Online lottery provider ZEAL shows first successes after Lotto24 acquisition in first half of 2019.

Billings and total operating performance 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).

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).

“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”.