Camelot prepares to unveil plan to end falling sales

Camelot prepares to unveil plan to end falling sales

Camelot, the operator of the UK’s National Lottery, is plotting a route back to growth, expecting to reveal crucial plans in the coming days that are designed to reverse a sharp fall in ticket sales.

During a tumultuous year, the group, which has run the lottery since its inception in 1994, has suffered a steep decline in revenues and is yet to appoint a permanent successor to its chief executive who left in April.

This week it emerged that the billionaire newspaper mogul Richard Desmond has stepped up plans to bid for the National Lottery when the UK franchise comes up for renewal. It would be the first serious challenge for the lottery since a consortium led by Richard Branson lost out in 2000.

The Gambling Commission, the body that grants the lottery license, is in the early stages of creating the tender process, which is expected to open in 2019, with the successful bidder taking control in 2023.

The watchdog has said it is “pressing” Camelot to lay out its plans to revive sales, while people close to the organisation suggested it was preparing to release the results of a sweeping internal review.

“Whilst the stakes are high, there is time [to turn round the business]” said one person close to Camelot’s leadership. “But there is pressure on the review, you have to get it right.”

Simon French at Cenkos Securities said Camelot needed to “get excitement back” to its main draw. Options include raising jackpot prizes and making it easier to win the top payout — a move that would reverse some of the changes made in recent years.

An analysis of Camelot’s financial records and interviews with people close to the company and other industry experts, shed new light on the pressures building on the business and the company’s response.

“The idea that . . . the business has had no input to its own fate is risible,” said Paul Leyland from Regulus Partners, the gambling industry analysts. “There is a level of management culpability because of the decisions that have been taken.”

Until the start of 2016, Camelot was generating record salesand profits — and was fulfilling the lottery’s underlying purpose of benefiting the public.

Since it was taken over by Canada’s Ontario Teachers’ Pension Plan for around £400m in 2011, Camelot has achieved sales of £47.8bn and returned £44bn in prizes to customers, money to charities and taxes. Only around 1 per cent of income has become profit and payouts.

Former chief executive Andy Duncan, a former Channel 4 boss, received a salary and other bonuses worth £1.6m in the 12 months to March 31 2016 — a £500,000 increase on a year earlier.

Camelot’s owners received a dividend worth £59.4m in 2016, their second-highest, taking their total payments to £320m.

But this year the group has stumbled. After some controversial moves in recent years, such as doubling the price of a lottery ticket to £2 and adding more balls to the draw to make it harder to win, Camelot revealed that sales fell 8.8 per cent in the year to March 31 2017. It predicted there would be a further decline in 2017-18 — the first successive fall in a decade.

Mr French said one of Camelot’s “self-inflicted wounds” was altering the split of prizes, so there are more winners of smaller sums. “That’s not why people play lotteries,” he said. “You pay your pound and you dream of winning a life-changing sum.”

Mr Leyland highlighted other factors, including a decline in the number of people engaged in small-stakes gambling, such as buying lottery tickets, and increasing competition.

But he said the changes to Lotto exacerbated the decline because, in an effort to make the game “more profitable,” Camelot made buying a ticket “less appealing”.

In the aftermath of the sales fall, Mr Duncan left, and saw his long-term incentive plan award cut from at least £500,000 in previous years to £100,000 in 2017. Mr Duncan declined to comment.

The annual dividend payment to OTTP was also reduced in 2017, to £300,000.

Camelot is still paying at least £800,000 a year to another ex-chief executive, Dame Dianne Thompson, under a long-term plan that runs until 2021.

Dame Thompson, who left in 2014, said Camelot structured payments over several years after her departure as part of a “non-compete” provision, ensuring she did not head up a rival bid for the lottery during the license process. “It was a way of making sure I behaved myself,” she said.

A Camelot spokesperson said that although its recent sales figures “fell well short of where we would have liked them to be, they were still our fourth best annual sales in 23 years”.

The Gambling Commission — and potential rivals for the lottery franchise, including Mr Desmond — will be paying close attention to the group’s attempt to improve on that performance.

Source: Camelot prepares to unveil plan to end falling sales