Revenue rose most quickly in New Brunswick, by 2.1% to CAD$221.1m, while in Prince Edward Island, revenue increased 1.4% to CAD$56.1m.

Atlantic Lottery’s direct expenses declined 4.6% to $143.1m. These expenses include commissions paid to retailers of $131 million, ticket printing costs of $9 million and other direct costs of $3 million. The company said that the decline in direct expenses was caused by the decline in video lottery revenue.

The company’s expenses were highest in Newfoundland and Labrador, at CAD$54.9m, but fell 6.7% year-on-year, the largest decline by region. Direct expenses totaled CAD$38.4 in New Brunswick, CAD$41m in Nova Scotia and CAD$8.8m in Prince Edward Island, declining in every region.

Atlantic Lottery’s gross profit reached CAD$621.7m. Nova Scotia took took in the greatest gross profit at CAD$198.8m, while Newfoundland and Labrador followed with CAD$192.9m. Gross profit in New Brunswick was CAD$182.6m, while in Prince Edward Island, it was CAD$47.3m.

The company’s operating expenses totaled CAD$110.1m, up 8.4% on the previous year. The company said the biggest causes for this were employee expenses (CAD 5.1 million), video lottery terminal (VLT) lease expenses (CAD$1.1 million) and depreciation (CAD$2.4 million). The increased employee expenses were due to hiring more employees, increasing pension contributions and a lower amount of capitalized salaries.

The largest portion of operating expenses came in Nova Scotia, totaling CAD$32.2m. However, Prince Edward Island saw the highest operating expenses as a percentage of revenue, with expenses of CAD$20.4m.

Capital-related costs increased 7.2% to CAD 33.7m, while other expenses increased slightly to CAD 55.6m.

The company’s net profit of CAD$422.2m was the highest since 2016. In absolute terms, Nova Scotia brought in the most profit, with CAD$138.6m, while Newfoundland and Labrador brought in CAD 135.4m, New Brunswick took in $130m and Prince Edward Island took in CAD$18.3m.

However, New Brunswick was the most profitable region by percentage of absolute revenue, with 59%, compared to Nova Scotia’s 58%, Newfoundland and Labrador’s 55% and Prince Edward Island’s 33%.

The company’s president and chief executive, Brent Scrimshaw, who announced his retirement from Atlantic Lottery in September, said he was pleased with the results, but warned of the effect of unlicensed offshore operators on ALC’s future performance.

“The gaming world is changing. Some change is bettering the player experience. Regrettably, other change is putting players increasingly at risk,” he said. “Our competitors include thousands of foreign companies who do not share our depth of knowledge and commitment to responsible gambling, nor are they regulated by provincial or federal governments, and therefore do not pay taxes, remit profits to benefit important programs and services, or support grassroots community initiatives and priorities.

“They are placing players at unacceptable risk. They operate in gaming categories where we are not present. Where we do compete, we are modernizing our offerings and are working with our shareholders to responsibly adapt to meet the new market.”