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Zeal hails lottery growth as revenue rises 35.2% in Q1

| By Robert Fletcher
Zeal Network has reported a “strong” start to the year after growth within its core lottery division helped drive revenue up 35.2% to €36.1m (£31.1m/$38.8m) in the first quarter.
Zeal Q1

The three months to 31 March proved to be a successful period for Zeal. Group revenue was higher, while EBITDA and net profit increased from Q1 of last year.

Zeal said this growth was mainly due to the success of its core lottery business, particularly in Germany. However, it also reserved praised for its new online games division, which went live in June 2023, with this returning healthy revenue.

Chief financial officer Sebastian Bielski also references Zeal’s customer acquisition strategy, with more than 320,000 new players secured in Q1. This is approximately 124.0% more than in the same quarter last year.

“We made a very strong start to 2024 and were able to significantly accelerate our revenue growth, particularly in our core business of lottery brokerage,” Bielski said. “We are also particularly proud of the fact that we were able to achieve EBITDA slightly above the previous year’s level in the past quarter.

“This shows that our measures to acquire new customers are paying off very quickly. We are generating income across the entire breadth of our customer base.”

What is the latest on Lotto24?

Bielski also made reference to the “squeeze-out” of Lotto24 that was announced alongside its 2023 full-year results. Zeal set out plans to acquire the remaining shares in the Lotto24 subsidiary. 

Zeal currently holds 94.86% of shares in Lotto24 and reached agreements to buy a further 0.59% stake, which would take its total holding to 95.45%. It also said it would seek approval to transfer the shares of any remaining minority shareholders of Lotto24 to Zeal. 

In March, Zeal secured a further 0.59% holding in Lotto24, with its overall holding now over 95.0%. As such, it meets conditions for a squeeze-out of the subsidiary, with the idea of taking on all remaining shares in the coming weeks.

By completing the squeeze-out, Zeal says this will help reduce complexity, save on costs and optimise its tax situation. 

“With the announced squeeze-out at Lotto24, we are also putting Zeal in the best possible position for the future and are leveraging further efficiency potential,” Bielski said.

Lottery revenue tops €32.0m in Q1

Taking a closer look at Q1, revenue from core operations in Germany increased by 36.6% to €34.7m.

This was driven by a 28.5% rise in lottery revenue to €32.0m. Activity here was boosted by record jackpots across both the Lotto 6aus49 and Eurojackpot lotteries. However, average jackpot for Lotto 6aus49 was lower than the previous year.

Zeal also noted the impact of a 21.0% rise in the number of active customers per month (MAU). In addition, average billings per user (ABPU) edged up 1.0% to €61.59.

As for the online games business in Germany, revenue totalled €2.2m. The segment only launched in June of last year, so there were no year-on-year comparable figures. However, Zeal did reveal that quarterly revenue was 22.2% higher than in Q4 of 2023.

Zeal said it expects revenue to continue to grow after it received a licence to publish more games. Secured in Q1, the licences allow 64 titles to be added to the online games offering, with this taking place over the coming weeks and months.

In terms of other activity outside Germany, revenue from these operations increased 9.0% to €1.4m. This was primarily generated from the ONCE business in Spain.

Zeal also references billings, which comprise stakes from players, including brokerage stakes and associated VAT net of bets. Total lottery billings in Q1 were 22.2% higher at €246.3m, with no comparable for the online games business.

Zeal posts €21.1m net profit

Turning to spending, costs were higher across almost all core areas at Zeal during Q1. The main outgoing was other operating expenses at €21.0m, up 68.0%, with marketing spend also jumping 91.4% to €13.4m.

Depreciation and amortisation fell 13.6% to €1.9m, while the group also noted €563,000 in finance costs and a €53,000 loss from associates. As such, Zeal was left with a pre-tax profit of €6.9m, marginally higher than €6.8m in 2023.

However, the bottom-line figure for Zeal was much higher, due in part to movement on the Lotto24 squeeze-out and the impact on tax. Zeal noted €14.2m in positive tax impact after the initial recognition of deferred tax assets on tax losses caried forward after the squeeze-out request.

As such, net profit for Q1 amounted to €21.1m, some 382.8% ahead of €4.4m in 2023. In addition, as referenced by Zeal, EBITDA edged up year-on-year to €9.4m. 

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