Lotto suffers sales slump and profit fall despite revamp

The National Lottery may implore its customers to "live a Lotto" but it appears to be dying a little with the announcement yesterday of its worst six months of sales.

Despite a multimillion-pound relaunch, revenue from the various games was less than £2.3bn in the period to September 28, down 5.2 per cent on the same time last year.

While Camelot insisted yesterday sales for other games were performing well, one reason for its continued decline is falling interest in the main Lotto game, down 10 per cent from £1.9bn to £1.7bn.

Just a week after its eighth birthday, the National Lottery is in its fourth year of decline. Over the past few months Camelot has taken steps to try to halt the downward slide, cutting 80 jobs and closing six regional centres.

In May, the company began a £72m relaunch that involved changing the name to match many of its European counterparts (Lotto) and drafting in the comedian Billy Connolly for a series of adverts that proclaim "Don't live a little, live a Lotto"

But the game continued to attract unflattering publicity. Some people suggested yesterday that sales may have been hit by a row over a £340,000 grant to the National Coalition of Anti-Deportation Campaigns. A grant to the group, which on its website accused David Blunkett of "colluding with fascism", was frozen in August after the Home Secretary and Tessa Jowell, the Culture Secretary, intervened. But the Community Fund – which has come under fire from tabloid newspapers, particularly the Daily Mail – announced last month the grant would go ahead.

Matters were not made any easier when Dianne Thompson, Camelot's chief executive, conceded that people now acknowledged the odds of winning the game were stacked against them.

"People have realised that though 'it could be you', it probably won't be," she said.

The obvious consequence has been less money to good causes – a drop of £56m from a total of almost £668m in the same six months last year. Results show a further £273mn went to the Government in duty.

Camelot, which narrowly avoided losing its licence to Sir Richard Branson two years ago, saw its profits after tax fall from £15.8m for the six months last year to £12.2m this year.

The company has always been quick to point out the May relaunch was part of an 18-month plan. Participation rates remain among the highest in Europe with other countries such as France and Sweden also seeing downturns in sales.

Yesterday a spokeswoman for the company said a decline had been inevitable after the first few years of excitement died down. She said: "What we need to do now is stabilise that decline with new games. But that leads to an inevitable cannibalisation of the original lottery games," she said. The company is hoping several projects in the pipeline, including online, daily and European games, will be its salvation.

Figures from Camelot show sales peaked in the 1997-98 financial year at £5.5bn or £106m a week. By 2001-2002 sales had slipped to £4.8bn or £92.2m a week.

Camelot said yesterday that Lotto HotPicks, launched in July as part of the overhaul, had performed above expectations with average weekly sales of more than £5.5m.

Sales of Thunderball were up, by 1.6 per cent on the same six months last year, as were sales of scratchcards – by 1.3 per cent to £294mn.

"Lotto has fallen faster than anticipated and is disappointing, but it was a difficult spring and summer as a trading period for all sorts of reasons such as the World Cup and the jubilee," said the spokeswoman.

"There are signs with HotPicks and the midweek Thunderball that things are picking up again. The relaunch programme hasn't finished yet and it was never about just Lotto. We think, given the investment we are putting in, we will turn things around."

The second half of the financial year, she added, was traditionally stronger for sales.

Sir Michael Grade, chairman of the Camelot Group, said: "We are confident we have the right plan in place to halt the slowdown and grow sales in the medium term.

"Lotto represents about 76 per cent of sales. In time, we expect Lotto to represent a lower proportion of sales as more new games come on stream. Development of a daily game for late 2003 and a European game for 2004 are progressing well, although both are subject to regulatory approval."

Sir Michael said: "In February 2003 scratchcards will be available to our players on the internet and we anticipate that other games in the portfolio will be available on the medium later in 2003."