Zeal Network SE — Audit Report / Information 2018

Mar 21, 2019

ZEAL Network SE

Investor Call, Annual Report as of 31/12/18 London, 21 March 2019

This presentation has been produced by ZEAL Network SE (the "Company") and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person.

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Contents

• 1. ZEAL at a Glance
• 1. Business Update
• 1. Financial Update
• 1. Appendix

2018 at a glance – strong, profitable, growing

➢ Excellent results

• TOP up 13% YoY
• Adjusted EBIT up 85% YoY
• ➢ Strong cash generation
• Net cash up 47% YoY to €101.9m
• ➢ Record number of new registered customers
• Up 49% vs 2017
• ➢ Awarded lottery license in Czech Republic
• ➢ ZEAL will reunite with Lotto24 – Germany's largest private digital lottery broker

Business Update – positive momentum

Lottery Betting segment

• Billings up 6% for the year
• 74% more new registered customers acquired vs 2017
• Customer acquisition costs reduced by 42% vs 2017
• UK lottery betting began scale-test and delivered promising billings

Lottovate segment

• Spanish lottery services business showing profitable growth
• Closure of Ventura24's consumer facing business
• UNICEF-Lotteriet Positive signs
• Acquired 5% stake in a lottery syndicate disruptor and 10% in a travel-deal subscription company
• First foreign operator to be awarded a lottery license in the Czech Republic

Areas of focus

• Complete Lotto24 reunification, implement business model change, deliver synergies.

• Continue building international portfolio

• Continue improving marketing efficiency.

Billings grew for third consecutive year

• Billings of €296.3m for the Group; up 6% on previous year
• Q4 2018 billings up 6% vs Q4 2017
• Driven by positive performance in DLTB products, IWG and US Lotteries

TOP and Revenue increase again

1) Negatively impacted by higher than expected prize pay-outs

• TOP up 13% YoY

• Driven by higher billings and lower exceptional payouts

• Statutory Revenue up 15% YoY
• Normalised Revenue up 7% YoY.

¹⁾ Negatively impacted by higher than expected prize pay-outs

Like-for-like costs following downward trend

• Like-for-like costs down by 3% YoY
• Exceptional items of €8.3m due to the takeover offer of Lotto24 AG and implementation of a restructuring program, partly offset by decrease in other costs of operations of €3.6m

Strong EBIT performance

• Strong Adjusted EBIT* of €46.6m & Normalised Adjusted EBIT of €49.4m
• Q4 Adjusted EBIT* set an operational record with €17.5m
• Statutory EBIT of €38.3m
• Net profit of €26.7m
• Earnings per share (EPS) up 56% to €3.18 (2017: €2.04)

Strong cash generation

• Net Cash has increased by €32.4m YoY
• €38.3m profit before tax for 2018
• €7.2m inflow from working capital and other non-cash movements
• €4.2m decrease in hedging reserve due to adjustments to the current hedging risk structure
• (€6.8m) income tax paid
• (€10.2m) paid in dividends to shareholders and purchase of treasury shares

¹ Definition of Net Cash: Cash (without pledged cash) + Short-term financial assets + Other current assets and prepaid expenses, less Trade payables, Other liabilities, Income tax liabilities and a €21.6m hedging reserve

6 million customers and current combined billings of c. €500m

Accelerating growth of online brokerage in Germany

Substantial de-risking and synergies of €57m p/a and €4m internal restructuring program

Well positioned to pursue international growth

ZEAL shareholders approved transaction on 18 Jan 2019

74% of Lotto24 shares tendered to date

Transaction set to complete on 14 May 2019

Brexit Brexit uncertainty continues. Mitigation plans in active process.

Case filed with the court. First court decision is expected soon. We remain confident that ultimately the outcome will be favourable for the Group

Excellent business results – growth in billings, revenue, TOP, EBIT

Strong cash generation – up 47% vs 2017

Like-for-like costs on downward trend

Continued laying the groundwork for international diversification

Created a sustainable growth path by reuniting with Lotto24

Appendix

Anticipated transaction timeline

(1) Incl. fairness opinion (2) Will be followed by 2-week additional offer period (3) Up to 20 banking days later in case of hard Brexit

Consolidated Income Statement and Balance Sheet in €k

		31/12/18	31/12/17	Change in %
t n	Revenue	154,751	134,295	+15.2
e m	Total operating performance	159,652	141,246	+13.0
e at	Total costs of operations	(121,345)	(116,065)	+4.5
St e m o c n I	EBITDA	47,742	26,436	+80.6
	EBIT adjusted	46,595	25,181	+85.0
	EBIT	38,307	25,181	+52.1
	Earnings before taxes	37,985	25,231	+50.5
	Profit	26,663	17,178	+55.2

et		31/12/18	31/12/17	Change in %
	Current assets	162,280	134,477	+20.7
e h	Non-current assets	6,932	6,634	+4.5
S e c n a al B	ASSETS	169,212	141,111	+19.9
	Current liabilities	42,096	32,730	+28.6
	Non-current liabilities	3,918	1,765	+122.0
	Equity	123,198	106,616	+15.6
	EQUITY & LIABILITIES	169,212	141,111	+19.9

	Lottery betting	Lottovate	Business unit total	Normalisation adjustments	Other adjustments	Statutory
Revenue from secondary lottery	119,646	–	119,464	(4,377)	186	115,455
Revenue from instant win games	13,562	–	13,562	1,744	–	15,306
Revenue from ticket sales and commission	16,217	7,773	23,990	–	–	23,990
Other operating income	4,391	537	4,928	(202)	175	4,901
Total operating performance	153,816	8,310	162,126	(2,835)	361	159,652
EBITDA	56,977	(7,682)	49,295	(3,071)	1,518	47,742
Depreciation/amortisation	(860)	(287)	(1,147)	–	–	(1,147)
Adjusted EBIT	56,117	(7,969)	48,148	(3,071)	1,518	46,595
Exceptional costs	–	–	(8,288)	–	–	(8,288)
EBIT	–	–	39,860	(3,071)	1,518	38,307
Financial result	–	–	–	–	(322)	(322)
EBT	–	–	39,860	(3,071)	1,196	37,985
Income tax	–	–	–	–	(11,322)	(11,322)
Net Profit/loss	–	–	39,860	(3,071)	(10,126)	26,663

e		2018	2017	Variance
u n	Statutory	154,751	134,295	20,456
e v e	Normalised	157,384	147,020	10,364
R	Variance	(2,633)	(12,725)

		2018	2017	Variance
T	Statutory	46,595	25,181	21,414
BI E	Normalised	49,430	38,096	11,334
	Variance	(2,835)	(12,915)

Billings (in €m)	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	2017	2018
	64.1	64.0	61.7	72.4	68.3	65.5	67.8	77.7	262.2	278.8
ABPU (in €)	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	2017	2018
	54.4	56.2	60.3	59.7	58.0	53.3	58.0	60.4	57.6	57.6
MAU (in k)	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	2017	2018
	393	380	341	405	392	410	384	427	380	404

Financial Calendar 2019

Publication of Q1 Report	7 May 2019
Annual General Meeting	27 June 2019
Publication of Q2 Report	14 August 2019
Publication of Q3 Report	13 November 2019

Frank Hoffmann, CEFA Investor Relations Manager

ZEAL 5 th Floor - One New Change London EC4M 9AF

T +44 (0) 203 739 7123 M +49 (0) 175 2673420 F +44 (0) 203 739 7099

frank.hoffmann@ZEAL-network.co.uk www.ZEAL-network.co.uk