Southern lottery companies report falling profit

Although business remains profitable, the growth rates of lottery companies in the south have shown remarkable signs of slowing down.

Southern Lottery Council revealed that the total first half sales of lottery products in 22 member companies have reached VND44.52 trillion ($1.96 billion), up more than 8 per cent compared to the same period last year. Total sales increased slightly as the average consumption rate continued to hover around 78 per cent, equivalent to VND34.921 trillion ($1.53 billion).

In the first six months, the pre-tax profits of lottery companies from Binh Thuan to Ca Mau provinces hit VND4.606 trillion ($202.9 million), up less than 1 per cent compared to last year. Financial contributions to the state budget reached VND14.743 trillion ($649.5 million), completing 69 per cent of the target set earlier this year.

Due to the aggressive competition posed by Vietnam Computerised Lottery One Member Limited Liability Company (Vietlott), also a member of Southern Lottery Council, while these companies remained profitable, they have reported signs of deceleration both in revenue and profit growth.

The most prominent case is Ho Chi Minh City Lottery Co., Ltd. The company’s pre-tax profit decreased by more than 9 per cent compared to the corresponding period last year and only reached VND480 billion ($21.15 million). This is also a five-year low for the company. Accumulated revenue in the first half of this year was VND3.238 trillion ($142.6 million), less than 2 per cent increase on-year. The lottery business accounted for 97 per cent of the total revenue, while the rest came from printing and office leasing.

In a business report issued in late May, company executives said it was losing out to Vietlott, the new player in the market. In particular, the board of directors said that the main reason for the gradual slowdown in growth was the continuous introduction of new lottery products by Vietlott.

By the end of 2016, the revenue of Ho Chi Minh City Lottery Co., Ltd. was seriously affected by the strong competition. Accordingly, Vietlott’s revenue soared by ten times, going from VND160 billion ($7.05 million) on September 30, 2016 to VND1,600 billion ($70.48 million) at the end of 2016.

Throughout the period, Vietlott was reported to gain VND16 billion in revenue each day ($704,845). In 2015, Ho Chi Minh City Lottery Co., Ltd. used to earn at least VND15.6 billion ($687,225) in revenue a day.

In an attempt to regain market share, the company seeks to maintain its core markets in Ho Chi Minh City and the eastern provinces, while developing more markets in the western region. In the near future, the company will also finalise business and operation plans for some of its investment projects to put into operation two new types of lottery products which have been approved recently: self-pick lotto and scratch-off instant tickets.

Tien Giang Lottery Co., Ltd. is in a similar situation as the company’s revenue and pre-tax profit figures were reported to drop by VND13 billion ($572,687) and VND27 billion ($1.189 million) on-year, respectively. In previous reports, it was constantly named in the list of companies producing a stable growth rate of about 5 per cent.

As consumption and demand are forecast to encounter a number of difficulties, earlier this year, the executives of Tien Giang Lottery Co., Ltd. only set a sales growth target of 0.02 per cent. However, matters are still “out of control” as over the first six months of the year the company only completed less than half of the target for taxed revenues, which was equivalent to VND3.86 trillion ($170 million).

In contrast, Vietlott has reported a record profit of approximately VND133 billion ($5.86 million), while in the same period last year, the company incurred a loss of VND4 billion ($176,212) due to the rising cost of facilities, information technology, and personnel recruitment to launch new types of lottery products.

Despite being over its super-fast growth spurt, Vietlott’s revenues from lottery products still reached VND1.884 trillion ($83 million), of which matrix-based electorate games accounted for about 93.5 per cent. This put Vietlott on top of industry big wigs, taking over names like Dong Thap, Dong Nai, and Kien Giang Lottery Co., Ltd.

The company also does not hide its ambition to seize a 30-per-cent market share of the lottery market in the next few years, with about 10,000 units of terminal equipment to be distributed nationwide. From an “underdog,” Vietlott has become one of the industry’s highest earners in 2016.

Previously, giving in to the dominance of Vietlott, a number of traditional lottery companies in Ha Nam and Thua Thien-Hue provinces decided to cooperate with Vietlott instead of pursuing a confrontation.

According to rumours, Capital Lottery Company also intends to cooperate with Vietlott to improve its business performance. Capital Lottery Company has been struggling since Mega 6/45 appeared. The company also launched a computerised lottery to put up a fight, but failed because

Vietlott has been offering much higher jackpot prizes. In the race to gain market share, traditional lottery companies in the south were forced to raise their maximum prize to VND2 billion ($88,260) since January 1, 2017 from the previous VND1.5 billion ($66,195).

By Minh Hong