VLT performance drives revenue growth for OPAP in Q3

Soaring revenue from its video lottery terminal (VLT) division saw Greek gaming operator OPAP report a 3.2% year-on-year increase in gross gaming revenue for the third quarter of 2018, despite declines across all other product verticals.

The operator saw amounts wagered for the quarter ended September 30 fall 3.9% to €1.0bn (£883.8m/$1.13bn), with gross gaming revenue for the period up at €368.9m. This was largely due to VLT revenue growing 212.2% from Q3 2017, to €50.8m. As a result of this growth it now accounts for 13.8% of total group revenue.

This helped offset the struggles of OPAP’s other product divisions. Lotteries still account for 51.4% of group revenue, but saw revenue fall 2.2% year-on-year to €189.6m. This was blamed on a decline Kino revenue, though the operator noted this was partially offset by the performance of the Joker game.

Betting also struggled, with revenue down 13.2% at €97.5m, as a result of customer-friendly sporting results, especially in the latter stages of the FIFA World Cup. Instant win game revenue fell 11.0% to €31.0m, which after the VLT growth is now the smallest product vertical, contributing 8.4% of total income.

The declines in lottery and instant win games led to a slight drop in commission paid out to OPAP sales agents during the quarter, which fell 0.1% to €90.3m. However with other commission rising 15.0% to  €11.3m, total gaming revenue-related expenses grew to €101.6m. Payroll expenses, including staff-related costs, were up 6.1% from the prior year at €18.5m.

Marketing expenses, however, fell 10.9% year-on-year to €10.4m, largely as a result of a 24.6% decline in investment in corporate social responsibility (CSR) and sponsorship, which was down at €3.4m. Advertising spend also fell, though at a slower rate, to €7.0m.

Other operating expenses, including IT-related costs and exceptional items, were up 44.7% to €37.0m.

As a result earnings before interest, tax, depreciation and amortisation fell 6.1% to €87.2m for the quarter, with operating profit declining to €62.7m. Once finance-related costs and taxes for the quarter were stripped out, including income taxes of €17.2m, OPAP saw its net profit for Q3 2018 decline 10.1% year-on-year to €39.1m.

For the nine months to September 30, 2018, amounts wagered fell 1.8% to €3.2bn, with gross gaming revenue rising 5.8% to €1.1bn. Operating expenses rose 5.5% to €213.0m, with EBITDA up at €244.6m.

The operator saw its net profit for the first three quarters of the year climb 12.8% to €105.2m.

“Our Q3 performance confirms OPAP’s steady progress in the delivery of our 2020 Vision,” OPAP chief executive Damian Cope commented. “Despite some unfavourable sports results, including the World Cup Final match itself, and the ongoing macroeconomic challenges, the OPAP team delivered strong like-for-like EBITDA growth, plus year on year revenue growth for the fifth quarter in a row.

“Our VLTs operations once again increased their contribution while we continue to maintain a close control on costs across the company.”

Looking at the early activity in the fourth quarter of the year, Cope said OPAP had enhanced its retail offering with the launch of new lottery and betting products, which had been well received by customers.

The operator’s new online betting platform is also live, following OPAP’s acquisition of Stoiximan Group in September.

“As we approach the seasonally busiest period of the year we remain confident in meeting both our own expectations and the long-term ambition of establishing OPAP as a world class gaming entertainment company,” Cope added.