Operator will take control of the licence from February 2024 with UK arm posting YoY dips in revenue and adjusted EBITDA for Q3 2023
Allwyn International expects the early stages of its UK National Lottery licence to have a “negative impact on margins” but foresees growth in the future.
The firm released its Q3 results on Tuesday, with total revenue up 98% year on year (YoY), with upticks in Austria and the Czech Republic of 2% and 6%, respectively.
While YoY total revenue increased, revenue and adjusted EBITDA was down in Greece and Cyprus by 4%, and in the UK, Allwyn saw a bigger decrease in total revenue of 12% and adjusted EBITDA by 19%.
When disclosing the financial performance of the UK arm, Allwyn said the dip was “largely due to the weaker performance of numerical lotteries”, plus a record rollover in Q3 2022.
The operator acquired Camelot UK in Q1 2023 and was awarded the UK National Lottery licence in September 2022.
The group will take over The National Lottery in February, marking the first time since its inception in 1994 that Camelot will not be running operations.
Speaking on the post-results call, Kenneth Morton, Allwyn International CFO, said the firm is expecting the rest of its international businesses to continue posting positive figures but the UK National Lottery will have a negative financial margin in the short term.
A combination of costs relating to the transition to the new licence and bottom-line pressures were cited as core reasons for the dip.
Morton said: “We don’t provide guidance on aggregate EBITDA margins but I can comment on the individual businesses.
“I would expect that you would see the margin of each of our underlying businesses broadly aligned with what you’ve seen in the first nine months of this year, with the exception of the UK, where we would expect to see some reduction in margin.
“But I think it’s worth highlighting that at the start of the new licence regime in the UK, after 1 February will have a negative impact on margins.
“We do expect that over a period of several years we will get back to decent levels of profitability broadly in line with what we’ve seen historically, but our bid for the UK was premised on strong top-line growth.
“The implication of that is some compression and margins in the short to medium term,” the CFO added.
While Allwyn gears up for the February transition, Northern & Shell boss Richard Desmond has taken a legal challenge to the Gambling Commission over the bid process for the fourth lottery licence.
Desmond has alleged the regulator’s process was littered with “numerous manifest errors”.