Lottery group Allwyn Entertainment said its operations are overriding weakening general consumer sentiment as it posted its Q2 trading figures.
The group, which has been selected as the UK’s new National Lottery operator from 2024, said the impact of macroeconomic factors such as inflation, cost of living concerns, the war in Ukraine and covid-19 on demand for its products has been limited thus far in 2022.
Allwyn – formerly Sazka Entertainment – said trading since the start of the year and since the end of Q2 has been broadly in line with its expectations at the beginning of 2022.
While macroeconomic and political developments have had some impact on consumer sentiment, it said any negative influence has been kept in check because of its products’ low price point and low average spend per customer.
Allwyn said all its businesses are currently operating without material impact from covid-19-related restrictions for the first time since the beginning of the pandemic, and it has not been materially impacted by the war in Ukraine.
Allwyn said current inflation and rising energy prices are having a limited impact on its costs, with its largest cost categories directly linked to revenue, such as gaming taxes and agents’ commissions, and energy accounting for a small proportion of its outgoings.
“Current trends are in line with the resilience of our revenues during previous periods of weaker general consumer sentiment – for example the early period of the Covid-19 epidemic, the Greek crisis and the global financial crisis – when demand for our products remained resilient, especially in comparison with other consumer sectors,” the group said in a statement.
“Similar to other periods when general consumer sentiment has been subject to shocks, our revenues were impacted to a limited extent in the immediate aftermath of the Russian invasion of Ukraine and the rapid increase in energy prices. However, once the period of the initial shock had passed and consumers’ behaviour had normalised, sales of most of our products in most of our geographies demonstrated a strong recovery.”
Gross gaming revenue (GGR) of €901.7m was up 23% on Q2 2021, while Adjusted EBITDA of €277.1m was up 17% year-on-year.
Allwyn said the GGR growth reflected continuing organic growth of its businesses, primarily driven by the online channel, as well as the impact of the COVID 19-related restrictions on the comparative period.
It achieved double-digit growth in all markets except Italy, with Austrian GGR up by 43% thanks to a strong performance in numerical lotteries, iGaming and casinos.
Robert Chvatal, Allwyn’s chief executive, said: “I am particularly pleased that our focus on online sales continues to pay off, with the online channel contributing a record 44% of GGR in the Czech Republic. We see the shift to online as an unprecedented opportunity to grow revenues through upselling and cross selling, at the same time as improving our profitability and as an enabler of safer gaming.
“The strong performance of the business during an unprecedented shock to consumer sentiment has once again demonstrated the resilience of demand for our products and the resilience of our profitability and cashflow generation.”
In July, the Court of Appeal granted permission to Camelot Group and International Game Technology (IGT) to appeal a decision to award the fourth UK National Lottery licence to Allwyn Entertainment.
The Gambling Commission in March named Allwyn as its preferred applicant for the licence, a decision that would bring to an end Camelot’s 28-year tenure as the UK’s lottery operator. Camelot, which has run the lottery since its inception in 1994, was named reserve applicant.
In April, Camelot launched a High Court challenge against the decision, regarding whether the Commission lawfully awarded the licence to Allwyn. This led to the formal issuing of the lottery licence to Allwyn being suspended.
The High Court lifted the suspension in June, though the legal challenge continued, with Camelot and IGT, which also launched a legal challenge against the decision, going to the Court of Appeal.
Earlier this month, Allwyn’s $9.3bn deal to publicly list on the New York Stock Exchange (NYSE) with special purpose acquisition company (SPAC) Cohn Robbins Holdings Corp (CRHC) inched closer to completion with an announcement from both companies on recent procedural progress. On 7 September, CRHC shareholders will vote on whether or not to approve the business combination.
In a release, CRHC stated why it believes its shareholders should vote to approve the combination.
“CRHC believes the global lottery industry has attractive characteristics, including high consumer participation across wide demographics, resiliency through market cycles and upside potential from increasing online penetration,” it stated.
“Allwyn is a leader in the $300 billion global lottery industry, operating lotteries through both retail and online channels in multiple European countries, including Austria, the Czech Republic, Greece, Cyprus and Italy.”
