Jumbo reports record FY21 results, agrees to acquire Stride Management

| By Robert Fletcher
Jumbo Interactive reported a year-on-year increase in revenue and net profit in what it said was a record financial year for the business, while the lottery retailer also agreed a deal to acquire Canadian lottery management provider Stride Management.

Revenue for the 12 months to 30 June totalled AUS$83.3m (£44.0m/€51.4m/US$60.4m), up 17.1% from $71.2m in the previous financial year.

Breaking down this performance, lottery retailing was the primary source of income for the business, with revenue rising 9.6% to $75.8m. Jumbo put this down to strong support at lower jackpot level but noted that growth was slowed from lower activity of large jackpots and the transfer of Western Australia customers to Lotterywest from December 2020.

Its Software-as-a-service (SaaS) segment revenue rocketed 308.3% year-on-year to $4.9m, net of intersegment revenue, due to the scaling-up of the current clients since becoming fully operational in the financial year period.

Managed services revenue also increased 120.0% to $3.3m as Jumbo felt the benefit of a full, 12-month contribution from the Gatherwell UK lottery business, compared to a seven-month period in the previous year.

Jumbo also noted that total transaction value for the business, comprising the gross amount received from the sale of goods and services rendered in the half, increased by 36.7% from $356.1m to $487.0m.

Looking at expenses, the cost of sales climbed by 56.6% to $8.3m, leaving an operating profit of $75.0m, up 13.0% year-on-year.

Administrative costs were 28.4% higher at $30.3m and by far Jumbo’s main outgoing, while marketing costs were only slightly up to $5.7m. Finance costs were down 9.0% to $202,000 and fair value movement on finical liabilities was level at $177,000.

This meant pre-tax profit for the year reached $39.1m, up 4.6% on last year, while earnings before interest, tax, depreciation and amortisation (EBITDA) also increased 10.9% year-on-year to $47.3m.

Jumbo paid $12.1m in tax during the 12-month and after also accounting for $249,000 in additional profit from foreign currency translation, this left a comprehensive net profit of $27.2m, up 7.9% on 2020.

 “FY21 reflects another record result for Jumbo; importantly, while our lottery retailing segment is trading well without the benefit of jackpot growth, our SaaS and managed services segments have made a meaningful contribution to overall performance,” Jumbo founder and chief executive Mike Veverka said.

“The digital lottery industry shows no signs of slowing down so the Jumbo team has wasted no time building our two new segments – SaaS and managed services – in Australia and the UK. 

“Together with our established lottery retailing division in Australia, these three segments make Jumbo a more complete digital lottery business ready to take on the growth runway ahead.”

Meanwhile, Jumbo has entered into an agreement to acquire 100% of Canadian lottery management provider Stride Management for a cash consideration of $11.7m.

Jumbo said the acquisition marks another key strategic step in its international expansion strategy, following the purchase of Gatherwell in November 2019.

Calgary-based Stride provides services to over 750,000 active lottery players in the Alberta and Saskatchewan provinces, with the deal to enable Jumbo to move into the Canadian charity lottery market for the first time.

Terms of the deal state that 70% of the purchase price will be paid in cash on completion, while the remaining 30% will be payable in cash in two instalments in FY22 and FY23, subject to earnings hurdles being met. 

Stride’s president Dean Faithfull and three key senior managers will remain with Stride post completion. Subject to approval from the Alberta and Saskatchewan Gaming Regulator’s, the deal is expected to go through before the end of 2021.

“The acquisition will significantly add scale to our managed services business and gives us a strategic foothold to grow in the Canadian charity lotteries market,” Veverka said said.

“Stride has a proven track record working with charitable organisations for over 20 years and we look forward to supporting the not-for-profit sector in Canada in meeting the challenges from Covid-19 and digitising their fundraising programs utilising Jumbo’s world leading software and services.”

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