Veikkaus: Sluggish revenue reflection of consumer behaviour

Revenue for the group stood at €1.07bn (£1.52bn/$1.81bn) for the 12-month period ending 31 December – a 3% fall from the €1.1bn the company achieved in the same period of the previous year.

Land-based casino increased as a proportion of the company’s total revenue, moving from 29.4% to 32.4%, generating €346.7m. Lotteries stood as by far the largest single segment at 56% of the company’s total at €600.0m – a 1.1% decline from the previous year.

The company saw a 16.9% year-on-year fall in its betting segment, which fell to €123.8m in revenue for the year.

Overall in 2022, 49.7% of revenue came from physical points of sale, while 50.3% came from online channels.

However, the rise of offshore and illegal offerings has bitten into the company’s market share.

“Veikkaus Oy’s share of the Finnish digital gambling market has been in decline for many years. It stood at just over 50 per cent by the end of 2022,” said the business.

However, the business’ online gaming vertical saw declines in both absolute and relative terms, falling from 13.5% to 11.6% from €149m to €123.8m

Veikkaus also achieved €4.9m in other profits from the business’ non-gaming operations, such as food or drink at the organisation’s land-based properties, which was a decline of 34.4%.

Increased costs eat away at profits

In terms of expenses, Veikkaus paid €36.3m in lottery taxes for the year, down by 39.8%. However, material and service costs at €132.5m were the highest costs of the period, rising by 3.3%.

Costs related to employee benefits came in at €85.5m. The company was also hit with €48.4m in depreciation and impairment charges, alongside $101.8m in miscellaneous costs.

From this total, the company reported €671.0m in net income, which – as a state-owned monopoly – will be distributed to a number of specific ministries.

Veikkaus also reported €343,210 in financial income, alongside €684,888 in finance costs.

The profit before tax totalled at €670.6m, down by 1.3% year-on-year.

Consumer uncertainty

The period stood as the first full year since the onset of the Covid-19 pandemic where the organisation’s land-based operations – which include a number of gaming halls as well as two casinos – were in operation throughout the entire year unaffected by pandemic restrictions.  

Despite the lack of restrictions, the business continued to see weak demand at its retail outlets.

“Consumer behaviour at the physical points of sale has not, however, returned to the same level as before the coronavirus pandemic, as can be seen in the figures for visits to Veikkaus gambling halls,” said CFO Regina Sippel.

“In addition, the mandatory loss limits introduced in 2021 for slot machines have reduced the volume of slot machine gambling,” she continued.

The CFO also highlighted the macroeconomic environment as a factor in reduced revenue, specifically pointing to the hit to consumer confidence and purchasing power.         

“The war in Ukraine and the resulting increase in consumer uncertainty and reduced purchasing power have also affected demand for Veikkaus games,” she said.

International subsidiary

Following the December 2021 passage of the country’s Lottery Act, Veikkaus opted to launch a new international B2B subsidiary Fennica Gaming, which was now permitted.

The new organisation’s operations did not significantly affect the company’s revenue in 2022, reporting €174,500 turnover for the year.

“The experiences gained regarding the interest and functionality of the games in different markets have been promising, and the high-quality games, technical reliability and high-quality customer cooperation have brought positive feedback to the company,” said CEO Olli Sarekoski.

“In the future, as the business becomes established, Fennica Gaming is expected to grow into a significant component in Veikkaus’ business.”