Lottery's profits fall 40% after sales slump

DECLINING INTEREST in the National Lottery has cut profits at Camelot by 40 per cent. Falling sales and massive spending by the operator to promote new games have eaten into its half-year profits, which fell from pounds 34m to pounds 20.2m.

Overall ticket sales dropped by 7 per cent, while Instants scratchcards fared worse with an 18 per cent fall. Lottery money donations to charities fell from pounds 696.3m to pounds 633.5m but Camelot said it was on course to beat its target for cash raised for good causes.

Yesterday's results for the first half of the financial year come at a crucial time for Camelot as it prepares to bid to keep running the lottery after its licence runs out in September 2001. The Government's National Lottery Commission is likely to publish the conditions of the new licence tomorrow and they are expected to allow a bid from an operator wanting to run a non-profit lottery.

Camelot said the 40.5 per cent fall in its pre-tax profits had been expected and was down to more competition and investment in marketing for new games. Ticket sales fell from pounds 2.43bn to pounds 2.26bn and total prize money paid out was pounds 1.13bn, down from pounds 1.2bn.

The decline in Instants sales was partly offset by the introduction of the Thunderball weekly draw in June. Earlier this month Camelot launched Big Draw 2000, a one-off lottery for the millennium weekend.

Camelot spent pounds 10m marketing the Big Draw and although initial sales have been slow it expects them to pick up as the two draws - on New Year's Eve and New Year's Day - become closer.

To bid successfully to keep running the lottery, Camelot must demonstrate it has raised pounds 9bn for good causes over its seven-year licence. Paul Murphy, the consortium's finance and business operations director, said it was on track to raise pounds 10bn by September 2001. He said the pounds 10m spent on marketing was necessary to maintain the high level of interest in the lottery.

Sir George Russell, chairman of Camelot, said: "As forecast, difficult and changing trading conditions and the lottery's natural life cycle did impact on lottery sales but, as a result of new game activity, prospects for the full year are promising.

"Camelot's tenure of the National Lottery has been characterised by an exceptionally strong performance, particularly when compared to lottery launches elsewhere."

Richard Branson, head of Virgin Group, has held talks with lottery equipment providers including AWI and Essnet, who are the main rivals to GTech, which is used by Camelot. Essnet is thought to have plans to allow the lottery to be played on the Internet.

But Mr Branson is understood to be unhappy with the terms proposed for the new licence. He has until February to submit a rival bid. A Virgin official said he had not decided whether to bid.

A spokesman for the commission said new bidders would have the opportunity to run a non-profit lottery but the decision would be made on which proposal promised to raise the most money for good causes.

"If a bid from Camelot raised more for good causes it has got a good chance," he added. Mark Slattery of the National Lotteries Commission said: "Between 28 and 30 per cent of the cost of every ticket must be given to charity."

But, he added, even if sales fell substantially, money would always be given away.