Escalante’s Virtual Gaming Worlds rockets to another big profit

Laurence Escalante’s online casino juggernaut Virtual Gaming Worlds is branching out into lotteries after another record-setting year that filled the billionaire’s pockets. Despite regulatory hurdles in its flagship US market, the Perth-founded VGW Holdings pulled in a 30 per cent higher net profit of $492 million in the year to June 30 on record revenue of $6.1 billion, according to new financial accounts. VGW’s staggering returns in the past few years have made Mr Escalante one of the country’s youngest billionaires with an estimated worth of nearly $4b. The 42-year-old, who has splashed out on luxury cars, property and boats, pocketed the lion’s share of $360m of dividends paid out by VGW last year, up from $318.9m a year earlier. Mr Escalante said in emailed comments that VGW had “again delivered another set of strong full-year results”, citing “strong profit growth as our industry-leading brands and social games continue to resonate with players and generate strong engagement”. The privately-owned group also used its annual report to reveal it had bought a 13.9 per cent stake in British lottery services company 99Dynamics for $US25m ($37m). 99Dynamics operates Jackpot.com, a website that provides access to myriad big--dollar US lotteries. Mr Escalante said the deal offered “exposure to an attractive adjacent market, diversification and future optionality”. The company is one of Australia’s fastest growing businesses, after booming demand for its digital poker machines and card games during COVID-19 restrictions in the US ignited revenues. As late as 2018, VGW made $5m on turnover of $379m. Three years later, it was making $295m off $2.2b in revenue. In the 12 months to the end of June, revenue jumped 27 per cent, with $3.3b of the $6.1b in annual turnover done in the second half. Armed with a Maltese gaming licence, VGW uses a sweepstakes model to comply with laws banning internet gambling in most US States. Customers buy virtual gold coins that allow them to play VGW’s games - notably Chumba Casino and Luckyland Slots - but have no outside value. However, buyers of most gold coin packages also get bonus “sweeps coins”, which as well as being used to play the games are redeemable for cash in most of the US and Canada. The model is not without challenges, with a number of court actions launched in US States - the latest in Georgia - seeking to block its games on the basis they are illegal because customers gamble and lose money. While it did not directly address the legal challenges, VGW said in the annual report that “management does not currently believe that any of these proceedings will have a material adverse effect on the group’s financial position or operational results”. The report also revealed VGW was fielding enquiries from the Australian Taxation Office and had launched a review of its tax obligations in Australia, the US and Malta. “It is possible that the review may identify that additional tax may be required to be paid on historical positions,” it said. The group, whose three-member board is devoid of independent directors, is also reviewing its corporate governance, its operating structure and its brands, and investing in a new centralised tech platform. “Pleasingly, all brands grew and while group operating costs increased, this was in line with revenue growth, and the investment in our people, operations and marketing will support our prudent ongoing expansion at an industry-leading level of practices and responsibility,” Mr Escalante said. “Our balance sheet remains strong and the future is bright, with several exciting growth opportunities.”