La Française des Jeux Report Solid Results in The First Half of 2023

July 29, 2023 | Government

• Revenue of €1,289 million, up +6% compared to the 1 ^st half of 2022 and +4% on a like-for-like basis [1]
  • Increase in sports betting and online games in competition by +10% to €257 million
  • Lottery growth of +1%, to €958m, limited by the low number of high Loto and Euromillions ^[2] jackpots for the whole half-year which also weighs on the dynamic of digital stakes
  • Good activity in point of sale (stakes +3%) and online (stakes +13%)
• Current EBITDA of €300m, i.e. a margin of 23.3% 
  • Margin of 24.0% excluding the exceptional allocation of €10 million for the prevention of underage gambling over the next five years
• Net income of €181m, up +13% supported by the strong improvement in financial income
• 2023 objectives: expected revenue growth of more than +5%, and more than +3% on a like-for-like basis [3] , with a current EBITDA margin rate maintained at around 24%
• Agreement for the acquisition of Premier Lotteries Ireland, the operator of the Irish lottery, a new major step in the deployment of the international strategy of the FDJ group

BOULOGNE, France, July 27, 2023 (5:45 p.m.) – La Française des Jeux (FDJ), the leading gambling and gambling operator in France, announces its results for the first ^half of 2023.

Stéphane Pallez , Chairman and CEO of the FDJ group, declared: ”  FDJ recorded solid results in the first half, driven by the good growth in stakes in our network of 30,000 points of sale, a sustained dynamic in digital stakes and the integration of new activities. I am also delighted with the acquisition of Premier Lotteries Ireland, the operator of the Irish lottery, a long-standing partner within the Euromillions community. Becoming a foreign lottery operator marks a new major step in the international development of the FDJ group . »

Key figures (in millions of euros)

	H1 2023	H1 2022 published	Var.
Turnover *	1,289	1,212	+6.3%
current operating income	240	245	-2.2%
Net profit	181	160	+13.5%
	308308	308308
Current EBITDA **	300	308	-2.7%
Current EBITDA / revenue margin	23.3%	25.4%

* Turnover: net income from games and income from other activities

** Current EBITDA: current operating income restated for depreciation and amortization

Highlights

• Agreement for the acquisition of Premier Lotteries Ireland, the operator of the Irish lottery, a new major step in the deployment of the international strategy of the FDJ group

FDJ today signed an agreement to acquire Premier Lotteries Ireland, the operator holding the exclusive rights to the Irish National Lottery until 2034, for an enterprise value of €350 million. The finalization of this transaction remains subject to the usual conditions precedent, in particular the authorization of the Irish lottery regulator, which should take place in the second half of 2023.

In 2022, Premier Lotteries Ireland recorded gross gaming revenue (GGR) of €399 million and revenue of €140 million, with an EBITDA margin rate comparable to that of FDJ, i.e. an additional contribution to Group growth of more than 5% over a full year.

• New formula of the Amigo game

Amigo, a point-of-sale game with a draw every 5 minutes, was relaunched at the beginning of June with a revised formula in accordance with the decision of the National Gaming Authority. This relaunch is accompanied, in particular, by the reduction in the number of draws (with a suspension for 15 minutes per hour between 6 a.m. and 2 p.m.) and the maximum amount per stake (8 euros versus 20 euros).

• Support for points of sale affected by the riots

About 450 FDJ points of sale suffered more or less significant damage during the summer riots; two-thirds of them have already reopened. The Group works alongside its retailers, in particular by postponing direct debits or managing unpaid bills, and supports them in order to facilitate their reopening, for example through the Rebond fund (personalized support system, launched in 2020, to provide administrative assistance , legal support, financial support, etc.).

• Increased support for underage gambling prevention

To further strengthen its actions in favor of responsible gambling, and in particular against underage gambling, FDJ made an exceptional commitment of 10 million euros at the beginning of 2023 to support, over the next five years, actions to prevent gambling. minors, carried out by associations and which will begin by the end of the year.

• 30 years of the FDJ Foundation in favor of equal opportunities

Since 1993, the FDJ Corporate Foundation has helped more than 300,000 beneficiaries throughout France. It supports projects of general interest intended for people in difficulty and strives to support innovative projects in favor of equal opportunities through education and inclusion in society. According to an EY study, for 1 euro of support for associations by the FDJ Foundation, the social value created amounts to 3.4 euros.

• Renewal of the “A” rating on the Axylia carbon score

FDJ obtained, for the 2nd ^consecutive year, the “A” carbon score of the Vérité40 index established by Axylia and composed of the 40 best carbon scores of SBF 120 companies.

Activity and results for the 1st ^half of 2023

Gross gaming revenue (GGR) is the benchmark indicator of the level of activity in the gambling industry. For better comparability, the presentation of the FDJ group’s income statement is now aligned with this aggregate, which corresponds to stakes, net of the share going to winners, and the GGR of other activities.

Unless otherwise indicated, the data and analyzes below, up to and including current operating income, are based on a restated 2022 base, integrating L’Addition (July 2022) and Aleda (November 2022) over comparable periods.

• Revenue of €1,289 million, up +6.3% and +3.6% like-for-like

GGR amounted to 3,295 million euros, up +2.4%. After 2,082 million euros in public levies, up +1.9%, net income from games (PNJ) ^[4] came to 1,218 million euros, up +3.0%, on the base of stakes increased by +4.4%.

Taking into account income from other activities of 71 million euros, the Group’s half-year sales amounted to 1,289 million euros, up +3.6%. Compared to the published data for the 1 ^st half of 2022, the increase in turnover is +6.3%.

• By distribution channel and by activity

• By distribution channel

Points of sale stakes increased by +3.2%, to 9,155 million euros, supported by sports betting and instant games.

Digital bets continued their momentum, driven by sports betting and the lottery. They were up by +13.3%, at 1,332 million euros, a performance attributable in particular to the increase in the number of players. Digital bets represent nearly 13% of total bets.

• By activity

The Group’s organization is structured around three operating segments: two “Business Units” (BU), Lottery and competitive sports betting and online games, and diversification activities which include three activities under development (International, Payment & Services, and Entertainment), with cross-functional support functions (notably customer, distribution and information systems), and the holding company, which mainly groups central costs.

The contribution margin is one of the main performance indicators for these segments. It is calculated as the difference between the revenue of the segments and the costs of sales (including retailer remuneration), and the marketing and communication costs (excluding depreciation) attributed to them.

• Competitive sports betting and online games

Revenue from competitive online sports betting and gaming amounted to 257 million euros, up +10.5% compared to the 1 st ^half of 2022, on the basis of stakes up +13 .0%. The return to players rate, which gradually normalized in the 2nd ^quarter compared to its high level in the 1st ^quarter , was slightly higher than the level of the 1st ^half of 2022.

Business growth, strong across both distribution channels, benefited from the momentum of the FIFA World Cup at the end of 2022 and a larger football calendar.

Cost of sales amounted to 123 million euros, up +12.0% (+13 million euros) compared to the 1st half of 2022. They correspond mainly to the remuneration of retailers, whose change is in line with that of the network bets. Marketing and communication costs amounted to 59 million euros. Their increase of +10.6% (+6 million euros) compared to the 1 ^st half of 2022 reflects the dynamic activity.

The contribution margin of the competitive sports betting and online games BU amounted to €74 million, an increase of €6 million, representing a contribution margin rate of 28.9%.

• Lottery

Lottery revenue amounted to €958 million, up +1.3%, on the basis of stakes up +2.3%.

This performance, despite a high basis for comparison in the first half of 2022 which reflected the very successful relaunch of Cash in February, is attributable to instant games (wagers +4%), with very well received launches and relaunches such as Carré Or in ^January , Club Color in March or Numéro Fétiche in May.

The performance of draw games (stakes -1%) is explained by a low number of high Loto and Euromillions jackpots over the whole half-year, games whose rate of transformation of stakes into turnover is high and which benefit a high rate of digitization. In addition, the induced effects of the new Amigo formula implemented at the beginning of June are hampering the performance of the game.

Cost of sales amounted to 527 million euros, up +2.6% (+13 million euros) compared to the 1 st ^half of 2022. They correspond mainly to the remuneration of retailers for 393 million euros. euros, whose increase of +1.5% is in line with that of network stakes over the period. Marketing and communication costs were down -4.6%, at 82 million euros.

The contribution margin of the Lottery BU was almost stable at 349 million euros, with a contribution margin rate of 36.4%.

• Diversification

Diversification activities (Payment & Services, International and Entertainment) recorded revenue of €74 million. Compared to a restated 2022 base, the increase of 8 million euros is mainly driven by the International business and the contribution margin stands at 3 million euros, an improvement of 7 million euros.

As announced, the Group has taken measures to improve the profitability of its business in the United Kingdom. Thus, on July 5, Sporting Group’s B2C – spread betting [5] activity was the subject of the signing of a preliminary sale agreement, which will be effective when the competent authorities have given their approval.

• Current operating profit of €240 million and current EBITDA of €300 million, i.e. a current EBITDA margin rate of 23.3%

Cost of sales amounted to 701 million euros: 493 million euros in remuneration for retailers, the increase of which (+3.1%, i.e. +15 million euros) is correlated to that of tune-ups of sales, and 208 million euros of other cost of sales, of which the increase of +4.1% (+8 million euros) reflects in particular the impact of inflation on various expense items among which the game media.

Marketing and communication costs amounted to 223 million euros, almost stable compared to last year. They include the costs linked to the development of the range of games and services, in particular digital, which continue to rise, as well as the costs of advertising and communication, which are falling.

Administrative and general costs mainly include the costs of personnel and central functions, as well as the costs of buildings and the costs of IT infrastructure. They amount to 118 million euros, including 10 million euros of exceptional allocation relating to the support, for the next five years, of actions to prevent underage gambling carried out by associations. Their increase compared to the 90 million euros for the 1 ^st half of 2022 notably reflects the impact of inflation on the main expense items.

Over the half-year, the Group continued its operational efficiency measures, in particular to offset the impact of inflation on its cost base. These measures will be reinforced in the second part of the year.

Other operating income and expenses amounted to -7 million euros and mainly include the charge for the amortization of exclusive game operating rights.

The Group’s current operating income (COI) thus amounted to 240 million euros, down -3.5% (-9 million euros) compared to the 1st ^half of 2022.

Current EBITDA corresponds to current operating profit restated for depreciation and amortization. Based on net amortization of tangible and intangible assets of 60 million euros compared to 63 million euros in the 1 st ^half of 2022, current EBITDA stood at 300 million euros, down – 3.8% (-€12 million) compared to the first ^half of 2022.

Thus, the current EBITDA margin rate stands at 23.3%. Excluding the exceptional endowment of 10 million euros to support actions to prevent underage gambling carried out by associations, the margin rate for the 1 st ^half of 2023 would be 24.0%.

Other non-recurring operating income and expenses amounted to -€14 million, compared to -€6 million in the 1 st ^half of 2022. They mainly include the impact of the revaluation of Sporting Group’s B2C assets – spread betting being sold and the costs related to the external growth strategy.

Operating income for the 1st ^half of 2023 came to 225 million euros, down -5.7% (-14 million euros) compared to that of the 1st ^half of 2022.

• Net profit of 181 million euros, +13% compared to the 1 ^st half of 2022 as reported

The change in financial income (+€19 million in the 1 ^st half of 2023 compared to
-€22 million in the 1 ^st half of 2022) reflects the rise in interest rates and a more favorable financial market environment.

The Group’s tax expense amounted to 65 million euros, i.e. an effective tax rate of 26.8% for the first ^half of 2023.

Consolidated net income for the 1 ^st half of 2023 thus amounted to 181 million euros, up +13.5% compared to the 1 ^st half of 2022 as published.

Net cash surplus of 941 million euros at the end of June 2023

One of the indicators representative of the Group’s cash level is the net cash surplus (NET) [6] .

As of June 30, 2023, the ENT amounted to 941 million euros. Its change compared to the 900 million euros of December 31, 2022 is mainly explained:

• By a free cash flow of 327 million euros, after taking into account a working capital surplus of 78 million euros and tangible and intangible investments for 64 million euros;
• Partially offset by 253 million euros in dividends for the 2022 financial year and 38 million euros in tax.

For information, the level of net cash surplus at the end of June cannot be extrapolated to the end of December because there are significant calendar effects on the settlements of public levies with, in particular, an advance payment on public levies in December.

Outlook 2023

Taking into account the 1 ^st half and the full effects of the new Amigo formula expected in the 2 ^nd half, the Group now expects sales to increase by more than +5% and more than +3% on a like-for-like basis [7] , with a current EBITDA margin rate maintained at around 24% for the whole of the 2023 financial year [8] .

FDJ’s Board of Directors met on July 27, 2023 and reviewed the consolidated half-year financial statements closed on June 30, 2023, which were prepared under its responsibility.

The limited review procedures on the half-year accounts have been carried out. The statutory auditors’ limited review report is in the process of being issued.

The condensed half-yearly consolidated financial statements, as well as a financial presentation, are available on the FDJ group website:

• https://www.groupefdj.com/en/investors/financial-publications.html
• https://www.groupefdj.com/en/shareholders/financial-presentations.html

Next Group financial communication

FDJ will communicate on Thursday October 19 after market close on its activity at the end of September 2023.