Leading internet lottery business, Jumbo Interactive (ASX:JIN) today announced that its German internet lottery business is scaling down

Leading internet lottery business, Jumbo Interactive (ASX:JIN) today announced that its German internet lottery business is scaling down

Adverse market conditions in Germany are causing a number of licensed resellers to exit the market, transition to a secondary lottery market model, or wait until conditions improve. “After 2 years in the German market, it has become clear that market conditions are not favourable for a licensed reseller model.  Whilst we strongly considered transitioning the business to a secondary lottery market model, it was decided that the Australian market holds more potential at this point in time”, said Mr Mike Veverka, CEO and Founder of Jumbo Interactive.

Leading internet lottery business, Jumbo Interactive (ASX:JIN) today announced that its German internet lottery business is scaling down to stop ongoing losses from that division and allow more focus on the thriving Australian business.

Adverse market conditions in Germany are causing a number of licensed resellers to exit the market, transition to a secondary lottery market model, or wait until conditions improve. “After 2 years in the German market, it has become clear that market conditions are not favourable for a licensed reseller model.  Whilst we strongly considered transitioning the business to a secondary lottery market model, it was decided that the Australian market holds more potential at this point in time”, said Mr Mike Veverka, CEO and Founder of Jumbo Interactive.

“To continue operations in Germany under the current model, a much larger investment would be needed and even then, it is still uncertain that it would yield an acceptable return on investment within a reasonable timeframe”, he said.

The German business contributed losses after tax of $2.6 million in FY15 and $1.6 million in FY16 to the group. With the scaling down of this business, the contributed loss is expected to be approximately $1.0 million in the 2017 financial year and will not incur any further losses or expenses in future years. A customer referral agreement has been signed with Lotto24, another independent lottery reseller, whereby Jumbo will receive payment for each of its customers that sign up to that website.

The Jumbolotto.de website and app will continue to operate as a customer referral service and in the event that market conditions in Germany improve, management maintains the option to relaunch should the opportunity be attractive enough.

As part of the scaled down approach, Jumbo will no longer have a physical presence in Germany, nor will it incur any ongoing operational costs.

Maintenance of a minimal digital presence will be absorbed by Jumbo’s Brisbane technology teams of which the cost will be negligible.

“Jumbo’s Australian business is thriving and so it makes better sense to focus on areas that have a greater positive impact to our bottom line”, he concluded. For example, since Charity Lotteries were included on the OzLotteries.com platform in June 2015, sales of those products now exceed the German business’ monthly Total Transaction Value and continue to grow at a greater rate whilst requiring minimal capital investment.

Jumbo Interactive Limited is listed in Australia (ASX: JIN) as well as the German Frankfurt, Berlin and Stuttgart securities exchanges (Symbol: WKN A1C82X). In 2000, Jumbo sold its first lottery ticket on the internet and witnessed a dramatic rise in popularity due to the convenience of buying tickets online.

At first customers were attracted to the security of never losing a ticket and the convenience of automatic number checking, prize payments and auto-play. In 2012, Jumbo released a lottery app for the iPhone and a new transition began driven by the convenience of mobile lotteries. A new app for the Apple watch takes the customer experience a step further with prize alerts, winning numbers and ticket management now available on the wrist.

The Company operates the popular website www.ozlotteries.com in Australia under agreements with the Tatts Group (ASX: TTS).

Jumbo has proven its ability to open up new lottery markets with its innovative technology and internet marketing initiatives that have brought lotteries to new demographics via the internet. Jumbo has succeeded in targeting a younger and more mobile demographic with mobile now accounting for 75% of all customer interactions.

Source: Leading internet lottery business, Jumbo Interactive (ASX:JIN) today announced that its German internet lottery business is scaling down