Veikkaus profit plummets 19.1% ahead of gambling monopoly end

State-owned Finnish gambling monopoly Veikkaus has reported a notable decline in both revenue and profit during the first half of 2024, coinciding with major impending changes in the nation’s gambling landscape.

While the company recorded a modest 1% increase in year-on-year revenue during the same period in 2023, Veikkaus Group’s sales revenue plummeted by 6.8% to €483.8 million (£407.6 million/$535.4 million) in H1 2024. Gross gaming revenue (GGR) experienced an even steeper decline, decreasing by 21% from January to June 2024.

The primary catalyst for this downturn was the implementation of mandatory ID verification for ticket-based game sales, introduced in Spring 2023. Veikkaus attributed the substantial 21% decline in sales to this requirement. Moreover, the recent introduction of similar ID verification for scratchcards has resulted in a staggering 44% year-on-year revenue drop in this segment.

Operating profit has also taken a hit, dropping by 20.4% to €246.9 million, with total group profit decreasing 19.1% to €252.3 million. Veikkaus pointed out that these reduced profits were also influenced by proactive investments into the company’s future and the resumption of the lottery tax to its full rate of 12%, up from a temporary reduction of 5%. The group paid €57.6 million in lottery tax to the state, reflecting a €31.7 million increase compared to the same period the previous year.

This decline in performance is unfolding against a backdrop of substantial revisions to Finland’s gambling regulations.

In June 2023, it was confirmed that Veikkaus’ current monopoly structure is set to conclude “no later than 2026,” with plans to separate into distinct operational entities within the same group.

Regina Sippel, Veikkaus’ Chief Financial Officer, remains optimistic about these regulatory transitions, asserting, “The upcoming overhaul of the gambling system presents an exceptional opportunity for Veikkaus, and we are committed to continuing our investments in business development to enhance the customer experience.”

Is B2B Performance a Ray of Hope for Veikkaus?

Veikkaus’ parent company, Veikkaus Oy, also reported a decline, with its GGR dropping by 7% to €482.8 million and its operating profit decreasing by 20.1% to €250.2 million. Overall, the total financial profit for H1 2024 was €255.6 million, marking an 18.8% reduction year-on-year. Contributions to the state totaled €313.2 million, down 8.1% from the previous year.

Despite the downturn, Veikkaus highlighted positive developments in certain areas. The turnover of its B2B subsidiary, Fennica Gaming, has shown promising trends, as noted by Olli Sarekoski, managing director of Veikkaus. Though specific figures were not disclosed, the company expressed confidence in the continued upward trajectory of Fennica Gaming.

Moreover, the total number of registered customers increased by 15,000 in the first half of 2024, surpassing 2.5 million at the end of June, suggesting a growing player base despite overall revenue challenges.

Impending Challenges for Finland’s Gambling Landscape?

With significant regulatory changes on the horizon, there are growing concerns regarding the potential impact of market liberalization on channelization rates towards legal operators. Mika Kuismanen, CEO of Finland’s online gambling trade body, voiced apprehensions in an opinion article published in Uusi Suomi, arguing that the government’s strict marketing restrictions “do not cultivate a sustainable gambling environment.”

The proposed draft regulations encompass a ban on bonuses, affiliate marketing, and influencer promotion. “The new gambling law should facilitate market entry and encourage healthy competition,” Kuismanen stated. “However, the direction it appears to be taking could impede progress and perpetuate grey market activities.”

Furthermore, local consultant Jari Vähänen cautioned that even with the introduction of commercial operators slated for 2027, Veikkaus may maintain a competitive edge over the licensed market. He suggested that the Finnish government should consider divesting its ownership of Veikkaus, stating, “The dual role of the state as both legislator and gambling operator could potentially lead to conflicts of interest.”

In summary, the evolving dynamics within the Finnish gambling sector present both challenges and opportunities. Stakeholders must navigate these changes strategically to harness potential benefits while addressing emerging concerns.