Veikkaus plots digital revamp as growth stalls in 2018

Finnish gaming monopoly operator Veikkaus has pledged to develop its digital offering over the next three years to ensure it doesn’t see profits cannibalised by offshore competition, after announcing slight declines in turnover and profit for 2018.

Turnover for the year ended December 31, 2018 fell 2.4% year-on-year to €3.15bn. The largest share of turnover was generated by the Lucky Games segment, comprising draw based games, which accounted for €1.19bn, or 37.8% of the total.

The core Lotto game, the most popular in Finland, endured a difficult year, with turnover falling 1.3% to €340.4m though this was offset by a strong performance from Eurojackpot, which reported a 40.6% rise in turnover to €300.8m.

Slot machines and instant games, comprising online and land-slots, bingo and instant win games, saw turnover decline 5.9% from 2017 to €1.16bn. The strong performance of online slots, which offset a decline in land-based machine turnover to drive a 2.2% increase in slot turnover to €840.3m.

Finally skill games, comprising real and virtual sports betting, toto and pools, saw turnover fall 4.8% to €799.4m. Veikkaus blamed this on spending and loss limits introduced during the year, noting that across all products, this led to a €21m decline in online turnover.

Despite the impact of these social responsibility controls Veikkaus said there was clear signs that customers were shifting away from the land-based offering to digital. Land-based still accounted for the majority (57.9%) of turnover, with digital making a 42.1% contribution. However, Veikkaus noted that active weekly digital customer numbers grew 17% year-on-year to 613,216 in 2018, with around 1.4m registered players by the end of the year.

“Gaming is shifting from the points of sale towards the digital channel, where Veikkaus also faces competition from foreign operators,” Veikkaus president and chief executive Olli Sarekoski (pictured) explained. “Veikkaus must develop its operations to succeed in international competition.

“Succeeding in the competition and ensuring our ability to channel gaming also provide the basis for the exclusive right and its continuation,” he explained. “We want to be able to provide games responsibly even in the future, minimizing game-related harm and channelling gaming revenue to the benefit of Finnish people.”

During the year Veikkaus paid out €1.4bn in prizes, as well as taxes of €211.0m to the Finnish state. It reduced 2018 operating expenses by 3.4% to €221.6m, as a result of lower retail commission payments, a slight reduction in product marketing and a drop in expenses related to draw-based games. Employee expenses also fell, down 7.3% to €98.3m.

Once other operating expenses, income tax and finance costs were stripped out, Veikkaus posted an profit of €1.01bn, down 0.7% year-on-year. This will be divided between the Finnish Ministry of Education and Culture (€537.5m), the Ministry of Social Affairs and Health (€436.1m), with the final €40.6m going to the Ministry of Agriculture and Forestry.

“In spite of the challenges in the development of [turnover], we were able to generate the projected profit to our beneficiaries in 2018, by operating in a cost-efficient way,” Sarekoski said.

“By developing further our operations, we can continue to guarantee the profit to our beneficiaries even in the future.”

Veikkaus has targeted a profit of €1.09bn, which will be divided between the beneficiary ministries.

To achieve this, Sarekoski said, would see the company’s strategy from 2019 to 2022 focus on developing its digital offering, ramping up the number of games released – including new titles from NetEnt and Yggdrasil – and improving the user interface.

Work to improve the land-based offering will continue, with Veikkaus’ point of sale design to be overhauled, its Pelaamo-branded arcades redeveloped and building on a new casino in Tampere underway. The operator will cease operating table games in restaurants and the Pelaamo arcade estate, which it said would lead to around 400 mostly part-time employees being laid off.