NHS Loto operator fights for survival

Pascal & Co has been given until the end of the month to provide 50m funding for the NHS Loto launch. If current negotiations with backers don’t work out, the National Lottery’s only remaining rival will die.

Time is running out for the NHS Loto. The attempt to turn its Thursday night televised draw into a genuine rival to the National Lottery has inflicted casualties on a global scale and those who were intended to benefit are running out of patience.

The two-year search for the estimated 40m to 50m funding needed for a major national launch of the Loto has led to the collapse of a Malaysian conglomerate and left a US businessman facing losses of up to 10m. And for the past year UK advertising agencies have been kept on tenterhooks wondering what has become of an account worth more than 4m – part of the yet-to-be-fulfilled promise of a 20m marketing budget.

Legal action over its registration with a London local authority, its refusal to be registered by the Gaming Board and a referral to the Crown Prosecution Service to investigate its activities all contributed to concerns last year about its continuing operation. The CPS found no case to be answered.

But the fate of the NHS Loto and its operating company, the Wolverhampton-based Pascal & Co, is to be decided by the end of this month.

The Loto’s future hangs on the outcome of new negotiations with an international consortium of backers taking place in locations across the world – from New York to Kuala Lumpur. After more false starts than Linford Christie, the NHS Loto will either be sent off the field or given the green light to chase its rival Camelot.

The NHS Loto raises funds for the National Hospital Trust, which buys medical equipment for NHS hospitals. But the Trust is clearly running out of patience with Pascal. NHT chairman Sir Adrian Blennerhassett says of the search for funding: “It is still in the melting pot, but the deadline is the end of February. It has been dragging on for a long time now, and we have been missing an opportunity of making a noise.”

Blennerhassett warns that if the new consortium fails to come together by the end of this month, the Trust may drop Pascal and the NHS Loto, and search for other methods of funding, on which he refuses to give any detail.

But he is hopeful that talks taking place with potential partners in the US, Switzerland, the UK and Malaysia will provide the necessary investment.

It has been a crucial search for Pascal’s US backer Allan Ginsburg, who has invested nearly 10m in setting up the NHS Loto’s weekly draw, and who, according to Companies House accounts, suffered losses of more than 5.5m on the operation in the 16 months to the end of 1995. They are the most recent figures available and only cover the period before the TV draw began. Ginsburg, according to Blennerhassett, has decided that UK charity lotteries are an expensive and risky business, and wants out.

Perhaps one of his mistakes was to put his faith in a somewhat unlikely plan hatched by a group of Malaysian businessmen at the end of 1995 (MW November 24 1995). Ginsburg sold 51 per cent of Pascal to a company called Stenworld, and Canadian lottery consultant David Lim was hired as a consultant.

Lim tried to set up a deal with the Malaysian feedmiller Sin Heng Chan (SHC), whereby SHC would shift its main business out of the highly competitive Asian chicken feed market and into UK gaming. SHC went to the Kuala Lumpur Stock Exchange with a planned rights issue to raise funds to acquire the capital of Stenworld and provide the funds NHS Loto needs for a national launch.

But the plan hit a snag. The Malaysian Securities Commission rejected the bid because Stenworld had failed to show “reasonable” profits for the past three years, which contravened the Commission’s guidelines for reverse takeovers. SHC’s share price crashed on the news of the rejection, with half its value being wiped out.

By that time the Malaysian directors of Stenworld and Pascal had been replaced by Carol Anne Walmsley and Lorraine Quirke. They were later joined by a third director, Ann Marsh, in October 1996. All three are believed to be employed by Stenworld’s own holding company Whitton Investments (Bahamas).

David Lim returned to Canada. It is unclear whether he still has any involvement in Pascal – it has been suggested he may still be involved in the funding search. But SHC, according to Blennerhassett, has not been deterred from what it sees as the “lucrative” UK gaming market and is still involved in negotiations to fund the launch of NHS Loto.

Pascal chairman Roger Cummins was unavailable for comment at the end of last week.

But just one look at the charity scratchcard market would be enough to put most business people off . The collapse of UK Charity Lotteries and its subsequent acquisition by Littlewoods Lotteries for a sum thought to be 1 should be a salutary lesson. The losses Camelot is sustaining on running Instants scratchcards should be another.

Pascal’s determination to drive a deal shows, if nothing else, the company’s faith in making a success of weekly draws in the same way Camelot has done – raising funds for Good Causes as well as raking in fat profits.

Unlike most other lotteries in the UK, NHS Loto is free of regulation by any watchdog, since it has steered clear of registration with the Gaming Board. It is controlled only by the 1976 Lotteries & Amusements Act and the local authorities with which it is registered, believed to include Croydon and Wolverhampton. This enables funds raised by the Loto to be distributed locally, which the NHT claims is a powerful marketing tool, since players will see the benefits of buying tickets at hospitals in their local areas.

It seems ironic that a local charity is having to go so far afield for its funding.

If the National Hospital Trust ditches the NHS Loto, Pascal will have to look for another charity to back, or wind up its operations. This would leave Ginsburg, or his backers, more out of pocket than 5m, a number of staff without jobs and disappoint those who believe there should be an alternative to the National Lottery. But with the NHT setting a February 27 deadline, the odds are stacked against Pascal.

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