Camelot Group Interim Results

De La Rue PLC 23 November 1999 CAMELOT GROUP PLC INTERIM RESULTS New game innovation keeps Camelot on track to hit increased target of £10 billion for the Good Causes Key Points * Camelot on plan to meet increased target of £10 billion, £1 billion more than originally forecast, for Good Causes by September 2001 * Half-year sales impacted by difficult and changing trading conditions. Slightly larger fall to Good Causes (2.2%), compared to the sales decline, because of the licence structure * Prospects for the full year are promising with the successful introduction of new on-line game, Thunderball, and recent launch of Big Draw 2000 to celebrate the Millennium * Profits impacted by increased operating costs due primarily to the increased marketing spend supporting new games and the core brands * Landmarks reached in the period include £7 billion raised for Good Causes, almost £3 billion in Lottery Duty passed to HM Treasury, and 800 millionaires created. Separately, Camelot staff have now raised £1.5 million for charities of their choice. * Independent research confirmed that Camelot remained the world's largest and most efficient lottery operator for the fourth consecutive year Camelot Group plc - Unaudited results for the six months ended 11th September 1999 24 weeks 24 weeks ended ended Change £m 11 September 12 September 1999 1998 Total Sales 2,259.2 2,425.0 -6.8% Good Causes 633.5 696.3 -9.0% Prizes 1,127.4 1,201.5 -6.2% Government 286.0 309.0 -7.4% (Lottery duty, tax and VAT) Retailers' 114.7 123.0 -6.7% Commission Profit 20.2 34.0 -40.6% Before Tax Profit After 13.9 23.4 -40.5% Tax Sir George Russell, Chairman, said: 'This was a period of exciting game innovation, with the launch of Thunderball and Big Draw 2000, and extensive marketing activity which has meant that we are well on course to meet our increased target of £10 billion for the Good Causes over our licence period. This is £1 billion more than promised. As forecast, difficult and changing trading conditions and the lottery's natural lifecycle did impact on lottery sales but, as a result of new game activity, prospects for the full year are promising. 'Weekly on-line sales have been boosted by the introduction of Thunderball, on 7th June, which has achieved average weekly sales of £5 million during the fourteen weeks to 11th September. A major marketing campaign around Instants has stabilised weekly sales and extensive new game development work led to the successful launch of Big Draw 2000 at the beginning of November. 'Key landmarks passed in the period include £7 billion raised for Good Causes, almost £3 billion in Lottery Duty passed to the Treasury and 800 millionaires created. In July, independent research by the international lottery expert Terri La Fleur confirmed that Camelot remained the world's most efficient lottery for the fourth consecutive year - no other lottery operator in the world annually returns more to Good Causes and government, both in real terms and as a percentage of sales. 'We continue to focus much effort on developing The National Lottery in a responsible way. This includes carefully pacing the launch of new games and developing programmes to play an important part in combating excessive gaming, where it exists. 'Camelot is playing a key part in the millennium celebrations and, as part of a £6 million sponsorship programme, is providing its expertise and technology as one of the distributors of tickets for the Dome. Camelot is also sponsoring the Dome's Shared Ground zone and the internet-based Citizens Connection project as part of the National Programme. 'We remain confident that our target of over £10 billion for Good Causes will be achieved through the continued success of our core on-line game, complemented by Thunderball, Instants and Big Draw 2000.' Chairman's Statement -------------------- Overview -------- In the first half of this year, The National Lottery experienced a period of exciting game innovation and extensive investment in brand marketing. As a result Camelot remains on course to meet our increased target of £10 billion for the Good Causes over our licence period. As forecast, difficult and changing trading conditions and the lottery's natural lifecycle did impact on lottery sales. For the fourth year running, Camelot has achieved the position of the world's largest and most efficient lottery operator, in the annual survey by independent lottery expert Terri La Fleur. On a global comparison, Camelot provides the largest annual return to both Good Causes and Government as a percentage of sales. It also provides the largest absolute return. For the 24 weeks ended 11th September 1999, total sales for Camelot Group were £2.2 billion, down 6.8%. On-line sales fell by 5.1% to £2.0 billion. Sales for Thunderball, the new on-line game, averaged £5.1 million per week. Instants showed a greater fall than the much larger on-line game, with sales 18% down at £267 million. Even so, Instants remain the country's most popular impulse purchase, outselling products such as Coca-Cola and Walkers Crisps. Additional investment in advertising for Instants, which began in March, has since stabilised sales at an average of around £11 million per week. The percentage of total sales paid out in prizes rose slightly from 49.6% to 49.9%. The fall in total sales dictated that, in absolute terms, prizes paid fell from £1,201.5 million to £1,127.4 million. The National Lottery Distribution Fund received cash payments of £743 million, of which £624 million related to ticket sales, £88 million came from the prize fund shortfall and £31m was in respect of unclaimed prizes. This compared to total NLDF contributions of £835 million in the same period last year. We continue to work closely with our retailers, the majority of which are independent businesses. Retailer commission for the first half fell, in line with sales, by 6.7% to £114.7 million. On-line retailers receive an average of £7,000 commission each year. Our operating costs increased because of greater investment in marketing and game innovation in the first half of the year, such as the launch of Thunderball in June. Our shareholders received a total dividend of £10 million. Profit after tax has decreased from 0.96p to 0.62p in the pound for the current period. Keeping The National Lottery popular ------------------------------------ Camelot's focus is to ensure the continued success of the core games through maintaining the popularity of The National Lottery brand. In the first half of the year we launched Thunderball, focused on Instants sales and extended the new 'Maybe, Just Maybe' advertising strapline to all products in our games portfolio. We have maintained interest in The National Lottery for over five years, making it the biggest consumer brand. Around 65% of adults - approximately 30 million people - still play regularly after five years. Instants remain the UK's top impulse buy. Our cost increases have been driven by the increased marketing spend with the launch of Thunderball. We expect the benefit to be seen in the second half of this year, when Thunderball will have been operating for a full period. This game, which has run for 14 weeks of the first period, has been well received with weekly on-line sales averaging around £5 million. To celebrate the Millennium we will also be offering a special game, Big Draw 2000. Two draws will be held, one on New Year's Eve with an estimated jackpot of £10 million and one early on New Year's Day, in which it is anticipated that 25 millionaires could be created. A book is on sale in conjunction with this game, to help players select their favourite years from the Millennium. Additionally, to further promote the game we shall be hosting pub quizzes next month throughout the UK, in conjunction with Whitbread. Operating The National Lottery responsibly ------------------------------------------ Camelot strives to ensure that it maximises the funds going to Good Causes, whilst maintaining its social responsibility. As always, we are working to protect participants from excessive play and to prevent underage gaming, both through our own initiatives and by working with leading organisations such as GamCare. We have continued with our own 'Operation Child' programme, which aims to reduce under-age purchase of lottery tickets, by ensuring increased vigilance and compliance at the point of sale. A total of 5,000 visits will be carried out each fiscal year to check whether retailers are implementing the necessary safeguards. Those who fail to do so will lose their lottery terminal. We aim to make certain that only those who are entitled to play the lottery actually do so. No other company imposes such a tough economic sanction on those retailers who fail to take their responsibilities to prevent underage sales seriously. In April 2000 we will publish, in full, the results of a far-reaching social and ethical audit of our business. Overseen by the New Economics Foundation and an independent advisory panel, the audit will mark the first of an annual process of social reporting, designed to ensure we meet the expectations of our stakeholders. Investing in the community -------------------------- Camelot, as the operator of The National Lottery, aims to raise the maximum possible amount for Good Causes. However, we also aim to add value to the community in our own right, through The Camelot Foundation, direct cash and in-kind donations and a wide range of employee initiatives. In August 1999, our employees, through The Camelot Foundation's match-funding scheme, reached the impressive landmark of a total £1.5 million raised for charities. Camelot ensures that its staff are able to contribute to their local community through voluntary work, by allowing each staff member time off every month for such activities. Camelot continues to be one of the UK's largest donors to charity in terms of the proportion of pre-tax profit paid out. Camelot's total contribution to the community to date now amounts to £14.4 million. Celebrating the Millennium -------------------------- Camelot is playing a key part in the millennium celebrations and, as part of a £6 million sponsorship programme, is providing its expertise and technology as one of the distributors of tickets for the Dome. This reflects the synergies available from our extensive retail network, our first-class technology and the confidence in the reliability of our systems. In line with our continued commitment to the community, Camelot is also sponsoring the Shared Ground zone within the Dome and an Internet-based project called Citizens Connection for people who want to make a difference in society. It will explain how the UK's systems, institutions and activities work, and will show people how they can influence them and make a difference. Outlook ------- To date, Camelot's tenure of The National Lottery has been characterised by an exceptionally strong performance, particularly when compared to lottery launches elsewhere. As forecast, difficult and changing trading conditions and the lottery's natural lifecycle did impact on lottery sales but, as a result of new game activity, prospects for the full year are promising. With the continuing launch of new games and the significant investment, in both marketing and our retail network, Camelot is confident that we can continue to deliver outstanding returns to The National Lottery Distribution Fund, whilst maintaining high public enthusiasm for The National Lottery. We remain confident that our increased target of £10 billion for Good Causes will be achieved through the continued success of our core on-line game, complemented by Thunderball, Instants and Big Draw 2000. Sir George Russell, Chairman For further information, contact: The National Lottery Newsroom Victoria Sabin/Kate Nustedt at Brunswick (01923) 425994 (0171) 404 5959 Financial Review ---------------- Sales ----- Total sales for Camelot Group for the 24 weeks ended 11 September 1999 were £2,259.2m (1998: £2,425.0m). Sales for the National Lottery on-line game decreased by £177.4m (8.5%) to £1,921.2m. Thunderball was launched in the period with sales of £70.7m over the last 14 weeks. The 24 week period benefited from 4 rollovers and 4 superdraws (1998: 6 rollovers and 5 superdraws). EasyPlay sales ceased in the period with £0.1m (1998: £0.4m) of fees included within on-line sales. Instants sales have declined by 18% to £267.2m, £58.8m lower than last year. Prizes ------ The target prize level for the year ending 31 March 2000 is 49.9% (1999: 49.6%). Different percentages are specified for each financial year. The average payout over the seven years of the licence period is expected to be around 50%. National Lottery Distribution Fund (NLDF) ----------------------------------------- The amount payable to the NLDF for distribution to the Good Causes was £633.5m (1998: £696.3m), which includes amounts in respect of ticket sales and the escrow account, but excludes payments for unclaimed prizes and the prize fund shortfall. This is a decrease of £62.8m (9.0%) on the corresponding period due to the lower level of sales and is determined by the provisions of our licence. Actual cash payments made to the NLDF in the period in respect of Camelot National Lottery games are as follows: 24 weeks ended 24 weeks ended Year ended 11 September 12 September 31 March 1999 1998 1999 £m £m £m -------------- -------------- ---------- Ticket sales* 624 690 1,478 Unclaimed prizes 31 38 78 Prize find shortfall 88 100 100 Escrow - 7 7 -------------- -------------- ----------- Total cash payments made to 743 835 1,663 NLDF ============== ============== =========== *Camelot adopts a full accruals basis of accounting. This figure, therefore, which relates to cash payments made, differs from that shown on the profit and loss account, which also includes the amount charged in respect of the escrow account (see note 4 to the financial statements). Lottery duty ------------ Lottery duty has remained at 12% throughout the period. Retailers' commission --------------------- Retailers' commission totalled £114.7m in the period (1998: £123.0m). Retailers receive 5% of all sales plus 1% of certain prizes paid by retailers. Overall, the amount paid approximates to 5.1% of total sales. Net interest receivable ----------------------- Net interest receivable for the period was £3.3m (1998: £4.1m). Profit after tax ---------------- Profit after tax fell within the period to £13.9m (1998: £23.4m). This is primarily attributable to an increase in marketing investment (classified under administrative expenses). Dividends --------- Dividends of £10.0m (1998: £18.0m) were declared by the board and paid in the period. A final dividend relating to 1998/9 of £1.5m was also paid within the period. Cash and cash flows ------------------- The decrease in total cash of £12.0m in the 24 week period is primarily attributable to the transfer of funds to term deposits. Prospects --------- Although the gaming market is undergoing increasingly rapid change towards greater liberalisation and therefore increasing competition for UK National Lottery products, we are confident that our game development strategies will result in achieving our target of £10 billion for the Good Causes. Profit and Loss Account For the 24 weeks ended 11 September 1999 UNAUDITED 24 weeks 24 weeks ended ended Year ended 11 September 12 September 31 March 1999 1998 1999 £m £m £m Notes ------------ ------------ ----------- Turnover - continuing operations On-line 1,992.0 2,099.0 4,538.3 Instants 267.2 326.0 668.7 ------------ ------------ ----------- 2,259.2 2,425.0 5,207.0 Cost of sales Prizes (1,127.4) (1,201.5) (2,579.5) Lottery duty (271.1) (290.9) (624.6) National Lottery 4 (633.5) (696.3) (1,487.4) Distribution Fund Retailers' commission (114.7) (123.0) (264.8) Terminal and data (44.2) (43.4) (94.7) communication costs ------------ ------------ ----------- Gross profit 68.3 69.9 156.0 Administrative (52.4) (40.9) (97.0) expenses Other operating income 1.0 0.9 2.0 ------------ ------------ ----------- Operating profit 16.9 29.9 61.0 Net interest 3.3 4.1 9.1 receivable ------------ ------------ ----------- Profit on ordinary 20.2 34.0 70.1 activities before taxation Tax on profit on 2 (6.3) (10.6) (21.6) ordinary activities ------------ ------------ ----------- Profit on ordinary 13.9 23.4 48.5 activities after taxation Dividends 3 (10.0) (18.0) (26.5) ------------ ------------ ----------- Profit retained for 3.9 5.4 22.0 the period ============ ============ =========== Statement of total recognised gains and losses For the 24 weeks ended 11 September 1999 UNAUDITED 24 weeks 24 weeks Year ended ended Ended 11 September 12 September 31 March 1999 1998 1999 £m £m £m ------------ ------------ ------------ Profit for the period 13.9 23.4 48.5 ------------ ------------ ------------ Total recognised gains and 13.9 23.4 48.5 losses relating to the period ------------ ------------ ------------ *Prior period adjustment - 10.8 10.8 ------------ ------------ ------------ Total gains and losses since 13.9 34.2 59.3 last annual report ============ ============ ============ *The prior period adjustment relates to our adoption of FRS12 'Provisions, contingent liabilities and contingent assets' within our interim results for the period ending 12th September 1998. Balance Sheet As at 11 September 1999 UNAUDITED 11 September 12 September 31 March 1999 1998 1999 £m £m £m ------------ ------------ ------------ Fixed assets Tangible assets 46.0 61.9 54.9 ------------ ------------ ------------ Current assets Stock 2.5 4.5 3.6 Debtors 107.1 124.1 73.1 Amounts recoverable from 116.6 103.9 159.0 trust in respect of prizes Trust reserve account 20.0 20.0 20.3 Cash at bank and in hand 169.3 150.8 141.0 ------------ ------------ ------------ 415.5 403.3 397.0 Current liabilities Creditors:amounts falling due (320.7) (339.8) (312.2) within one year ------------ ------------ ------------ Net current assets 94.8 63.5 84.8 ------------ ------------ ------------ Total assets less current 140.8 125.4 139.7 liabilities Creditors:amounts falling due (1.1) (3.8) (1.2) after more than one year Provisions for liabilities (9.3) (11.7) (12.0) and charges ------------ ------------ ------------ Net assets 130.4 109.9 126.5 ============ ============ ============ Capital and reserves Called up share capital 38.8 38.8 38.8 Capital redemption reserve 11.2 11.2 11.2 Profit and loss account 80.4 59.9 76.5 ------------ ------------ ------------ Equity shareholders' funds 130.4 109.9 126.5 ============ ============ ============ Cashflow statement For the 24 weeks to 11 September 1999 UNAUDITED 24 weeks 24 weeks ended ended Year ended 11 September 12 September 31 March 1999 1998 1999 £m £m £m Notes ------------ ------------ ----------- Net cash inflow from 5 36.7 68.2 93.3 operating activities Returns on investments and servicing of finance Interest received 5.6 3.7 11.1 Interest paid - (0.1) (0.1) Interest element of (0.1) (0.1) (0.2) finance lease payments ------------ ------------ ----------- 5.5 3.5 10.8 ------------ ------------ ----------- Taxation Taxation paid - (9.5) (28.6) Consortium relief - (0.1) (11.4) payments ------------ ------------ ----------- - (9.6) (40.0) ------------ ------------ ----------- Payment to the trust 0.3 (9.0) (9.3) reserve account ------------ ------------ ----------- Capital expenditure Purchase of tangible (2.0) (0.9) (3.6) fixed assets Equity dividends paid (11.5) (18.0) (25.0) ------------ ------------ ----------- Management of liquid resources Increase in term (40.7) (18.1) (2.0) deposits ------------ ------------ ----------- Financing Capital element of (0.3) (0.3) (0.6) finance lease payments ------------ ------------ ----------- Purchase of own shares - (51.3) (51.3) ------------ ------------ ----------- (0.3) (51.6) (51.9) ------------ ------------ ----------- Decrease in cash (12.0) (35.5) (27.7) ============ ============ =========== Notes 1. Basis of preparation ------------------------ The results for the 24 weeks to 11 September 1999 have been prepared on the basis of accounting policies set out on pages 32 and 33 of the Annual Report and Accounts 1999. The results for the 24 weeks to 11 September 1999 and 12 September 1998 are unaudited but have been reviewed by the auditors, and their review report to the directors is set out below. The statutory accounts for the year to 31 March 1999 have been delivered to the Registrar of Companies. The auditors' opinion on those accounts was unqualified and did not include a statement under section 237(2) or (3) of the Companies Act 1985. 2. Taxation ------------- Taxation on profits for the 24 weeks to 11 September 1999 has been calculated based on the estimated effective tax rate for the full year of 31.4% (1998: 31.2%). 3. Dividend ------------ A first interim dividend of 25.8p per share was paid on 11 June 1999 (1999 interim dividends: 46.45p). 4. Escrow account ------------------ The licence provides for Camelot to make a payment to an escrow account based on a percentage of 2.5% applied to previous years' sales levels less £40 million for annual sales up to £5,685m. The balance held in this account is for the benefit of the National Lottery Distribution Fund. Amounts paid and payable to the escrow account are allocated evenly to the profit and loss account over the period of the Section 5 Licence. 5. Reconciliation of operating profit to net cash inflow from operating -------------------------------------------------------------------- activities ----------- 24 weeks ended 24 weeks ended Year ended 11 September 12 September 31 March 1999 1998 1999 £m £m £m ------------ ------------ ----------- Operating profit 16.9 29.9 61.0 Depreciation 10.2 8.7 19.7 Loss on disposal of fixed - - (0.5) assets Movement in working capital Decrease/(increase) in stocks 1.2 (0.6) 0.3 (Increase)decrease in debtors (32.9) (27.4) 18.5 Decrease in amounts 42.4 61.5 6.4 held in Trust in respect of prizes Decrease in creditors (1.1) (3.9) (12.1) ------------ ------------ ----------- Net cash inflow from 36.7 68.2 93.3 operating activities ============ ============ =========== Independent review report by the auditors to the board of directors of ---------------------------------------------------------------------- Camelot Group plc ----------------- We have been instructed by the company to review the financial information set out in the Financial Review and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities --------------------------- The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the London Stock Exchange, which the company applies as if it were a listed company, require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed --------------------- We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion ----------------- On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the 24 week period ended 11 September 1999. PricewaterhouseCoopers ---------------------- Chartered Accountants & Registered Auditors London

Companies

De La Rue (DLAR)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today