Covid-19 closures push revenue and profit down at OPAP in Q1

Greek gaming operator OPAP said a shutdown of its retail network as a result of the novel coronavirus (Covid-19) pandemic led to a year-on-year decline in revenue and profit during the first quarter.

Overall revenue in the three months through to 31 March amounted to €328.3m (£294.3m/$373.2m), down 17.1% from €396.0m in the same period last year. Players wagered a total of €885.1m across OPAP’s products, a drop of 18.3% from €1.1m in Q1 of 2019.

Lottery was OPAP’s primary source of income in Q1, with revenue from this segment amounting to €154.5m, down 19.4% on last year, while sports betting revenue fell 13.5% to €88.0m as a result of the closure of retail shops.

The shutdown of land-based operations also saw video lottery terminal (VLT) revenue decline 3.4% to €66.6m, while instant and passives games revenue fell 43.0% year-on-year to €19.2m.

However, when looking at the period up until the closure of venues on 14 March, OPAP said revenue had been up 1.7% year-on-year.

Incidentally, pre-lockdown lottery revenue was down marginally down 0.8%, while sports betting revenue was up 3.2% and VLT revenue 21.5% higher year-on-year. OPAP did not publish instant and passives games revenue for the period.

OPAP’s stores in Greece were closed for 58 days, 14 March to 11 May, while its locations in Cyprus were shut between 16 March and 25 May. VLTs activity resumed on 8 June across its network of PLAY stores and OPAP stores in Greece, while horse racing at Markopoulo Park is set to restart on 15 June.

In terms of costs for the quarter, OPAP was able to lower spending across several areas. Gaming revenue related expenses were down 15.9% to €95.1m, on the back of lower revenue during the period.

Payroll expenses remained almost flat at €19.8m, while marketing costs were cut by 15.0% to €12.6m, as a result of less advertising spend in retail venues and a stronger focus online. Other operating expenses were down 7.6% to €25.3m.

However, despite lower costs across the business, earnings before interest, tax, depreciation and amortisation (EBITDA) was down 23.5% to €86.4m. After accounting for €27.1m in depreciation and amortisation costs, operating profit amounted to €59.3m, a drop of 30.8% on the previous year.

Finance costs in Q1 amounted to €11.4m, which left OPAP with €48.8m in profit before tax. After paying €15.0m in tax, profit for the period stood at €33.8m, a drop of 40.4% from €56.7m in the first quarter of 2019.

OPAP chief executive Jan Karas described the first quarter as “double faced”, highlighting sizeable growth in the period up until the closure of retail stores, whereas after the shutdown, it saw a severe decline in revenue.

“Nonetheless, we reported an overall solid set of results by putting promptly into effect our business continuity plan, achieving material cost savings and enhancing liquidity,” Karas said.

“During this exceptional period, our focus and preparatory work related to online, started paying off; we delivered strong customer growth, while significantly improving our online product offering through the launch of virtual and casino games.”

Karas also pointed out that OPAP in April agreed a deal to acquire an additional stake in Stoiximan’s Greek and Cypriot business, with the aim of reaching an effective 84.49% holding and giving it a greater online presence.

In addition, he paid tribute to the group’s network, praising staff for adapting to new working conditions and claiming a 99% reactivation rate from the first day of reopening.

“I am confident that our agents’ and employees’ hard work, positive spirit and commitment will drive once more OPAP’s business forward,” Karas said.