Veikkaus Revenue Drops in H1 2024 as Finnish Gambling Faces Overhaul

State-owned Finnish gambling monopoly Veikkaus has reported a significant decline in revenue and profit for the first half of 2024. The drop comes as Finland prepares for major changes in its gambling industry, signaling a challenging period ahead for Veikkaus.

During the first half of 2024, Veikkaus Group’s sales revenue fell by 6.8% compared to the same period in 2023, totaling €483.8 million. This contrasts with the 1% revenue growth reported in the first half of the previous year. The company’s gross gaming revenue (GGR) also took a substantial hit, declining by 21% year-on-year.

The company attributed these declines primarily to the impact of mandatory ID verification measures. Starting in spring 2023, customers have been required to their identity for ticket-based game sales, which Veikkaus claims led to a 21% drop in sales. Additionally, the introduction of an ID requirement for scratchcards this year resulted in a 44% year-on-year decline in revenue from those sales.

Veikkaus’ operating profit also saw a sharp decrease, dropping by 20.4% to €246.9 million. The group’s total profit fell by 19.1% to €252.3 million during the same period. According to Veikkaus, these reductions in profit were partly due to investments in the company’s future and the end of a temporary reduction in lottery tax, which returned to its previous rate of 12% after being temporarily lowered to 5%. As a result, Veikkaus paid €57.6 million in lottery tax to the state, an increase of €31.7 million compared to the same period in 2023.

Anticipating Industry Changes

The downturn in Veikkaus’ performance comes as Finland’s gambling industry faces significant changes. In June 2023, it was confirmed that Veikkaus’ current monopoly system would be dismantled by 2026 at the latest. The company will be divided into separate entities, all part of the same group, marking the end of its monopoly over the Finnish gambling market.

Despite the current challenges, Veikkaus’ chief financial officer, Regina Sippel, expressed optimism about the regulatory changes. “The overhaul of the gambling system is a great chance for Veikkaus, and we will continue to invest in business development and offering the best customer experience,” Sippel stated.

While the overall financial performance of Veikkaus has been disappointing, the company highlighted some positive developments. For example, Veikkaus’ B2B subsidiary, Fennica Gaming, has shown promising growth. According to Veikkaus managing director Olli Sarekoski, Fennica Gaming’s turnover has “developed positively,” although specific figures were not disclosed. Despite its relatively small contribution, the subsidiary is moving in the right direction, offering some cause for optimism.

Additionally, Veikkaus reported an increase in the number of ed customers, which rose by 15,000 during the first half of the year. By the end of June, the total number of ed customers had exceeded 2.5 million.

Concerns Over Industry Liberalization

As Finland moves towards liberalizing its gambling market, concerns have been raised about the potential impact on the industry. Finnish online gambling trade body CEO Mika Kuismanen expressed skepticism about the government’s plans to heavily restrict marketing, warning that such measures could harm the channelization of gambling towards legal operators.

In an opinion piece for Uusi Suomi, Kuismanen criticized the draft regulations, which include bans on bonusing, marketing, and influencer marketing. “The new gambling law… was supposed to open the market and welcome competition,”Kuismanen wrote.

“Now the law threatens to go down the wrong path right from the start. Marketing is unjustifiably limited, sponsorship is stifled, while bonuses and offers are prohibited. If it doesn’t change course quickly, the law reform will run into a wall and gambling on the grey market will continue.”

Local consultant Jari Vähänen also voiced concerns about the future of Finland’s gambling industry. He warned that even with the introduction of commercial operators, Veikkaus could still retain a competitive advantage over the licensed market, which is expected to come into effect in 2027. Vähänen suggested that the Finnish government should consider selling its ownership of the Veikkaus monopoly to avoid potential conflicts of interest.

“The Finnish state wants to maintain a dual role, taking care of the legislation and supervision of gambling activities and, at the same time, owning the company involved in gambling activities. There is a high risk of conflict of interest in such a model,” Vähänen argued.

As Finland’s gambling industry braces for these sweeping changes, the challenges facing Veikkaus and other market players remain significant. The outcome of these regulatory reforms will likely shape the future of gambling in Finland for years to come.

Source:

”Veikkaus profit plummets 19.1% ahead of Finnish gambling overhaul”, igamingbusiness.com, September 02, 2024.