REG-ZEAL Network SE ZEAL Network SE: Adjustment of EBIT Guidance

ZEAL Network SEAnnouncement

19/11/2018 07:30

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   ZEAL Network SE (-)
   ZEAL Network SE: Adjustment of EBIT Guidance

   19-Nov-2018 / 08:29 CET/CEST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   ZEAL Network SE: Adjustment of EBIT Guidance

   As the following forecasts are prepared on the basis of assumptions about
   future events and actions, it naturally entails substantial uncertainties.
   The forecasts constitute the forecasts for the financial year 2018 of
   Earnings Before Interest and Tax (the 'ZEAL Profit Forecast') and of Total
   Operating Performance (the 'ZEAL Revenue Forecast'). Because of these
   uncertainties it is possible that the actual revenue and/or profit of the
   ZEAL Network SE ('ZEAL') group may differ materially from the forecasted
   numbers.

   Based on the following factors and assumptions and associated
   uncertainties, ZEAL expects for the financial year 2018 that Earnings
   Before Interest and Tax (EBIT) will range between EUR 33 million and EUR
   38 million, and Total Operating Performance (TOP) between EUR 150 million
   and EUR 160 million. This is not a statement about facts and should not be
   interpreted as such by potential investors. Rather, it is a statement
   about the expectations of ZEAL's management in respect of EBIT and TOP of
   the ZEAL group.

   ZEAL defines EBIT as Earnings Before Interest and Tax and Total Operating
   Performance as the sum of revenue and other operating income. In this
   context, ZEAL considers EBIT to provide a measure of the ZEAL group's
   ability to increase the economic value of its operating activity over a
   period of time and TOP to provide a measure of the statutory revenue and
   other operating income (including income from hedging activities) of the
   ZEAL group.

   The ZEAL Profit Forecast is based on the assumptions set out below made by
   ZEAL's Executive Board for the development of the influencing factors of
   EBIT and TOP of the group. The assumptions used in the ZEAL Profit
   Forecast relate to factors which (i) cannot be influenced by the ZEAL
   group and those which (ii) can, even if only to a limited extent, be
   influenced by the ZEAL group. Even if ZEAL believes that these assumptions
   are reasonable at the time of the estimate of EBIT and TOP by ZEAL's
   management, they may prove erroneous or unfounded. If one or more of these
   assumption(s) prove(s) to be erroneous or unfounded, the actual result
   could deviate materially from the ZEAL groups' current EBIT and TOP.

   The members of the Executive Board of ZEAL confirm that the ZEAL Profit
   Forecast is valid, has been properly compiled on the basis of the
   assumptions stated and that the basis of accounting used is consistent
   with ZEAL's accounting policies.

   These forecasts relate to EBIT and TOP in line with guidance previously
   provided by ZEAL and as a means of evaluating the financial performance of
   the ZEAL Group. Generally ZEAL releases profit forecasts annually. When
   ZEAL released its preliminary results for the financial year 2017, it
   released its first profit forecast for 2018 - of EBIT between EUR 33
   million and EUR 43 million, and Total Operating Performance (TOP) between
   EUR 150 million and EUR 160 million. The profit forecast was confirmed in
   each case when ZEAL released its results for the first three, six and nine
   months of 2018.

   The adjustment of the upper end of the EBIT forecast range for the
   financial year 2018 in the ZEAL Profit Forecast in comparison to the
   previously released and confirmed profit forecasts for 2018 from EUR 43
   million to 38 million, while maintaining the lower end of the range of EUR
   33 million, includes the impact of transaction costs in connection with
   the announced intention of ZEAL to make a public takeover offer for
   Lotto24 AG as well as restructuring expenses in connection with an
   internal cost savings programme initiated on the date of the announcement.

   Except for the narrowing of the previously forecasted EBIT range, the
   Executive Board of ZEAL confirms its previously published guidance and
   expects the ZEAL group to generate Total Operating Performance (TOP) of
   EUR 150 million to EUR 160 million in the financial year 2018.

   Explanatory notes to the ZEAL Profit Forecast

   Basis of Preparation

   The ZEAL Profit Forecast was prepared on the basis of management forecasts
   of the results of ZEAL for the financial year ending 31 December 2018.

   The accounting policies applied in the preparation of the forecast are
   consistent with the accounting policies applied in the preparation of the
   ZEAL's annual report for the year ended 31 December 2017 which are
   explained in pages 77 to 90 of ZEAL's annual report for the year ended 31
   December 2017.

   The intended takeover offer for Lotto24 AG is not expected to complete
   until after the end of the period covered by the ZEAL Profit Forecast and
   so, with the exception of transaction costs of EUR 3.5 million, the impact
   of the intended takeover offer has not been included in the ZEAL Profit
   Forecast.

   Additionally, the ZEAL Profit Forecast for EBIT in the range between EUR
   33 million and EUR 38 million includes restructuring and severance costs
   of approximately EUR 4.5 million which will also be treated as Exceptional
   Items in ZEAL's results for the year ended 31 December 2018.

   Assumptions

   The ZEAL Profit Forecast is based on the following assumptions:

   Factors outside ZEAL's influence or control

   The ZEAL Profit Forecast is subject to certain factors outside the
   influence or control of ZEAL. The relevant assumptions are described
   below:

   While preparing the forecast, ZEAL's Executive Board assumes that no
   significant unforeseeable results will occur that could lead to
   significant constraints in its ongoing business operations. In particular,
   ZEAL's Executive Board assumes that no or only insignificant changes will
   occur in respect of current legal and regulatory framework as it pertains
   to ZEAL.

   - It is assumed that there will be no material changes in legislation or
   regulatory requirements impacting on ZEAL's operations or its accounting
   policies.

   - It is assumed that the market for secondary lotteries, especially in
   Germany, will not suffer any negative developments, and that ZEAL will be
   able to retain its current competitive positions in the markets in which
   it operates.

   - It is assumed that the occurrence and size of jackpot prize events in
   the markets in which the ZEAL group operates will be in line with long
   term trends.

   - The ZEAL Profit Forecast is susceptible to the level of pay-outs won by
   customers. In preparing the ZEAL Profit Forecast, ZEAL's Executive Board
   assumes that statistically expected pay-out levels will be incurred in the
   forecast months.

   - It is assumed in the ZEAL Profit Forecast that no
   individually-significant jackpot prize wins will be borne by ZEAL group in
   the forecast months before the end of 2018.

   - It is assumed that no financial or economic crisis will occur that
   affect Europe and specifically Germany, and that the economic conditions
   in Germany will not suffer any negative developments.

   - It is assumed that there will be no other material changes to the
   conditions of the markets in which ZEAL operates.

   - It is assumed that the principal exchange rates to which ZEAL's results
   are exposed to fluctuations will remain materially unchanged from the
   prevailing rates.

   - It is assumed that there will be no material change to the competitive
   environment leading to an adverse impact on customer preferences.

   Factors within ZEAL's influence or control

   Other factors that can be influenced or controlled by ZEAL affect the ZEAL
   Profit Forecast. The relevant assumptions are described below:

   - It is assumed that there will be no material change in ZEAL's ability to
   negotiate new business, and that there will be no material change to the
   ZEAL's customer base or the ability or willingness of the customer base to
   meet its obligations to ZEAL.

   - It is assumed that there will be no material change in ZEAL's
   go-to-market approach, and that historic trends of customer retention and
   acquisition will remain materially unchanged.

   - It is assumed that the scale and type of marketing activity to retain
   existing customers and acquire new customers will not materially change.

   - With the exception of the exceptional transaction and restructuring
   costs described above, it is assumed that the level of cost incurred by
   ZEAL will not materially change over the remainder of the financial year
   2018.

   Examination and Reporting Accountant's Report of the ZEAL Profit Forecast

   The Reporting Accountant's Report by Ernst & Young of the examination of
   the ZEAL Profit Forecast for the financial year 2018, which is available
   for inspection at the Company's offices, reads as follows:

   The Directors
   ZEAL Network SE
   5th Floor - One New Change
   London
   EC4M 9AF

   Lazard & Co. Limited
   50 Stratton Street
   London
   W1J 8LL

   19 November 2018

   Dear Sirs

   We report on the profit forecast comprising forecast of EBIT of Zeal
   Network SE (the 'Company') and its subsidiaries (together the 'Group') for
   the year ending 31 December 2018 (the 'Profit Forecast'). The Profit
   Forecast, and the material assumptions upon which it is based, are set out
   in the announcement titled 'ZEAL Network SE: Adjustment of EBIT Guidance'
   released by the Company on 19 November 2018 pursuant to Article 17 MAR of
   the Regulation (EU) No 596/2014 (the 'Announcement'). This report is
   required by Rule 28.1(a)(i) of The City Code on Takeovers and Mergers (the
   'City Code') and is given for the purpose of complying with that rule and
   for no other purpose.

   Save for any responsibility that we may have to those persons to whom this
   report is expressly addressed, to the fullest extent permitted by law we
   do not assume any responsibility and will not accept any liability to any
   other person for any loss suffered by any such other person as a result
   of, arising out of, or in connection with, this report or our statement,
   required by and given solely for the purposes of complying with Rule 23.2
   of the City Code by consenting to its inclusion in the Announcement.

   Responsibilities

   It is the responsibility of the directors of the Company to prepare the
   Profit Forecast in accordance with the requirements of the City Code.

   It is our responsibility to form an opinion as required by the City Code
   as to the proper compilation of the Profit Forecast and to report that
   opinion to you.

   It is the responsibility of Lazard to form an opinion as required by, and
   solely for the purpose of, rule 28.1(a)(ii) of the City Code as to whether
   the Profit Forecast has been prepared with due care and consideration and
   to report that opinion to you.

   Basis of preparation of the Profit Forecast

   The Profit Forecast has been prepared on the basis stated in the
   Announcement and is based on the unaudited interim financial results for
   the six months ended 30 June 2018, the unaudited management accounts for
   the four months ended 31 October 2018 and a forecast to 31 December 2018.
   The Profit Forecast is required to be presented on a basis consistent with
   the accounting policies of the Group.

   Basis of opinion

   We conducted our work in accordance with the Standards for Investment
   Reporting issued by the Auditing Practices Board in the United Kingdom.
   Our work included evaluating the basis on which the historical financial
   information included in the Profit Forecast has been prepared and
   considering whether the Profit Forecast has been accurately computed based
   upon the disclosed assumptions and the accounting policies of the Group.
   Whilst the assumptions upon which the Profit Forecast are based are solely
   the responsibility of the Directors, we considered whether anything came
   to our attention to indicate that any of the assumptions adopted by the
   Directors which, in our opinion, are necessary for a proper understanding
   of the Profit Forecast have not been disclosed and whether any material
   assumption made by the Directors appears to us to be unrealistic.

   We planned and performed our work so as to obtain the information and
   explanations we considered necessary in order to provide us with
   reasonable assurance that the Profit Forecast has been properly compiled
   on the basis stated.

   Since the Profit Forecast and the assumptions on which it is based relate
   to the future and may therefore be affected by unforeseen events, we can
   express no opinion as to whether the actual results reported will
   correspond to those shown in the Profit Forecast and differences may be
   material.

   Our work has not been carried out in accordance with auditing or other
   standards and practices generally accepted in Germany or other
   jurisdictions and accordingly should not be relied upon as if it had been
   carried out in accordance with those standards and practices.

   Opinion

   In our opinion, the Profit Forecast has been properly compiled on the
   basis stated and the basis of accounting used is consistent with the
   accounting policies of the Group.

   Yours faithfully

   Ernst & Young LLP

   Report on profit forecast by ZEAL Network SE for purposes of Rule
   28.1(a)(ii) of the City Code on Takeovers and Mergers

   The Executive Board
   ZEAL Network SE
   5th Floor - One New Change
   London EC4M 9AF
   United Kingdom

   19 November 2018

   Dear Sirs,

   Report on profit forecast by ZEAL Network SE for purposes of Rule
   28.1(a)(ii) of the City Code on Takeovers and Mergers

   We refer to the profit forecast comprising a forecast of EBIT of ZEAL
   Network SE (the 'Company') and its subsidiaries for the year ending 31
   December 2018 (together, the 'Profit Forecast') for which the Executive
   Board of ZEAL (the 'Directors' or 'you') are solely responsible under Rule
   28 of the City Code on Takeovers and Mergers (the 'City Code').

   We have discussed the Profit Forecast and the bases and assumptions on
   which it has been prepared and the accounting policies and basis of
   calculation for the Profit Forecast with the executive officers of the
   Company and with EY as auditors of the Company and reporting accountants
   whose responsibility it is to form an opinion as required by Rule
   28.1(a)(i) of the City Code that the Profit Forecast has been properly
   compiled on the basis stated and that the basis of accounting used is
   consistent with the Company's accounting policies. We have considered EY's
   letter dated 19 November 2018 addressed to you and us on this matter

   You have confirmed to us that all financial and other information relevant
   to the Profit Forecast has been disclosed to us. We have relied upon the
   accuracy and completeness of all such information and have assumed such
   accuracy and completeness for the purposes of providing this letter to
   you. Our work did not involve an independent examination of any of the
   financial or other information underlying the Profit Forecast. We do not
   express any opinion on the achievability of the Profit Forecast.

   This letter to you is solely in connection with Rule 28.1(a)(ii) of the
   City Code and for no other purpose. We accept no responsibility to the
   Company or its shareholders or any person other than the Directors in
   respect of the contents of this letter. We are acting exclusively as
   financial adviser to the Company and no one else in connection with the
   transaction in connection with which the Profit Forecast has been produced
   and it was solely for the purpose of complying with Rule 28.1(a)(ii) of
   the City Code that you requested us to prepare this letter. No person
   other than the Directors can rely on the contents of this letter and
   accordingly, to the fullest extent permitted by law, we exclude all
   liability (whether in contract, tort or otherwise) to any other person in
   respect of this letter, its contents or the work undertaken in relation to
   this letter, or any of the results or conclusions that can be derived from
   this letter or any written or oral information provided in connection with
   this letter, and in relation to any loss suffered by any such person as a
   result of, or in connection with, this letter.

   On the basis of the foregoing, we consider that the Profit Forecast, for
   which you in your capacity as Directors are solely responsible, has been
   prepared with due care and consideration by the Directors.

   Yours faithfully,

   For and on behalf of
   Lazard & Co., Limited

   Contact:
   Frank Hoffmann, CEFA
   Investor Relations

   ZEAL
   5th Floor - One New Change
   London EC4M 9AF

   T +44 (0) 20 3739-7123
   F +44 (0) 20 3739-7199
   frank.hoffmann@zeal-network.co.uk

   NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART)
   DIRECTLY OR INDIRECTLY IN, INTO OR FROM THE UNITED STATES OF AMERICA OR
   ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
   RELEVANT LAWS OF SUCH JURISDICTION.

   Important note

   This announcement is for information purposes only and neither constitutes
   an offer to purchase or exchange nor an invitation to sell or to make an
   offer to exchange, securities of Lotto24 AG ('Lotto24') or ZEAL Network SE
   ('ZEAL'). The final terms and further provisions regarding the public
   takeover offer will be disclosed in the offer document once its
   publication will have been approved by the German Federal Financial
   Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht).
   ZEAL reserves the right to deviate in the final terms and conditions of
   the public takeover offer from the basic information described herein.
   Investors and holders of securities of Lotto24 are strongly recommended to
   read the offer document and all announcements in connection with the
   public takeover offer as soon as they are published, as they contain or
   will contain important information.

   The offer will be made exclusively under the laws of the Federal Republic
   of Germany, in particular under the German Securities Acquisition and
   Takeover Act (Wertpapiererwerbs- und Übernahmegesetz (WpÜG)). The offer
   will not be made pursuant to the provisions of jurisdictions other than
   those of the Federal Republic of Germany. Therefore, no other
   announcements, registrations, admissions or approvals of the offer outside
   of the Federal Republic of Germany have been filed, arranged for or
   granted.

   The ZEAL shares have not been and will not be registered under the U.S.
   Securities Act of 1933, as amended, or with any securities regulatory
   authority of any state or any other jurisdiction of the United States of
   America ('USA'). Therefore, subject to certain exceptions, ZEAL shares may
   not be offered or sold within the USA or in any other jurisdiction where
   to do so would be a violation of applicable law. There is no public
   offering of ZEAL shares in the USA.

   To the extent this announcement contains forward-looking statements, such
   statements do not represent facts. Forward-looking statements include all
   matters that are not historical facts. They are characterised by the words
   'expect', 'believe', 'estimate', 'intend', 'aim', 'assume', 'plan' or
   similar expressions. Such statements express the intentions, opinions or
   current expectations and assumptions of ZEAL and the persons acting in
   conjunction with ZEAL, for example with regard to the potential
   consequences of the takeover offer for Lotto24, for those shareholders of
   Lotto24 who choose not to accept the takeover offer or for future
   financial results of Lotto24. Such forward-looking statements are based on
   current plans, estimates and forecasts which ZEAL and the persons acting
   in conjunction with it have made to the best of their knowledge, but which
   do not claim to be correct in the future. Forward-looking statements are
   subject to risks and uncertainties that are difficult to predict and
   usually cannot be influenced by ZEAL or the persons acting in conjunction
   with it. Actual events or consequences may differ materially from those
   contained in or expressed by such forward-looking statements.

   This announcement and any materials distributed in connection with this
   announcement are not directed to or intended for release, publication or
   distribution (in whole or in part) directly or indirectly into or from the
   USA or any other jurisdiction where to do so would constitute a violation
   of the relevant laws of such jurisdiction, nor are they directed to, or
   intended for use by, any person or entity that is a citizen or resident or
   located in the USA or in any locality, state, country or other
   jurisdiction where such release, distribution, publication, availability
   or use would constitute a violation of the relevant laws of such
   jurisdiction or which would require any registration or licensing within
   such jurisdiction.

   The ZEAL Profit Forecast is a profit forecast for the purposes of Rule 28
   of the City Code on Takeovers and Mergers (the 'Code'). The ZEAL Profit
   Forecast, the assumptions on which the ZEAL Profit Forecast is based and
   the reports from ZEAL's reporting accountants, Ernst & Young, and its
   financial adviser, Lazard, as required by Rule 28.1 of the Code are set
   out in this announcement. Each of Ernst & Young and Lazard has given and
   not withdrawn its consent to the publication of its report in this
   Announcement in the form and context in which it is included.

   Other than the ZEAL Profit Forecast, no statement in this announcement is
   intended as a profit forecast or estimate for any period and no statement
   in this Announcement should be interpreted to mean that earnings or
   earnings per share for ZEAL or Lotto24 AG, as appropriate, for the current
   or future financial years would necessarily match or exceed the historical
   published earnings or earnings per share for ZEAL or Lotto24 AG, as
   appropriate.

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   ISIN:           GB00BHD66J44
   Category Code:  TST
   TIDM:           -
   LEI Code:       391200EIRBXU4TUMMQ46
   OAM Categories: 2.2. Inside information
   Sequence No.:   6581
   EQS News ID:    747797


    
   End of Announcement EQS News Service

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