Net profit down at Zeal as rising costs offset revenue growth in 2023

For the 12 months to 31 December 2023, revenue at Zeal hit €116.1m (£99.2m/$126.2m) up 10.4% from the previous year. Billings, comprising stakes from players, including brokerage stakes and associated VAT net of bets, also climbed 11.2%.

Reflecting on the year, Zeal says the main highlight for the group is the launch of its online games offering. Zeal rolled out games in Germany through its Lotto24 B2C subsidiary and sister brand Tipp24 in June 2023. 

Zeal went live with an initial selection of games, adding more content to its portfolio during the year. The online games launch, Zeal said, had a positive impact on the business, generating an additional €3.0m in revenue for 2023.

As for the core lotteries business, there was more good news for Zeal. Revenue here was up year-on-year, with revenue rising 7.6% to €105.7m.

Increasing market share for Zeal

However, despite revenue growth, Zeal ended 2023 with a lower net profit than the previous year. This came as costs increased across the business, with marketing and personal among the areas where Zeal spent more.

While the bottom-line figures will be disappointing, Zeal CEO Helmut Becker said the launch of online gaming offering offers potential for further growth. He also welcomed higher revenue from the lotteries segment.

“In 2023, we further expanded our position as market leader,” Becker said. “We’re benefiting from our strong brands. Lotto24, for example, has developed into a winner’s factory, producing more record winners last year than any other lottery provider in Germany.

“Our strong top- and bottom-line results and our market share, which has grown to 41.4%, show that we are on the right track. We are therefore looking to the future with determination and confidence.”

Counting the costs of expansion

Expanding its business meant Zeal had to spend more during 2023, with costs higher across all segments. The largest increase was personnel expenses, with this increasing by 19.6% to $22.6m.

Other operating costs were up 8.8% to €62.0m for 2023. Within this area, marketing was the main outgoing, with expenses here up 5.6% to €36.0m. Direct operating costs also rose 12.2% to €12.0m and indirect operating expenses 14.8% to €14.0m.

Zeal also noted €9.3m in amortisation and depreciation costs, as well as $1.3m in financial costs. As such, it was left with a pre-tax profit of $23.3m, down 2.2% from $22.8m in 2022.

The group paid €8.6m in tax, leaving a net profit of €13.7m, a decline of 17.5% from €16.6m in the previous year. However, there was some good news in terms of EBITDA, with this up 3.8% to €32.9m.

Growth expectations for 2024

Looking to the current year, Zeal mapped out its expectations. It plans to accelerate the growth of the newly launched games offering and introduce new products in the charity lottery segment.

This, it said, will likely lead to an increase in revenue. For 2024, Zeal said revenue should amount to between €140.0m and €150.0m, with the midpoint of €145.0m being 24.9% higher than 2023.

As for EBITDA, Zeal forecast a range of between €38.0m and €42.0m. Taking the midpoint of €40.0m, this would be 21.6% ahead of 2023’s total.

“The strong growth in our billings and revenue shows that we inspire our customers with our attractive and innovative product range,” Zeal chief financial officer Sebastian Bielski said. “Our continuously growing customer base also proves that we have expanded our marketing activities in a targeted manner. 

“At the same time, our successful start in the online games business clearly shows that we are in a position to successfully develop new business areas.”

Zeal seeks full holding of Lotto24

In other news, Zeal has announced plans to acquire the remaining shares in the Lotto24 subsidiary. 

Zeal currently holds 94.86% of share in Lotto24 and has reached agreements to purchase a further 0.59% stake, which would take its total holding to 95.45%. This is expected to occur in the next few days.

After these agreements are complete, the group will seek approval to transfer the shares of any remaining minority shareholders of Lotto24 to Zeal. The business said it would provide cash compensation to shareholders in exchange for their holdings.