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China online lottery ban hits revenue at DJI Holdings, Rexlot

China’s ban on online lottery sales has hit first-half earnings at lottery suppliers to the mainland, with Rexlot Holdings and DJI Holdings the latest to report declining revenue.

Rexlot Holdings reported that its turnover was HK$848.84 million ($109.5 million) in the first six months of the year, down 7 percent year-on-year due to the suspension of online lottery sales in China.

In its interim report, the company said profit before tax declined 23 percent to HK$342.22 million compared with HK$444.22 million in the same period the year before. The lottery business accounted for 100 percent of the group’s total turnover.

The company said the suspension adversely affected its single match games (SMG) business as the company’s internet-based lottery distribution unit used to be one of the key distribution channels for SMG.

“Furthermore, the suspension prevented consumers from buying lottery ticket online which eventually put pressure on the lottery sales in the Chinese lottery market. Other than SMG, the growth of the Chinese Welfare Computer Ticket Games (“CTG”) market was also affected by the suspension. The suspension affected the performance of the group’s Welfare CTG business.”

“Despite the negative impact of the suspension, the group was able to benefit from its comprehensive distribution platform and foothold established in physical and mobile lottery distribution channels.”

Rexlot said ultimately, the suspension and resulting review should benefit the industry and lead to long-awaited regulation of the sector. Beijing halted all online sales from March 1st this year due to widespread illegal gambling.

China’s lottery market registered total lottery sales of RMB187.6 billion ($29.4 billion) in the first six months of 2015, up 5 percent over the same period last year.

Meanwhile, London-listed DJI reported net revenue plunged to GBP2.1 million ($3.2 million) from GBP 3.4 million in the first half of the prior year. The net loss widened to GBP3.4 million from GBP2.3 million.

The company said it has been actively seeking to diversify its revenue sources to improve long-term prospects, both in the lottery and non-lottery businesses.

“Our recently announced joint venture with Heilongjiang is one such example where we have developed a very exciting opportunity which covers a multitude of commercial activities, including the distribution of physical lottery products (via stores and scratch cards), the sale of online lottery products (B2B, B2C and mobile) and the sale of non-lottery services and products,” it said in a stock exchange filing.

The non-lottery activities included the launch and operation of the Heilongjiang Sports Bureau online booking platform for sports facilities and sports equipment hire throughout the province, which is the location of the most popular winter-sports destination in China, with 290 million tourists visiting in 2014.

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