Czech Bounce: Strong H1 Belies Potential Drop for the Second Half of H2
Published September 11, 2017 by Lee R
Robust H1 figures only seem to have come from operators with native holdings.
Good numbers came out of the Czech Republic for H1, but new tests are facing the regulated market.
Fortuna’s Fortune
In the face of impending new restrictions taking effect in H2 2017, Central European betting and lottery operator Fortuna Entertainment Group (FEG) reported significant gains in H1 revenue.
Positive Steps
The jumps included increased boosted showings for betting stakes jumping nearly 41% to €720.7m, along with revenue growth of 24.5% to €100.5m, even as overall earnings fell 22% to €7.6m and profit dropped by more than half to €2.5m.
The Drops
The drops were caused by recent ambitious FEG’s pricey acquisitions, investing significantly in Romanian, Croatian and Spanish betting holdings previously operating under the Hattrick Sports Group and the Forbet brands.
CEO Praises Acquisitions
FEG CEO Per Widerström estimated that absent the acquisition absorption, FEG’s H1 earnings would have risen some 8% year-on-year, asserting that from an internal standpoint the losses were temporary and not reflective of true growth.
Growth Driver
FEG claims that the H1 general growth was driven primarily by online gambling operations, starting with the launch of the newly regulated Czech market in February.
International Controversy
International operators entering into the market were not as thrilled, finding stiff tax rates of 23% on gross gaming for sports and betting lotteries and 35% on RNG casino games along with stringent in-person customer registration requirements, on top of a pre-existing standard 19% corporate rate.
Bleak Outlook for Now
The situation for operators is only expected to worsen in light of restrictive new H2 curbs on online bonuses and free bet promotions.
Nature of Restrictions
The Czech Ministry of Finance is imposing the ban ostensibly due to protect players at risk for addiction against aggressive operator promotions.
Free Bet Concerns
The free bet promotional tool is incurring increased scrutiny all across Europe, including leading regulated jurisdiction the UK, which decided to impose a General Betting Duty on free bets online.
In the Czech Republic, operators are as of H2 prevented from offering their customers any free promotional offers for online wagering activities, as confirmed in the document released last week calling operators bonuses direct responsible for new gambling problems within the cultural fabric of Czech society:
“The casinos, appealing to instant and seemingly easy winnings, have become typical not only of the suburbs of the Czech cities, but also of the centres of smaller municipalities, and all of the related socially harmful activities pose a threat to public order and peaceful coexistence.”
Outlook
At this point, a common ground appears necessary to improve protections without discouraging foreign operators, whom all regulating ultimately governments need in the fold to boost revenues.
