Central and Eastern European sports betting and lottery operator Fortuna Entertainment Group (FEG) saw its 2016 profits fall by nearly half thanks to higher costs and taxes.
Preliminary figures released Thursday show FEG’s 2016 revenue rising 3.3% to €106.2m thanks primarily to betting stakes rising 23%. But earnings dropped 18.5% to €22.1m and net profit slumped 42.4% to €11.2m thanks to decreased sports betting margins, double-digit rises in costs and taxes, and an unfair comparison with 2015, which featured a deferred one-off tax gain.
Betting taxes were up more than one-quarter to €52.4m last year thanks to increased betting volume and tax rate increases in the Czech Republic, which accounted for 44% of FEG’s overall sports revenue. Staffing costs were up 10.7% to €34.7m while other operating expenses rose 11.5% to €49.3m.
Sports betting stakes enjoyed strong growth in FEG’s three core markets, with Czech stakes up 21.5% to €561.3m, Slovakia up 28.7% to €334.5m and Poland rising 17% to €123.6m. Sports win was also up across the board, albeit by smaller ratios, led by the Czech market (€67.8m, +13.8%), Slovakia (€48.3m, + 8.9%) and Poland (€37.7m, +8.4%).
FEG’s total number of registered online betting customers rose more than one-fifth last year. The company says it finished 2016 with a 31% share of the Czech retail & online betting and lottery market, a 33% share of Poland’s betting market and a 35% share in Slovakia.
FEG made a major push to expand into Croatia and Romania’s betting markets via last month’s €135m acquisition of the Hattrick Sports Group. FEG claims the deal makes it the number one retail betting operator in Romania and the number two retail and online operator in Croatia.
FEG expects the acquisition will help 2017’s earnings rise between 20% and 25%, while sports betting turnover will top €1.3b. FEG also expects great things from its new Playtech-powered online casino brand in the Czech Republic, while regulatory plans to crack down on unauthorized international online operators in both the Czech Republic and Poland this year will likely add further momentum to FEG’s upward trajectory in 2017.