Sazka benefits from Covid-19 measures easing in Q3

Czech gaming giant Sazka Group benefitted from countries easing their novel coronavirus (Covid-19) restrictions in the third quarter of the year, which saw its land-based operations recover from the disruption caused by the pandemic.

This was accompanied by a continued strong performance from its digital operations, which maintained once land-based restrictions were eased.

This saw total stakes for the three months to 30 September grow 98.1% year-on-year to €2.61bn (£2.37bn/$3.18bn), aided by a full contribution from Casinos Austria, which was consolidated as a subsidiary from 26 June.

After player winnings, gross gaming revenue came to €768.9m, up 66.1%, thanks to Casinos Austria’s €303.0m contribution.

Sazka also saw Greek operator OPAP’s contribution recover from its Covid-19 hit second quarter, with declines in draw-based and instant lotteries offset by growth from sports betting and video lottery terminals.

Digital revenue, which had grown strongly earlier in the year amid national lockdowns, also remained above prior year levels.

“All of our businesses traded well in Q3 as lockdown measures were eased and online sales remained high,” Sazka chief executive Robert Chvatal said. "The swift return to normalised trading in the markets and channels that were more affected by restrictions in H1 demonstrates the resilient underlying demand for our products as well as the agility of our teams across the regions.

“We are particularly pleased to report that the strong momentum in online sales, including traditional products and digital-only games, has been maintained even as restrictions eased,” he continued. “Online is a major strategic focus for us and our investments and the changes in customer behaviour in the last several months will bring long term benefits.”

Gaming taxes, meanwhile, more than doubled to €313.1m, again as a result of Casinos Austria’s consolidation, leaving net gaming revenue of €455.9m, up 43.8%. The business recorded a further €50.4m in other revenue, from the sale of non-gaming products in its retail outlets, and €11.4m in other operating income, from sources such as deferred taxes.

Its share of profit from equity investments, namely its Italian lottery business, fell 30.1% to €23.5m, however, while other operating costs rose. The biggest jump was recorded for personnel expenses, which increased from €25.6m to €82.9m.

However, the rise in revenue meant that earnings before interest, tax, depreciation and amortisation (EBITDA) was 37.5% ahead of Q3 2019’s total, at €196.6m. Once €46.7m in depreciation and amortisation charges, plus €53.9m in restructuring costs related to an ongoing reshaping of Casinos Austria were factored in, operating profit was down 15.0% at €96.0m.

This was reduced further by €31.0m in net finance costs, leaving a pre-tax profit of €65.1m, down 31.9% year-on-year. After €16.6m in income taxes, net profit for the quarter came was 32.6% below prior year levels at €48.5m.

For the nine months to 30 September, amounts wagered were up 14.0% at €4.46bn, with gross gaming revenue marginally ahead at €1.42bn. After gaming taxes, however, net gaming revenue was down 6.1% at €884.6m.

After non-gaming revenue and other operating income, plus operating expenses and its share of profits from businesses in which it holds an equity interest, Sazka’s EBITDA for the period fell 15.4% to €363.4m.

Rising depreciation and amortisation charges, plus restructuring costs, then saw operating profit drop 42.9% to €194.2m. After net finance costs of €73.4m, pre-tax profit came to €120.8m, falling to €90.4m after income taxes.

While this was significantly lower than the €509.9m net profit posted for the nine months to 30 September 2019, the prior year figures included a €292.8m share from discontinued operations.

Looking ahead, the business’ fourth quarter performance is once again likely to be hit by Covid-19 restrictions. This saw Sazka’s land-based operations in Greece, Austria and Italy all restricted, though in each case their online offerings were not affected.

In its native Czech Republic, however, government restrictions had little effect on the sale of its products.

“In recent weeks, some Covid related restrictions have been reintroduced across our geographies, having some impact on our business,” Chvatal said. “With our resilient business and strong management team having coped well with the situation earlier in the year, we are well placed to manage the business through the current restrictions.

“Our diverse geographic exposure, game portfolio and sales channel mix with a strong and growing online are key advantages in this environment.

“Overall, I’m very pleased with Sazka Group’s strong performance in Q3 and so far in Q4 and the strategic progress made so far this year,” he added. “I am confident in our ability to manage any further challenges and emerge with an even more resilient business that is well positioned for growth.”