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Camelot is set to lose its licence to run the National Lottery for the first time since its launch in 1994, after the Gambling Commission announced Allywn Entertainment has been chosen as its preferred applicant.

The commission set the selection of Allwyn as preferred applicant follows a “fair, open and robust competition which received four applications at the final stage”.

This is the highest number of applications since the first National Lottery licence was awarded in 1994.

Allywn is Europe’s largest lottery operator and earlier this year named former chief exec of Sainsbury’s Justin King as its UK Chair.

Alongside Allwyn, the other applicants were existing operating Camelot UK, Sisal Spa and The New Lottery Company. Camelot has been named reserve applicant.

The commission said Allwyn has committed to investment in the National Lottery that is expected to deliver growth and innovation across the National Lottery’s products and channels, resulting in increased contributions to good causes, subject to the protection of participants and propriety.

This milestone marks the first day of a legal standstill period, lasting at least 10 days, that will be followed by a 22-month transition towards the fourth licence.

Andrew Rhodes, Gambling Commission CEO said: “In its lifetime, the National Lottery has raised more than £45 billion for good causes and is rightly seen as a great national asset.

“Our priority was to run a competition that would attract a strong field of candidates. Having received the most applications since 1994, it is clear that we’ve achieved just that.

“I am confident that the success of the competition will lead to a highly successful fourth licence – one that maximises returns to good causes, promotes innovation, delivers against our statutory duties, and which ultimately protects the unique status of the National Lottery.

“We look forward to working with all parties to ensure a smooth handover.”

Morning update

Imperial Brands has announced it has begun negotiations with an unnamed Russian company over the transfer of our Russian assets and operations.

Imperial said it believes that, in the current circumstances, an orderly transfer of its business as a going concern “would be in the best interests of our Russian colleagues”.

The group employs 1,000 people in Russia in sales and marketing operations and its factory in Volgograd - and said “their safety and wellbeing is our key priority in this process”.

It added that it will continue to pay their salaries until any transfer is concluded.

Meanwhile, it said it was supported Ukrainian colleagues and their families, including with transport and accommodation to enable them to escape the areas most severely hit by conflict, as well as resettlement assistance for those who have left Ukraine.

It said the exit from Russia and suspension of operations in Ukraine will impact its financial performance.

It now expects full-year constant currency net revenue growth of around 0-1% and a relatively small impact on our constant currency adjusted operating profit, reflecting the limited profit contribution of the two markets.

In 2021 Russia and Ukraine represented in total around 2% of net revenues and 0.5% of adjusted operating profit.

Elsewhere, Ocado has struck a deal with Auchan Retail to partner with its Polish operations to build an online delivery service.

Auchan Poland and Ocado will initially build a Customer Fulfilment Centre to serve the Warsaw region, beginning in 2024, with additional CFCs to be announced at future dates.

Auchan Poland will also leverage Ocado’s in-store fulfilment software across its hypermarkets nationwide to enable more efficient picking from those stores, covering both its food and non-food business.

Ocado said the structure of fees agreed with Auchan Poland are similar to those agreed with other international Ocado Solutions partners. Auchan Poland will pay Ocado certain fees upfront and during the development phase, then ongoing fees linked to both sales achieved and installed capacity within the CFC and service criteria.

Ocado Group and Auchan Retail will continue to explore the potential to further develop our relationship with partnerships in other geographies.

The agreement is mutually exclusive in Poland on the basis of Auchan Poland, in the longer term, meeting market share targets or ordering an agreed amount of CFC capacity per annum.

Tim Steiner, CEO of Ocado Group, commented: “”Today though, we recognise that this announcement comes at a very difficult time for everyone in Poland, including many cherished colleagues working in our technology development centres in Wrocław, Krakow and elsewhere.

“The human tragedy unfolding in Ukraine, and the refugee crisis along its borders, has shocked the world. My thoughts, and those of everyone at Ocado Group, are with the Ukrainian people and everyone impacted by Russia’s invasion of their country.”

Gérard Gallet, CEO of Auchan Retail Poland, added: “In the current very difficult context we are faced with, our teams are very committed to help Ukrainian refugees with the support of NGOs like Caritas and Red Cross. We strongly call for peace in Ukraine. At the same time, we would like to prepare our company for the future.”

“The development of ecommerce services is our priority direction, which we have been consistently pursuing for years, and recently especially intensively. The partnership agreement with Ocado Solutions is the best proof of our commitment. I am convinced that the introduction of such innovative and forward-looking solutions will be a significant step for our company on the way to achieving the leading position in the e-grocery market in Poland.”

Also this morning, Virgin Wines has posted a broadly flat first half despite a “significantly more challenging trading environment.

Revenue for the six months to 31 December were in line with the previous year at £40.6m, up 55% compared with the first half of 2020.

Adjusted operating profit before tax was £3.3m, which was also was broadly in-line with £3.4m in the corresponding period last year.

It said strong net cash generation of £13.6m leaves it in a “positive position to assess further opportunities to invest in growth, whether that be in adjacent markets, through M&A or through international expansion”.

Sales generated by subscription schemes grew 23% in to £26.3m and by 77% compared to 2020. The popularity of its WineBank scheme continues to build with membership increasing by 11k customers (9.3%) in the past six months delivering a 28% increase in revenue year-on-year.

The balance of total customer deposits in WineBank also continued to build with £5.2m of customer money held at 31 December 2021 (WineBank deposits are not included in the company net cash balance), up 42% on 31 December 2020 and “is an excellent indicator of future revenue as customers save for their ongoing wine orders”.

However, it saw decreased levels of organic walk-up traffic and the lapsing of PAYG customers led to only modest growth of 2k in the active customer base over the past six months to 185k customers.

It said the continued focus on recruiting a high-quality and loyal customer base, alongside building the number of customers in our subscription schemes, resulted in a sales retention rate of 94%.

Customer acquisition was the “most challenging” area of the business, with aggressive competitor pricing coupled with the wider promotional schemes made throughout the sector to potential customers over the Christmas trading period, led to decreased traffic to the website from acquisition activity.

New customers were acquired at an average cost of £13.62 per new customer, up from £12.65 last year, while the conversion rate achieved was 56.2%.

Virgin Wines said there had been “significant pressure” across its operations over the past six months, with warehouse labour, principally temporary labour over the Christmas period, particularly competitive.

This coupled with a significant increase in absenteeism as the Omicron variant took hold in December 2021 led to a challenging environment, and ultimately to an early cut-off for guaranteed Christmas deliveries costing the business circa £800k of sales in the final week running up to Christmas.

Additionally, increased costs in shipping, packaging, glass and courier charges led to pressure on the cost price of our goods although the group was able to mitigate much of this through flexible merchandising, efficiencies and beneficial FX rates.

It said there continues to be inflationary pressure in multiple areas of the supply chain and it will keep pricing continually under review to ensure gross margins are maintained.

CEO Jay Wright commented: “As expected, the trading environment has evolved considerably over recent months, and given strong prior year comparatives, we have worked hard to maintain encouraging growth from our core sales channels, whilst maintaining strict discipline around our customer acquisition and our cost control.

“This result demonstrates the strength of the underlying business model, our discipline in acquiring good quality customers, the reliability of future subscription revenues from a highly engaged customer base and the ability to generate free cashflow as well as our award-winning consumer propositions, the quality of our wines and our outstanding customer service.

“The second half of the year has started well. We continue to make progress with our strategic initiatives and remain in line with management expectations.”

Finally, Sainsbury’s has named Shore Capital as a joint corporate broker.

UBS will continue to act as the company’s joint corporate broker and joint financial adviser.

On the markets this morning, the FTSE 100 has plunged 1.5% to 7,087pts.

Fallers include THG, down 5.8% to 82.2p, Naked Wines, down 4.3% to 374.5p and Marks & Spencer, down 2.7% to 161p.

Risers include McColl’s, up 9% to 2.3p, Bakkavor, up 2.6% to 108.8p and Coca-Cola Europacific Partners, up 2% to €44.00.

Yesterday in the City

The FTSE 100 opened the week up 0.5% to 7,193.4pts yesterday.

Risers included DS Smith, up 5.9% to 325.2p, McColl’s, up 5.3% to 2.1p, Greencore, up 4% to 120.3p, Associated British Foods, up 4% to 1,766.5p, Nichols, up 3.5% to 1,400p, Marks & Spencer, up 3.3% to 165.5p, Pets at Home, up 2.7% to 386p and Coca-Cola Europacific Partners, up 2.6% to €43.12.

The day’s few fallers included Just Eat Takeaway.com, down 5.9% to 2,449p, Bakkavor, down 3.6% to 106p, Domino’s Pizza Group, down 2.6% to 355.4p and British American Tobacco, down 1.4% to 3,025.5p.

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