Jumbo Interactive eyes further M&A to build on FY22 growth

| By Robert Fletcher
Lottery retailer Jumbo Interactive said it intends to pursue further M&A to build on growth during its 2022 financial year and drive the expansion of its business.
Affiliate giant Catena Media has expanded its strategic review, which will now cover its entire European online betting and casino business, and said it will begin the consultation process for redundancies in the UK and Malta.

Jumbo announced a series of acquisition deals during the 12 months to 30 June including Canada-based lottery management provider Stride Management, the $11.7m purchase of which completed in June following delays in the approval process.

The retailer in January also agreed to acquire UK external lottery manager and digital payments business StarVale Group via its wholly-owned entity Jumbo Interactive UK. However, a longer-than-expected regulatory approval process meant this deal will likely not complete until next year.

With M&A activity supplementing growth across a number of key financials in FY22, Jumbo’s founder and chief executive Mike Veverka said the business will look to pursue further opportunities in 2023 and beyond.

“The strength of our balance sheet, strong cash generation profile of our business, debt headroom and flexibility from our revised dividend policy enables us to continue to invest in the business, provides capacity for further M&A and organic growth, and delivers shareholder returns through dividends and a share buy-back,” Veverka said.

“We have a clear growth strategy and FY22 has simply been about execution. We are very pleased to have completed our acquisition of Stride in Canada and anticipate regulatory approval for StarVale in the UK by the end of Q1FY23. Together, these businesses will add approximately 1.6 million active players to our platforms. 

“The more active players we have on our platform, the more we can grow. We use our digital skills to continuously improve player experience, to engage players and keep them active – in turn, satisfying our lottery partners and minimising our contract risks.

“We see a substantial opportunity for Jumbo to grow in our priority markets of Australia, the UK and Canada.”

Looking at Jumbo’s results for its 2022 financial year and revenue was up by 25.1% year-on-year to AUS$104.3m (£61.5m/€72.9m/US$72.5m).

Retail lottery revenue was 26.7% higher at $91.1m, helped by a strong jackpot environment in Australia with 43 Powerball and OzLotto jackpots greater than or equal to $15.0m in FY22, compared to 38 in the previous year.

Software as a service (SaaS) revenue increased 31.9% to $42.7m, due to a 39.0% jump in the number of active players driven by a long-term agreement signed with Western Australia’s Lotterywest at the end of 2020. Managed services revenue jumped 46.6% to $4.8m, with the main contribution here coming from the Gatherwell UK lottery business.

Jumbo also noted that the segment revenue figures included $34.4m worth of intersegment revenue, which was eliminated from group revenue. In addition, total transaction value for the business, comprising the gross amount received from the sale of goods and services rendered in the period, increased by 35.5% to $659.9m.

Turning to costs and total operating spend for the year were 30.8% higher at $36.7m, while depreciation and amortisation expenses increased 6.1% to $8.7m and net interest costs hit $66,000.

However, such was the impact of revenue growth in FY22 that pre-tax profit increased by 15.8% year-on-year from $39.1m in 2021 to $45.2m. After accounting for tax payments, net profit for the year was $31.2m, up 15.6% on the previous year.

In addition, Jumbo reported a 14.3% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to $54.1m.

“We are pleased with the strong growth achieved in FY22 off the back of an improved jackpot cycle. FY22 was a pivotal year for Jumbo as we build the foundations to successfully execute our global growth strategy,” Veverka said. 

“Lottery retailing is exceptionally well positioned to benefit from the ongoing shift to digital and the new OzLotto game launched in May 2022, while the integration of Stride and StarVale will build scale in our managed services and SaaS segments globally.”

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