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:

*Not including Lotto24

Contact:
Frank Hoffmann
Investor Relations Manager
T: +44 (0)20 3739 7123

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.