GGRAsia – DJI 1H loss widens on China lottery online sales ban

DJI 1H loss widens on China lottery online sales ban

Sep 30, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck

London-listed DJI Holdings Plc, a supplier to mainland China’s lottery market, said in a filing on Tuesday that its net loss for the first half of 2015 widened to GBP3.4 million (US$5.2 million), from GBP2.2 million in the prior-year period.

The firm – a licensed promoter and distributor of Chinese sports lottery and welfare lottery products to third party retailers and direct to consumers – stated trading had been “materially affected” by the Chinese government’s decision on March 1 to suspend temporarily the sale of lottery products online throughout China. The purpose of the suspension, DJI said, was for an official review of the online market ahead of the authorities introducing new legislation.

DJI’s gross sales in first half 2015 fell by more than a third year-on-year to GBP86.0 million, compared to GBP134.2 million in the first half 2014.

Net revenue in the first six months slipped to GBP2.1 million, from GBP3.4 million last year. DJI’s operating loss was GBP2.5 million, compared to GBP2.2 million in first half 2014.

Darren Mercer, DJI’s chief executive, stated in the unaudited results: “Against the background of a strong performance in 2014, the temporary suspension of online lottery sales has materially and adversely impacted our operating results and our financial position in the first half of 2015.”

He added: “We have, however, taken advantage of this downtime to significantly improve our long-term prospects by exploring new ways to work with [Chinese] provincial lottery partners to develop other revenue streams, both lottery and non-lottery, and strengthening our position in the lottery sector to enable us to fully capitalise on the resumption of online lottery sales once the suspension is lifted.”

No date for resumption has been mentioned in recent Chinese media reports on the suspension.

DJI admitted in its filing that the suspension of sales had “created hardships for the group,” but said it was an “important step” to control unauthorised online lottery sales and to ensure “healthy development” of the online lottery market in China.

“The directors have a reasonable expectation that the company and the group will have adequate resources to continue in operational existence for the foreseeable future,” added the filing.

As of June 30, the group was funded by cash balances of GBP5.1 million and did not have access to any borrowing facilities. After the end of the reporting period, the company conditionally raised GBP5.6 million through the placement of approximately 16 million new ordinary shares.

The board has not declared an interim dividend for the first half.

In September, DJI said it had reached a deal with English soccer club Arsenal F.C. making the club its official promotional partner in the Chinese lottery market.