REG-ZEAL Network SE ZEAL shows first successes after Lotto24 acquisition in first half of 2019

ZEAL Network SEAnnouncement

14/08/2019 06:40

============

   ZEAL Network SE ( -)
   ZEAL shows first successes after Lotto24 acquisition in first half of 2019

   14-Aug-2019 / 07:36 CET/CEST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

   ══════════════════════════════════════════════════════════════════════════

   ZEAL shows first successes after Lotto24 acquisition in first half of 2019

     • Lotto24 now fully consolidated
     • First cost synergies realised
     • EBITDA almost doubled
     • Guidance provided for 2019

   (London, 14 August 2019) In the first half of 2019, ZEAL Network SE
   ('ZEAL') successfully completed the acquisition of Lotto24 AG ('Lotto24')
   and thus established the ZEAL Group as the leading online provider of
   state-run lotteries in Germany.

   Lotto24 now fully consolidated
   ZEAL has fully consolidated Lotto24 AG since the acquisition date, 14 May
   2019. Billings and total operating performance (TOP) of the ZEAL Group
   increased by 26% to EUR 179.4 million (2018: EUR 141.9 million) and by 6%
   to EUR 79.3 million (2018: EUR 74.9 million) in the first six months of
   2019. This was mainly driven by the positive contribution from Lotto24 but
   partly offset by negative effects from the closure of Lotto Network
   Limited and Ventura24 S.L.U. in November and December 2018.

   The jackpots of the lotteries 'Lotto 6aus49', EuroJackpot and EuroMillions
   only partially supported this growth: although the German lottery 'Lotto
   6aus49' developed better than in the previous year, the European lotteries
   EuroJackpot and EuroMillions were significantly below or only at the
   previous year's level. The EuroJackpot lottery, in particular, showed a
   comparatively weak trend with only one jackpot of EUR 90 million (2018:
   eight).

   First cost synergies realized
   As promised, ZEAL has also succeeded in significantly reducing its cost
   base: at EUR 11.2 million (2018: EUR 15.2 million) and EUR 36.8 million
   (2018: EUR 43.3 million), both personnel expenses and other operating
   expenses were significantly lower than in the previous year. The planned
   reduction in the number of employees from the original 350 to 271 also
   contributed to this. Since the necessary personnel measures have already
   been initiated and communicated to the employees concerned, the company is
   confident that it will have achieved its target of around 200 employees by
   mid-2020.

   Against this background, ZEAL confirms the planned annual cost synergies
   of at least EUR 57 million, of which 80% are to be realized after the end
   of the first year and 100% after the end of the second year following
   completion of the Lotto24 takeover. Even though around 60% of the savings
   - as well as the expected dis-synergies - will only take effect in the
   course of the business model change, the planned reductions in personnel
   expenses and other operating expenses within the combined company account
   for around 40% of the expected total cost synergies.

   With marketing expenses of EUR 11.0 million in the first half of 2019
   (2018: EUR 9.8 million), the ZEAL Group gained 377 thousand new registered
   customers (2018: 293 thousand); Lotto24 accounted for 42 thousand of these
   customers. At 370 thousand, average customer activity measured in monthly
   active users (MAU) was below the previous year's figure (2018: 401
   thousand) due to the comparatively weak jackpot trend. However, average
   billings per user (ABPU) rose to EUR 61 (2018: EUR 56).

   EBITDA almost doubled
   With growth of 84% to EUR 31.2 million (2018: EUR 17.0 million), EBITDA of
   the ZEAL Group almost doubled. Since depreciation - mainly due to the
   capitalization of intangible assets after the acquisition of Lotto24 and
   the application of IFRS 16 - rose to EUR 2.5 million (2018: EUR 0.6
   million), profitability of the new ZEAL Group is better reflected in
   EBITDA. The company will therefore concentrate on this key figure in
   future.
   EBIT rose by 30% to EUR 21.4 million (2018: EUR 16.4 million) despite
   extraordinary expenses of EUR 7.4 million (2018: EUR - million). At EUR
   7.9 million, exceptional items were incurred mainly in connection with the
   takeover of Lotto24, but were reduced by the reversal of provisions of EUR
   0.5 million in connection with the closure of Ventura24 S.L.U. After
   implementation costs of EUR 3.8 million were already incurred in 2018, EUR
   11.7 million of the total planned EUR 15 - 20 million have already been
   expensed as at 30 June 2019.

   Guidance provided for 2019
   In addition to the future jackpot development for major lottery products,
   the exact timing of the planned business model change - in connection with
   the takeover of Lotto24 AG in May 2019 - is of decisive importance for the
   ZEAL Group's forecast. Since the more profitable secondary lottery
   business will be converted to the brokerage business permitted in Germany
   from this date, ZEAL expects negative effects on revenue and profitability
   in the fourth quarter of 2019.

   Based on the expectation of a business model change in October 2019, the
   effects on the customer base that cannot be conclusively assessed from
   today's perspective and the big price pay-out on 10 August 2019, ZEAL
   anticipates TOP for the 2019 financial year significantly below the
   previous year (2018: EUR 160 million) and EBITDA between EUR 18 and 21
   million (2018: EUR 48 million).

   The dividend policy for 2019 remains under review.

   'Even though we still have a lot of work to do, we are well on our way to
   achieving reunification with Lotto24 and the transformation of our German
   core business into online lottery brokerage as planned,' says Jonas
   Mattsson, CFO of ZEAL. 'We are convinced that the combination of the two
   companies will provide the best path to sustainable growth for the ZEAL
   Group and will lead to tangible added value for our customers, employees
   and shareholders'.

   The relocation of the corporate seat back to Germany is also planned for
   October 2019.

   Selected financial key figures to 30 June 2019:

                     H1 2019           H1 2018*
   Billings          EUR 179.4 million EUR 141.9 million
   Statutory Revenue EUR 77.5 million  EUR 73.0 million
   TOP               EUR 79.3 million  EUR 74.9 million
   EBITDA            EUR 31.2 million  EUR 17.0 million
   Exceptional items EUR (7.4) million EUR -
   Statutory EBIT    EUR 21.3 million  EUR 16.4 million
   Net Profit        EUR 14.3 million  EUR 11.1 million
   EPS               EUR 1.21          EUR 1.32

    

   *Not including Lotto24

   Contact:
   Frank Hoffmann
   Investor Relations Manager
   T: +44 (0)20 3739 7123
    1 frank.hoffmann@zeal-network.co.uk

   About ZEAL Network SE:

    1. ZEAL is an international digital lottery group.
    2. The company was founded in 1999. Renamed as ZEAL Network SE in 2014.
    3. The company is headquartered in London.
    4. Its shares are listed on the Prime Standard of the Frankfurt Stock
       Exchange.
    5. Since its incorporation, ZEAL Group has generated stakes of more than
       EUR3 billion and paid out more than EUR1.5 billion in winnings.
    6. ZEAL Group includes all subsidiaries of ZEAL Network SE and the
       affiliated companies of the independent shareholding myLotto24 Ltd.

    

   ══════════════════════════════════════════════════════════════════════════

   ISIN:           GB00BHD66J44
   Category Code:  IR
   TIDM:           -
   LEI Code:       391200EIRBXU4TUMMQ46
   OAM Categories: 1.2. Half yearly financial reports and audit
                   reports/limited reviews
   Sequence No.:   16747
   EQS News ID:    857281


    
   End of Announcement EQS News Service

   ══════════════════════════════════════════════════════════════════════════

    2 fncls.ssp?fn=show_t_gif&application_id=857281&application_name=news&site_id=reuters6

References

   Visible links
   1. mailto:frank.hoffmann@zeal-network.co.uk


============