Rehab says nothing mysterious about its low profit margins

Rehab Lotteries director John McGuire said yesterday there was nothing secretive or mysterious about the "low profit margins" associated with its gaming products.

He also accused Minister for Justice Alan Shatter of misrepresenting how a State compensation scheme for charity lotteries was established and how it operated.

Mr McGuire, a former director of fundraising at Rehab, said returns from its bingo and scratch cards games were made each year to the Government, detailing sales, prizes, costs, how much was raised and how this money was used.

Condition
"That has been a condition of the scheme so it can't have come as a surprise to Minister Shatter to learn that the return on the scratch cards was as poor as it is at the moment," he said.

An audit carried out by the Department of Justice showed the charity’s gross lottery sales in 2010 of almost €7.2 million yielded a net profit of €558,000 or just 8 per cent. The figures indicated bingo sales of €3,190,000 yielded profits of only €548,000 while scratch card sales of €3,969,000 yielded profits of only €9,452.

Poor margins
Explaining the seemingly low profit margins, Mr McGuire said about 82-83 per cent of turnover from scratch card sales was taken up by prize payouts, which accounted for 62 per cent of sales, with the remaining going to retailers' commission and associated printing and distributing costs.

The remaining 17-18 per cent was spent on fixed costs related to the 12 staff members responsible for operating the games, he said.

While Rehab’s bingo game has a similar cost structure, he said its profitability was higher because the prize payout was lower, about 45 per cent.

Mr Shatter’s decision last year to pull the plug on funding for charity lotteries has soured relations between Government and Rehab.

The charity, which is awaiting the result of a High Court challenge against the decision, was apparently caught off guard by Mr Shatter's surprise intervention on the matter in the Dáil on Tuesday.