The Jumbo Interactive Ltd (ASX: JIN) share price has come under pressure on Wednesday following the release of its full year results.
At the time of writing the online lottery ticket seller's shares are down 4% to $13.10.
What happened in FY 2020?
It was a bit of a mixed year for Jumbo. After years of explosive growth and margin expansion, Jumbo's earnings growth came to an end in FY 2020.
For the 12 months ended 30 June 2020, the company posted a 9% increase in total transaction value to $349 million and a 9% lift in revenue to $71 million.
However, a 38.9% increase in administrative expenses to $17.6 million weighed heavily on its profit margins. This increase was predominantly due to the Gatherwell acquisition and positioning the business to underpin planned future growth.
As a result, Jumbo's underlying net profit after tax came in flat at $26.5 million in FY 2020.
What were the drivers of its results?
During the 12 months the company had to contend with a period of lower jackpot activity. In FY 2019 there were 49 large jackpots, whereas in FY 2020 this reduced to 39 large jackpots.
This lower activity was offset by the shift to online playing during the pandemic, which underpinned a 9% increase in active customers to 827,411.
The company's founder and CEO, Mike Veverka, commented: "Covid-19 restrictions helped drive players online which helped deliver an increase in ticket sales despite lower jackpots compared to the previous strong year."
"In addition, the Software as a Service business continues to grow with the signing of our 5th contract with the "Classics for a Cause" lottery and the completion of the onboarding process for the Mater Lottery", he added.
Dividend.
The Jumbo board declared a final fully franked dividend of 17 cents per share, down from 21.5 cents per share a year earlier.
This took its full year dividend to a total of 35.5 cents, down 1 cent from 36.5 cents in FY 2019.
Outlook.
No guidance was given for FY 2021 with today's result.
Instead, the company spoke about its long term prospects, reminding investors that it has signed a 10 year reseller agreement with Tabcorp Holdings Limited (ASX: TAH). It notes that 28% of lottery ticket sales are made online in Australia, which gives it a long runway for growth.
It also spoke about its large global total addressable market (TAM) for its SaaS business. It estimates that the business has a $26 billion TAM in Australia, UK, Canada, and USA.
