German lottery provider Zeal Network has reported a 12.3% year-on-year increase in net profit for the first nine months of its 2021 financial year, despite experiencing weaker jackpots.
Revenue for the nine months to 30 September amounted to €65.1m (£55.7m/$74.6m), up 0.9% from €64.5m in the same period last year.
The majority of revenue was generated within Zeal’s core German business, with activities in the country leading to €61.5m in revenue, an increase of 5.3% from €58.4m in 2020.
This, Zeal said, was despite a comparatively weak market environment for lotteries in the country. The ‘Eurojackpot’ lottery only reached the €90.0m mark three times in the period, compared to six last year, while the maximum payout mark for German lottery ‘Lotto 6aus49’, set at €45m since 23 September 2020, was not reached at all.
Zeal said that while these low jackpots had a negative effect on its billings, gross margin and new customer acquisition, it was still able to gain 446,000 new registered customers in the German segment in the nine-month period.
Total group billings – comprising all stakes from customers – also increased by 4.5% to €493.2m, of which the German segment accounted for almost the entire amount (€470.9m).
The period also saw Zeal Network make an offer to purchase all remaining shares in Lotto24 and take full ownership of the online lottery broker it spun off in 2012. Zeal already owned 93% of the shares in Lotto24, with the agreement requiring Lotto24 delist remaining shares from the Frankfurt Stock Exchange in order to allow Zeal to acquire them.
The acceptance period ran from 16 August to 13 September, and the offer was accepted for a total of 22,834 Lotto24 shares, corresponding to 1.42% of share capital. As such, Zeal now holds approximately 94.9% of Lotto24’s share capital.
“The fact that we have managed to continue to grow with a significantly weaker jackpot development compared to the previous year [while] at the same time significantly improve the profitability makes us proud,” Zeal’s chief financial officer Jonas Mattsson said.
“It furthermore demonstrates that we have taken the right measures by adjusting marketing investments and implementing strong cost discipline to match the market reality.”
Turning to costs and personnel expenses were lowered by 12.7% to €14.5m while other operating expenses, including marketing and both direct and indirect operating expenses, were reduced by 22.7% to €33.2m.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was 155.7% higher at €17.6m, while after accounting for €6.6m in depreciation and amortisation costs, earnings before tax and interest was €11.1m, up 286.7% year-on-year.
Pre-tax profit climbed 92.3% year-on-year to €10.8m and after paying €3.4m in income tax, Zeal ended the period with a net profit of €7.3m, an increase of 12.3% on last year.
“The scalability of our business model will also help us in the future to take advantage of market opportunities, adapt to the dynamic environment and continuously optimise,” Mattsson said.