ZEAL publishes Annual Report 2019 and new dividend policy

• Preliminary figures for 2019 confirmed
• Proposed dividend payment more than doubles
• Outlook 2020 reiterated

(Hamburg, 26 March 2020) ZEAL Network SE (Lotto24.de, Tipp24.com) Germany's leading online provider of state-licensed lottery products, today published its Annual Report 2019 and confirmed the preliminary figures for the 2019 financial year already published on 19 February 2020.

After succeeding in integrating Lotto24 AG, changing its business model to online lottery brokerage and relocating its registered office back to Hamburg ZEAL raised billings by 58% to EUR 466.7 million (2018: EUR 296.3 million) - thanks to the Lotto24 takeover and despite the extensive organisational changes as well as the much weaker EuroJackpot development than in the previous year. At EUR 113.5 million, revenue was down on the previous year's figure (2018: EUR 154.8 million), mainly due to a prize pay-out from the former secondary lottery business and the announced revenue dis-synergies caused by the business model change.

As announced, the Company succeeded in further reducing its cost base: Although additional costs of EUR 22.0 million were incurred in connection with the Lotto24 takeover, total costs fell by EUR 20.6 million to EUR 91.9 million (2018: EUR 112.5 million). At acquisition costs per new registered customer (cost per lead, CPL) of EUR 32.50 (2018: EUR 34.90), ZEAL Group gained 274 thousand new registered customers in fiscal year 2019 - this figure only includes new Lotto24 customers since the takeover on 14 May 2019 and new Tipp24 customers since the business model change on 15 October 2019. At 731 thousand, monthly active users (MAU)¹ significantly increased following the Lotto24 takeover (2018: 404 thousand). As result of the closure of the secondary lottery business in October 2019, average billings per user (ABPU)² decreased to EUR 53.20 (2018: EUR 57.57).

¹ MAU: is the average of the monthly active users in each month in 2019. Up to 14 May 2019, this includes Tipp24 users only. Both Lotto24 and Tipp24 customers are included from 15 May 2019 to the end of the year.
² ABPU: Average billings per user, is calculated as the total billings in the year divided by total monthly active users. It includes Tipp24 users and their billings up to 14 May 2019. Both Lotto24 and Tipp24 customers and their billings are included from 15 May 2019 to the end of the year.

Due to the revenue dis-synergies and the last high prize pay-out, adjusted EBITDA (result from operating activities before amortisation, depreciation and non-recurring expenses) of EUR 29.4 million was, as expected, down on the previous year (2018: EUR 47.7 million), but in line with the recently raised guidance of between EUR 27 million and EUR 30 million. After deducting depreciation and amortisation charges mainly resulting from the takeover of €8.8 million (2018: €1.2 million) and additional non-recurring expenses of €11.4 million (2018: €8.3 million), EBIT fell to €9.1 million (2018: €38.3 million).

Proposed dividend payment more than doubles

Following the takeover of Lotto24 AG and the resulting change in business model, ZEAL Network SE adapted the dividend policy to the new circumstances and, in view of the Company's relocation back to Germany in October 2019, did not pay an interim dividend in December 2019 in accordance with German practice.

However, the dividend policy of the Company is based on continuity and sustainable earnings development. Due to the positive liquidity situation of the ZEAL Group in 2019 and the expected increasing profitability, the Management Board and the Supervisory Board will propose a total amount of pay-out of EUR 17.6 million (2018: EUR 8.4 million) to the Annual General Meeting on 17 June 2020. This corresponds to a dividend of EUR 0.80 per share for the fiscal year 2019 (2018: EUR 1.00). Depending on the economic development of the ZEAL Group, the Management Board and the Supervisory Board also intend to propose an annually increasing dividend to shareholders in the following years - with the aim of reaching EUR 1.00 per share in 2022.

"We have reviewed our dividend policy in light of the business model change, the sustainability of the online lottery brokerage business and the growth opportunity in the German market," says Jonas Mattsson, CFO of ZEAL Network SE. "We aim to be attractive for our shareholders not only as Germany's leading online provider of lottery products - mostly independent of economic cycles and comparatively low risk - but also because of our consistent dividend policy based on continuity and sustainable earnings development."

Outlook 2020 reiterated

ZEAL plans to further expand its market leadership as an online provider of state lottery products with the Lotto24 and Tipp24 brands in fiscal year 2020. Aware that the comparative figures for the previous year are difficult to compare with those forecast for 2020 due to the Lotto24 takeover in May 2019 and the business model change from a secondary lottery to an online lottery broker in Germany in October 2019, ZEAL Group expects billings of between EUR 550 million and EUR 570 million. This includes for the first time the full year billings of Lotto24 and the discontinuation of the international products as part of the termination of the secondary lottery business. Based on the expected dis-synergies as a result of the business model change, ZEAL anticipates revenue of between EUR 70 million and EUR 73 million in the fiscal year 2020. As the gross margin in the online lottery brokerage business is naturally lower than in the riskier secondary lottery business, the company expects a gross margin of approximately 12% - a comparable level to Lotto24 in recent years. Depending on the general conditions, in particular the jackpot development, the timing of the implementation of the planned synergy effects and the marketing investments for the acquisition of new customers, EBITDA is expected to be between EUR 5 million and EUR 8 million. Due to the access to proven, more cost-effective marketing channels, the Company expects the German business of ZEAL Group to nearly double the number of new customers in 2020 with a lower CPL compared to the previous year.

* Including Lotto24 since 14 May 2019, German secondary lottery business up to 15 October 2019 and Tipp24 online lottery brokerage business beginning with 15 October 2019
** Result from operating activities before amortisation, depreciation, impairment and non-recurring expenses
*** Related to the Germany business of the ZEAL Group;
2019: incl. Lotto24 since 14 May 2019 and Tipp24 only since the business model change on 15 October 2019

About ZEAL Network SE: ZEAL Network SE, Germany's leading online provider of state-licensed lottery products, is a Hamburg based Group which mainly brokers customers' tickets to the state lottery companies through the brands Lotto24.de and Tipp24.com, for which it receives a commission. The offerings include among others »Lotto 6aus49«, »Spiel 77«, »Super 6«, »EuroJackpot«, »GlücksSpirale«, lotto clubs, »Keno« and the »Deutsche Fernsehlotterie«. Founded in Germany in 1999, it was initially set up as a lottery broker. In 2005, it was floated on the Frankfurt Stock Exchange (Prime Standard) and became one of the most successful initial public offerings (IPOs) in Germany at the time. In 2009, the Group changed its focus from lottery brokerage to the secondary lottery business. It moved its registered office to London and was renamed as ZEAL Network SE in November 2014. In May 2019, ZEAL completed the takeover of Lotto24 AG, returned its Tipp24 secondary lottery to the German brokerage business in October 2019 and relocated its registered office back to Germany in the same month.

Contact:
Frank Hoffmann
Investor Relations Manager
T: +49 (0)40 808 141-123
frank.hoffmann@zealnetwork.de