Lottery operator loses €17.4 million in 19 months

The new operator of the National Lottery made a loss of €17.4 million in the 19 months to the end of 2014, due to expenses associated with the transition and borrowing costs. Premier Lotteries Ireland (PLI), which took over the lottery licence on November 30th, is now eyeing online growth as it focuses on growing sales.

According to results filed with the Companies Registration Office, PLI, which paid €405 million to operate the licence for 20 years, reported a pretax loss of €17.4 million in the period from May 22nd, 2013, to December 31st, 2014.

The PLI consortium, which includes An Post and the Ontario Teachers' Pension Plan (OTPP), owners of UK operator Camelot, started trading on November 30th, 2014.

Over the 19-month period, but realistically just in December as it had just started trading then, PLI reported total sales of €56.8 million “reflecting strong sales in our scratchcard and Lotto games”. As a comparison, in 2013 An Post, the former operator of the Lotto, reported full-year sales of €685 million and profits of €205 million, down from sales of €735 million in 2012.

Tickets for the Lotto draw accounted for almost 70 per cent of sales, with the rest accounted for by scratchcards.

Almost 60 per cent of this – €32.7 million – was paid out in prizes, which left gross gaming revenue of some €24.1 million.

Under the terms of its licence, 65 per cent of this must be paid out to good causes, hence €15.7 million went to charities, leaving net income of €8.4 million.

Administrative expenses for PLI came to some €10.2 million, with “transition costs” associated with the handing over of the licence accounting for almost 60 per cent of these expenses. PLI also incurred finance costs of €14.1 million in the period under review, related to interest charged on loans. According to its accounts, PLI drew down loan agreements with OTPP, An Post and An Post Pension Plan, all of which incur interest at a fixed rate of 9 per cent.

The operator was hit by technical glitches, most recently with two outages last weekend prior to the Friday and Saturday night draws. In the early part of this year, as it switched retailers over to a new technology platform, retailers were hit by frequent system crashes and delays. In February the midweek draw was postponed for the first time in its 28 year history due to one such glitch. In its accounts, PLI cited the company’s “significant reliance” on IT as a “key risk” going forward.

PLI did not make any dividend payment to its shareholders during the period under review.