Croatian sell-off boosts Sazka’s bottom line in 2019
Sazka Group has reported a 6.0% year-on-year rise in gross gaming revenue for 2019, with all subsidiaries growing during the year, while the sale of its Croatian subsidiary has more than doubled net profit for the period.
Amounts wagered across all brands and markets rose 5.0% to €5.46bn (£4.76bn/$5.94bn), which after winnings paid out to customers left revenue of €1.91bn.
The vast majority of this total came from lotteries, which accounted for €968.4m of GGR, up marginally from 2018, with an additional €211.4m coming from instant win games. Video lottery terminal revenue grew 42.7% to €297.7m, and digital gaming revenue soared from €8.2m in 2018 to €25.7m. Sports betting revenue, on the other hand, was down 2.2% at €402.9m.
After lottery taxes of €595.0m, up 5.2%, net gaming revenue for 2019 was up 6.3% at €1.31bn.
The bulk of net revenue came from Greece’s OPAP, in which Sazka increased its stake to 40.0% in November 2019, with the business reporting a 4.4% increase in 2019, to €1.09bn.
Casinos Austria followed, with revenue up 2.0% to €719m. Sazka also increased its stake in the business in 2019, striking a deal to acquire Novomatic’s 17.9% stake in December 2019. Following the end of the reporting period, in March this year, it then agreed a deal to jointly control the business, in partnerships Austrian state investments body Österreichische Beteiligungs (ÖBAG).
Italian lottery business Lottoitalia followed, with revenue rising 1.7% to €489m, and Sazka – the Czech state lottery operator after which the group is named – saw net gaming revenue grow 13.5% to €219m.
“2019 was another very strong year for the group,” Sazka chief executive Robert Chvatal commented. “Apart from the outstanding organic growth and increased profitability across all our markets, we have taken a number of important strategic steps.
“In particular, we increased our ownership of OPAP through the voluntary tender offer and have taken significant steps towards a majority shareholding position in [Casinos Austria] by reaching an agreement to acquire a stake of up to 17.2% from Novomatic (subject to various conditions precedent).”
Sazka also sold its stake in Croatian operator SuperSport in May 2019, for a total consideration of €302.6m, while the investment body behind the business, KKCG, also bought out Emma Capital’s stake in the business to become its sole owner.
The business made a further €147.3m from the sale of goods and services and recorded €12.5m in other operating income.
Turning to costs, Sazka paid out €419.8m, up 2.0%, with spending on materials, consumables and services rising to €330.2m. Marketing costs also rose marginally to €92.4m, with personnel expenses growing 8.3% to €106.1m, and other operating expenses coming in at €50.6m.
Sazka also saw its share of profit from investments climb to €120.4m, resulting in earnings before interest, tax, depreciation and amortisation (EBITDA) rising 16.6% to €592.3m. After depreciation and amortisation charges of €121.6m (up 2.9%), operating profit was up 20.8% year-on-year to €470.6m.
Finance costs rose 47.7% to €113.0m, leaving a pre-tax profit of €357.6m, and after income tax of €46.3m, net profit from continuing operations amounted to €311.4m (up 35.3%).
However, Sazka’s bottom line was significantly boosted by gains from the disposals of the Croatian subsidiary, which added €277.3m to the group’s net profit. A further €15.6m was gained in profit from this discontinued operation, resulting in profit after tax more than doubling to €604.2m.