Lottery payout to increase in bid to tackle illegal parallel gaming

The gaming company that has acquired a lucrative 10-year concession to run Malta’s national lottery games will increase Lotto payout ratios in a bid to tackle illegal gaming.

National Lottery plc will increase payout ratios for the Lotto game, one of several offered under the national lottery concession, to tackle what is believed to be a clandestine network of parallel betting with the official national lottery games.

The IZI group’s prospectus for a €30 million bond issue, published earlier this week, announced that it would increase payouts for the Lotto game “to curb the rampant illegal gaming linked to this game.”

The illegal lottery involves a network of runners who take illegal bets on the Lotto and Super 5 numbers, in parallel with the official games. The illegal gaming is worth millions, according to industry sources.

IZI Group’s €30 million bond will finance a €16.2 million spend for its recently-acquired national lottery concession, which includes new hardware terminals, lottery software systems, extended real estate and staffing; and €8.5 million for IZI’s Dragonara Casino management system and software, building, new slot machines and gaming tables, and IT; as well as €3.9 million for IZI’s network of retail gaming outlets.

The IZI group registered over €20.1 million in revenues in 2021, with a net loss of €946,000.

The group has assets of over €42 million in retail gaming stores and the Dragonara casino property, apart from €97 million in valued goodwill from its subsidiaries for a total €85 million in equity.

Its last bumper year was in 2019 from its retail gaming outlets, where it registered a €30 million net profit right before the onset of the COVID-19 pandemic.

IZI’s revenue is primarily generated from gaming activities of its customers, but COVID-19 negatively impacted disposable income. In response to the pandemic, in the years 2020 and 2021, the Group was required to temporary close or restrict access to its gaming premises. “The imposition of preventative and containment measures has had, and may continue to have, a negative impact on expectations relating to the IZI Finance Group’s gaming operations, with the susceptibility to the risk of a reduction in revenue,” the finance company said in its prospectus.

Rival lottery bidder Sisal Malta, a consortium made up of Italy’s Sisal Lottery, Austria’s Scientific Games International, and the Eden Leisure Group Limited, has challenge the finance ministry’s award of the National Lottery 10-year concession to IZI’s subsidiary National Lottery plc. The company is contesting Sisal’s claims.

The concession was granted to National Lottery plc for €105 million. IZI is still negotiating a €45 million loan with a Maltese bank to finance the first €40 million payment to the Maltese government, apart from a €4 million performance security requirement.

National Lottery plc will be continuing the operation of the Grand Lottery, the Lotto, Super 5, Tiritombola, FASTKENO, scratch-cards, sports betting, and electronic gaming machines.

The company aims to introduce a secondary sales network for lottery games, adding French horse racing to sports betting, extending opening hours for lotto stores, introducing a Super 5 second chance draw and a bi-weekly Lotto draw, and increase the Lotto payout ratio “to curb the rampant illegal gaming linked to this game.”