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October 7, 2019

Growth still sustained in the 3rd quarter of 2019: Positive outlook for 2020 Profitable growth momentum set to continue in the run up to 2025

#Corporate

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  • Stakes up by 8% and revenue up by 7% at the end of September 2019

    • Forecast for 2019: stakes up by over 7%, to approximately €16.9 billion, revenue of approximately €1.9 billion and EBITDA of approximately €325 million.

  • Positive outlook for 2020[1]

    • Revenue up by around 5% over the year

    • An EBITDA margin in line with that of 2019

  • Profitable growth momentum set to continue in the run up to 2025

    • Over 2020-­2025, average annual organic growth in stakes and revenue at the upper end of the +3% / +4% range.

    • 2025 EBITDA margin of over 20%.

Stéphane Pallez, Chairwoman and CEO of FDJ Group said: "The positive momentum recorded by FDJ since the start of the year has been confirmed in the third quarter. A continuous increase in revenue and stakes across all segments confirms the favourable outlook and that the Group is on track to meet its objectives for 2019. FDJ benefits from a new, stable regulatory framework, granting 25-year exclusive rights over Lottery, and Sports Betting at points of sale. Combined with the strength of our business model, this gives us confidence that this momentum is set to continue in 2020 and up to 2025."

Sustained growth in the 3rd quarter of 2019, in line with annual targets

  • Revenue up 7% at the end of September

At the end of September 2019, stakes amounted to €12.54 billion, up 8% compared with the first nine months of 2018. The positive performance recorded in the 1st half (up 7%) continued in the 3rd quarter (up 9%, to €4.12 billion).

Over the first nine months of 2019, prizes of €8.52 billion were paid out, an 8% increase, hence a player payout ratio of 68% vs. 67.8% over the same period in 2018, and 68.4% in the 1st half of this year. The increase in player payout ratio was attributable to changes in the product mix, owing to the strong performance of Sports Betting and growth in instant games.

On this basis, FDJ's gross gaming revenue (GGR = stakes – prizes) was up 7% to €4.02 billion. FDJ's contribution to public finances was up 8% to €2.63 billion.

Net gaming revenue (NGR = GGR – contribution to public finances) was €1.40 billion, i.e. 11.2% of stakes, stable vs. the end of June 2019 and the end of September 2018.

Accounting for other revenue of €25 million, FDJ Group revenue totalled €1.42 billion at the end of September, up 7% compared with the same period in 2018 (details in Appendix 1 and 2).

  • Stakes up 8% at the end of September and 9% in the 3rd quarter
  • Loto and Euromillions combined stakes up 10% in the 3rd quarter thanks to exceptional jackpots

At the end of September, Lottery stakes were up 6% to €9.98 billion, a slight acceleration vs. the end of June, due in particular to the exceptional performance of draw games, including Loto and Euromillions (up 2% at the end of September and up 10% in the 3rd quarter alone for these two games together).

Overall, at the end of September, growth was being driven by:

  • Draw games, up 5% to €3.97 billion, benefiting from many long cycles[2], 16 in total at the end of September 2019 vs. 13 over the same period in 2018. At the end of September 2019, Loto had 9 long cycles, the most recent of which paid out €20 million. Over the same period, Euromillions had 7 long cycles, including a "record" that started at the end of July and remained ongoing at the end of September, having reached the maximum payout capped at €190 million. In the 3rd quarter alone, these two games accounted for 20% of Group stakes;
  • Instant games, up 8% to €6.02 billion, with a rich flow of new games (ten launches / relaunches since the start of the year). The increase in stakes is mostly due to new, mainly one-off, games and is concentrated on the €5-15 category (up 10% at the end of September);
  • Online gaming confirmed its strong growth momentum (+27%), driven by product range extension and mobile usage.
  • Sports Betting up 14%

At the end of September 2019, Parions Sport stakes were up 14%, to €2.56 billion, with three sports notably driving this momentum: tennis, football and basketball.

In an ever-buoyant market, despite less favourable events vs. 2018, Parions Sport En Ligne (online) and Parions Sport Point de Vente (at point of sale) continue to perform well, thanks to an enriched product range and attractive betting odds.

  • Significant increase in digitalised stakes: +38%

Digitalised stakes continued to increase significantly, up 38% to €2.41 billion at the end of September 2019, representing almost 20% of the Group’s stakes. This was driven by the development of online games and the digitalisation of stakes in points of sale, particularly for Sports Betting.       

Stakes in the steady 30,000+ points of sale network stood at €11.77 billion at the end of September, up 6% compared with the same period in 2018.

Forecasts for 2019 and 2020[3]

  • Player stakes up by over 7% in 2019

FDJ expects to record stakes of around €16.9 billion for the full 2019 financial year, up by over 7% compared to 2018 and driven by Sports Betting and Lottery.

The Group also expects revenue of around €1.9 billion. With adjusted revenue[4] of €2 billion:

  • Lottery should generate revenue in excess of €1.55 billion;
  • Sports Betting should generate revenue of around €370 million;
  • Revenue from other activities should amount to around €50 million, including the integration of Sporting Group over the whole financial year.

Group EBITDA, excluding costs related to FDJ’s privatisation and IPO, is expected to reach €325 million vs. €319 million in 2018, hence an increase despite the rise in distributors commission rates introduced at the beginning of the year.

For 2020, the Group is targeting growth in player stakes at the upper end of the +4% / +5% range, benefiting in particular from the UEFA Euro 2020 football tournament, as well as growth in revenue of around 5% like-for-like4 with c.+5% for Lottery and c.+6% for Sports Betting. EBITDA margin should be in line with that of 2019 on an adjusted basis4 (i.e. 19%).

Outlook: profitable growth momentum set to continue in the run up to 2025

FDJ has established its 2025 strategic plan taking into account 1) the validation for 25 years of its exclusive rights over Lottery, and Sports Betting at points of sale, and 2) the new tax regime and regulatory framework. This plan leverages the momentum initiated with the 2020 strategic plan, particularly in terms of digitalisation and international development.

Over 2020-­2025, FDJ is targeting an average annual organic in stakes and revenue of between 3% and 4%, aiming for the upper end of this range. In terms of revenue, Sports Betting should grow at a faster rate than Lottery, while other activities, notably International B2B and Payment & Services at points of sale, should contribute to sustain growth.

By 2025, EBITDA margin should be in excess of 20%, excluding external growth

Over 2020-­2025, FDJ expects total investments of c.€600 million, excluding external growth. These are expected to increase gradually every year in line with revenue while relating mainly to IT transformation, as in the past five years. EBITDA to cash flow conversion should be maintained at c.80%, in line with trends observed in the past. Finally, FDJ aims for a dividend payout ratio of 80%, subject to shareholders’ approval at the Annual General Meeting. In 2020, the dividend that will be paid in relation to the fiscal year 2019 should be in line with that paid for 2018.

About Française des Jeux (FDJ) Group

FDJ is the historical and unique Lottery operator in France, #2 in Europe and #4 worldwide. FDJ is also the main Sports Betting operator in France. FDJ offers more than 85 games, lottery – draw-based games (Loto, Euromillions) and scratch-card games (Millionnaire, Astro, Vegas, Cash) - and sports betting (Parions Sport), at points of sale and on line.

Appendix

  1. Breakdown of player stakes*

In billions of Euros

Stakes 9m 2019

Stakes 9m 2018

Change

FDJ total

12.54

11.64

+8%

Lottery

9.98

9.39

+6%

Instant games**

6.02

5.59

+8%

Draw games

3.97

3.79

+5%

Sports Betting

2.56

2.25

+14%

 

Digitalised stakes***

2.41

1.74

38%

Offline distribution network stakes

11.77

11.07

+6%

Unaudited figures

* Stakes are the sums wagered by players and do not constitute FDJ Group revenue.                                                                              

** Mainly scratch games (online and at points of sale).

*** Digitalised stakes comprise stakes placed online and dematerialised stakes at points of sale, i.e. using a digital service/app for their preparation before being registered at point of sale.

  1. From stakes to revenue

In billions of Euros

9m 2019

9m 2018

Change

Player stakes

12.54

11.64

8%

Prizes won

8.52

7.89

8%

Payout ratio

68.0%

67.8%

 

Gross gaming revenue*

4.02

3.74

7%

GGR as a % of player stakes

32.0%

32.2%

 

Net gaming revenue**

1.39

1.31

6%

NGR as a % of player stakes

11.1%

11.2%

 

Revenue***

1.42

1.33

7%

Unaudited figures

*Gross gaming revenue: stakes minus prizes.

**Net gaming revenue: gross gaming revenue minus contribution to public finances.

***Revenue: net gaming revenue plus revenue from other activities.

  1. Divisional breakdown contribution margin by Business Unit (BU)

Since 1 January 2019, the Group has adopted a new organisation that revolves mainly around two business units: Lottery and Sports Betting. For each of these, contribution margin ­ revenue minus cost of sales and marketing & communication expenses (excluding D&A ­ depreciation & amortisation) ­is shown below.

In millions of Euros

2018

 

Lottery BU

Sports Betting BU

Others & holding

Total before D&A

D&A

Group total

Player stakes

12,770

3,047

 

15,817

 

15,817

Gross gaming revenue

4,372

748

 

5,120

 

5,120

Net gaming revenue

1,477

297

 

1,774

 

1,774

Revenue

1,482

297

23

1,803

 

1,803

Cost of sales*

- 874

- 192

- 2

- 1,067

- 33

- 1,100

Marketing & communication expenses**

- 132

- 82

- 48

- 262

- 15

- 277

Contribution margin

476

24

- 27

474

- 49

425

General & administrative expenses

   

- 159

- 159

- 15

- 174

EBITDA

 

   

315

   

Depreciation & amortisation (D&A)

       

- 64

 

EBIT

 

       

251

 

* Costs of sales are the costs pertaining to the distribution and the sale of games, plus all the related back-office functions. They essentially comprise, in order of importance: commissions to point of sale network distributors, costs related to point of sale equipment and those related to the implementation of point of sale promotional activities.

** Marketing and communication expenses comprise, in order of importance: IT costs related to the development and provision of games and services, advertising spend, personnel and operating costs of marketing, advertising and customer function teams, and costs related to the design and facilitation of offers and services.


[1] 2019 adjusted for: (i) full-year integration of Sporting Group, acquired at the end of May 2019, and (ii) full-year impact of the new tax regime applicable from 01 January 2020.

[2]Unwon jackpots are cumulative – starting at €8 million for Loto and €75 million for Euromillions, thus offering increasingly larger jackpots.

  1. Subject to validation from the tax administration of FDJ’s interpretation of the new tax regime

[4] Adjustments include:

  • integration of Sporting Group, acquired in May 2019, over the whole financial year, representing a positive impact of c.€15 million;
  • full-year impact of the new tax regime based on gross gaming revenue (GGR) applicable as from 01 January 2020. The c.€50m positive impact on revenue represents the elimination of allocations to counterparty funds (requiring a new insurance policy to cover these risks) and the change related to the accounting of promotions with regards to the elimination of player funds.

In 2018, the new tax regime would have had a €50m positive impact on FY revenue. 

Press Contact

Phone

+33 1 41 10 33 82

This number is for the press only.

 

For any question regarding our games and products, please contact our customer service: +33 969 36 60 60 (non-premium call)

Email

For non-urgent requests:
servicedepresse@lfdj.com

 

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