Australian online lottery retailer Jumbo Interactive has reported an 8.7% year-on-year increase in revenue for its 2020 financial year, and is now targeting growth in markets such as the UK, US and Canada as it aims to increase sales to AU$1bn.Total sales for the 12 months to 30 June amounted to AU$348.6m (£190.6m/€212.3m/$251.0m), with revenue rising from $65.2m to $71.2m. Jumbo benefitted from Covid-19 shuttering land-based lottery retailers in the latter part of its year, which chief executive Mike Veverka said helped drive players online.
Its core Australia Lotteries saw revenue increase 6.9% year-on-year to $68.7m, aided by a $260,000 contribution from its burgeoning software-as-a-service business, as well as large jackpots driving customer activity.
Five charity lotteries – Mater Prize Home Lottery, Endeavour Foundation, Deaf Services, Multiple Sclerosis QLD and Classics for a Cause – are powered by Jumbo’s software, representing $140m in annual ticket sales. These are connected to Jumbo’s core OzLotteries.com portal, alongside lotteries run by the Royal Society for the Prevention of Cruelty to Animals, Surf Life Saving Lotteries and Act for Kids.
The retailer also noted the impact of UK-based Gatherwell, a business that provides lottery management services to local authorities that was acquired in a £5.0m deal in November last year. Gatherwell contributed $1.5m in revenue for the seven months it was part of the Jumbo business.
In terms of spending for the year, costs of sales were up 5.1% to $5.3m, while administrative expenses also increased 46.5% to $23.6m. However, Jumbo was able to reduce marketing costs by 19.9% to $5.6m, while occupancy expenses were cut by 86.0% to $104,000 for the year.
After taking into account $222,000 in finance costs and $176,000 in fair value movement on financial liabilities, this left Jumbo with a $37.4m profit before tax, down slightly from $38.2m at the end of its 2019 financial year.
Jumbo paid $11.5m in tax during the year, and after also including a $676,000 negative impact from foreign currency translation, this meant comprehensive profit for the year amounted to $25.2m, down 4.6% from $26.4m in 2019.
However, in terms of underlying earnings before interest, tax, depreciation and amortisation, this increased 7.7% to $43.2m.
Analysing the results, chairman David Barwick spoke positively about Jumbo’s performance during the 12-month period: “The online lottery industry has experienced further growth and this is expected to continue, especially as we broaden the charity lottery tickets we are now selling through our Powered by Jumbo software, which we feel will not only assist our profitability but also the deserving charities we are focusing on.”
“We have often been asked if the Covid-19 pandemic has had an effect on our operation. With the experience of our major shareholder and CEO Mike Veverka and his very skilled staff, we have been able to continue to work both within the office and from the staffs‘ respective homes.
“This was a platform put in place many years ago in the event of such a situation where working from the office was not an option.”
Veverka was also upbeat about the performance, saying that with online sales of lottery tickets accounting for 28% of Australian sales, the industry “clearly has a lot of growth ahead”.
“Lotteries are perfect for the internet and customers enjoy a top quality experience whether they play on OzLottries.com or another lottery using the Jumbo platform. Continual innovation is driving the customer experience even higher and is ensuring lotteries continue to remain popular into the future.”
Veverka also highlighted Jumbo signing a long-term extension to its reseller agreement with Australian lotteries and gaming operator Tabcorp, saying this will help to support its growth plans moving forward.
“The recent 10-year agreement with Tabcorp is an important milestone as it gives Jumbo certainty and the ability to plan long term,” he said. “The next 10 years will be exciting as the internet share of ticket sales race up as players, young and old, enjoy the experience of playing online
“From humble beginnings with a single computer in 1995, Jumbo has navigated many challenges and is ready for the growth that lies ahead. Our staff and partners over the years deserve enormous credit for this growth due to their efforts and trust in the vision to grow through technology.”
Alongside the Gatherwell deal in the UK, Jumbo is actively seeking opportunities in other markets as part of its ongoing international expansion plan. This included the US, where Jumbo said the government lottery sector “is by far the most lucrative” to the business.
Jumbo’s international lottery advisor Richard Bateson said that the retailer has identified opportunities for its iLottery and iRetailer solutions in the US, as more states move lotteries online.
“The iLottery proposition provides lotteries with an integrated digital lottery channel that is more efficient and effective than its industry competitors,” Bateson said. “The iRetailer proposition provides lotteries with a standalone digital channel that is self-sufficient and does not require operating cost or marketing budget to be diverted from the lottery’s main operations.”
Canada’s charitable lottery market was another potential opportunity, Bateson continued, where he said Jumbo would be able to partner or acquire to gain a meaningful presence and market share.
“Once there is an established foothold in Canada, management believes the model can be exported to other parts of the North American region, using the expertise of the local market in adjacent markets,” he explained.
“The international ambition is to drive sustainable businesses in the UK, the US and Canada that will be used as a beachhead in each region to grow into other markets and sectors.”
