New GM finds Romanian lottery in shaky situation, close to insolvency

The Romanian Lottery is not in a rosy situation and could become insolvent unless measures to make it more efficient are not implemented, according to the company's director, Dan Alexandru Ghiţă, who took the company helm earlier in July. He accused former managers of the Lottery of having purchased at overly high prices and of having closed contracts to the detriment of the Lottery.

'I am coming from the private sector and I was scared when I saw the company's financial documents. The word 'efficiency' was never in the vocabulary of the former management teams, which focused on spending money, on over-evaluated acquisitions, and less on increasing the company's cashing. In this context, the financial side is not rosy and the Lottery could become insolvent without efficiency measures, but it is the last option we are taking into account, said Ghita. The Lottery has a profit margin of 8 percent, which is 'weak', according to the manager. At a profit rate of under 5 percent, 'we might as well go home', said the manager. Ghita used to run sales for the gambling company Galaxy Games. “I accepted this job because it is a challenge. I know this area very well. I will try to help the Romanian Lottery boat not to sink,” he said. Ghita sees high growth potential for the lottery, comparing it to the Hungarian national gambling operators, which had a profit of EUR 200 million, in a country with 10 million inhabitants, or half Romania's. The Romanian Lottery ended in 2011 with a turnover of EUR 274 million, an increase of 5.3 percent on the previous year and a net profit of EUR 19.3 million, down 32.6 percent on 2010. The company's revenues went down by 50 percent between 2007 and 2011, while its expenses stayed up, via over valued acquisitions. “For example, a software application which is worth some EUR 300,000 on the market was bought by the Lottery for some EUR 1.7 million,” said the new manager. He also mentioned that the big problem is a contract with a group of companies in Greece, which cash in 70 percent of the Lottery's net profit on the video lottery segment. The Lottery gets less than 30 percent of these revenues, as it has to pay expenses for using the machines. The contracts have been drafted in a way that doesn't leave room for canceling them, while the equipment is old and generates high running expenses. The Romanian Lottery runs 2,000 sales points, of which 1,116 are its own. Romanians spend around EUR 8 on gambling, while gambling spending can reach EUR 70 in more developed companies. The new Lottery GM is currently analyzing the option to reduce the price of a 6/49 lottery ticket, decrease the pot for the first category and increase the prize for second and third, while launching new lottery products. The Romanian Lottery has been running since 1906 and is currently state-owned. editor@romania-insider.com