ZEAL on track also in the third quarter 2019

• Increase in billings
• Further cost synergies realized
• EBITDA slightly below previous year
• Forecast and dividend

(Hamburg, 13 November 2019) ZEAL Network SE (Lotto24.de,Tipp24.com),Germany's leading online provider of state lottery products, performed well in the first nine months of 2019 despite the organisational changes resulting from the takeover of Lotto24 AG and the comparatively weak jackpot development.

Billings of the ZEAL Group - including Lotto24 AG, which has been fully consolidated since 14 May 2019 - rose by 57% to EUR 332.6 million in the first nine months of 2019 (2018: EUR 212.4 million, +3% on a like-for-like basis). However, due to the high jackpot win of EUR 26.3 million in August 2019, revenue of EUR 93.2 million (2018: EUR 111.2 million) and total operating performance (TOP) of EUR 101.2 million (2018: EUR 114.1 million) ended up below the respective prior-year figures. As part of the business model change implemented on 15 October 2019, which returned the Tipp24 secondary lottery back to the German brokerage business, fluctuations in revenue and other operating income due to jackpot-related winning pay-outs are no longer expected in the future.

Further cost synergies realized

In the first nine months of 2019, the ZEAL Group also succeeded in further reducing its cost base: Although additional costs of EUR 11.0 million were incurred in connection with the Lotto24 takeover, total costs fell by EUR 11.6 million to EUR 73.1 million (2018: EUR 84.8 million). The planned reduction in the number of employees from the original 350 to 203 and the associated reduction in personnel expenses by EUR 5.2 million to EUR 17.2 million (2018: EUR 22.4 million) contributed in particular to this. In addition, other operating expenses fell by EUR 6.4 million to EUR 56.0 million (2018: EUR 62.4 million) - despite the EUR 2.2 million increase in marketing costs for both brands (Lotto24, Tipp24).

Against this background, ZEAL confirms the planned annual cost synergies of at least EUR 57 million, of which 80 % are to be realized at the end of the first year and 100 % at the end of the second year after completion of the Lotto24 takeover. Even though around 60% of the savings (as well as the expected dis-synergies in revenue) only began to take effect in the course of the business model change in October 2019 and thus had no effect on the first nine months of 2019, the planned reductions in personnel expenses and other operating expenses within the combined company account for around 40% of the expected total cost synergies. The latter have already been almost fully implemented and will thus show further positive effects in the coming quarters. The expected total costs for the realization of the planned cost synergies remain in the targeted range of between EUR 15 and EUR 20 million. So far, costs of EUR 13.7 million have been incurred.

The German market for online lottery brokerage offers considerable growth potential for the ZEAL Group. Thanks to effective marketing in the first nine months of 2019, ZEAL was able to acquire 568 thousand registered new customers for the Group and its partners (2018: 418 thousand excluding Lotto24). Mainly due to the successful brokerage business acquired in May 2019 average customer activity measured in monthly active users (MAU) rose to 952 thousand (2018: 395 thousand excluding Lotto24). At EUR 56.91, the average billings per user (ABPU) in the two segments lottery betting and lottery brokerage together remained at the previous year's level (2018: EUR 56.58 excluding Lotto24).

EBITDA slightly below previous year

Despite the high jackpot pay-out in August 2019, the EBITDA of the ZEAL Group at EUR 28.3 million was only slightly below the previous year (2018: EUR 30.0 million). At EUR 12.9 million (2018: EUR 29.1 million), EBIT was significantly lower than in the previous year (2018: EUR 0.9 million), in particular due to exceptional items of EUR 10.0 million (2018: EUR - million) as well as amortisation and depreciation, which increased to EUR 5.4 million (2018: EUR 0.9 million) as a result of the Lotto24 takeover and the application of IFRS 16. The exceptional items mainly related to activities to restructure the ZEAL Group in connection with preparations for the business model change (EUR 7.9 million) and the takeover of Lotto24 (EUR 2.0 million).

Forecast and dividend

After the secondary lottery business was returned into the brokerage business permitted in Germany on 15 October 2019, ZEAL expects further negative effects on revenue and profitability for the fourth quarter of 2019.

Due to the business model change, the effects on the customer base (e.g. the level and timing of migration from secondary lottery to brokerage), which cannot be conclusively assessed from today's perspective, and the high jackpot pay-out, ZEAL continues to expect total revenue for the 2019 financial year to be significantly lower than in the previous year (2018: EUR 160 million) and EBITDA between EUR 18 and EUR 21 million (2018: EUR 48 million).

Because of the transfer of our registered office back to Germany, we will no longer pay interim dividends, in accordance with German practice. Accordingly, no dividend will be paid in December 2019. We will publish a proposal on the appropriation of profits by the management board and a new dividend policy in our 2019 financial statements in March 2020 at the latest.

"We kept what we promised: We defined the new organisational structure, reduced the number of employees as planned, implemented the business model change, stopped the secondary lottery business and relocated the company headquarters back to Germany. The implementation of cost synergies is also proceeding according to plan," says Jonas Mattsson, CFO of ZEAL Network SE. "We are confident and look forward to continuing our recent success story with our future focus on the sustainable, continuously growing and socially valuable German lottery brokerage business".

Selected financial key figures to 30 September 2019:

*Not including Lotto24
** Including Lotto24 since 14 May 2019

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

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 Hamburg.
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.