ZEAL Network SE Investor Call Annual Report 2015 London, 30 March - PowerPoint PPT Presentation

ZEAL Network SE Investor Call Annual Report 2015 London, 30 March 2016

Highlights 2015 Strong underlying business performance, with normalised revenue and EBIT up year on year ‘Normalised’ 1 Revenue increased by 7% to € 141.2m (2014: € 131.8m) • • ‘Normalised’ EBIT increased by 173% to € 47.1m (2014: € 17.3m) Statutory Numbers € k 2015 2014 Change % Total Operating Performance (TOP) 140,986 145,651 (3) EBIT 42,859 19,156 123 • Total operating performance: – Product portfolio enhanced with the successful introduction of Instant Win Games – Plus favourable jackpot situation drove revenue up – Offset by higher jackpot pay-outs than in the previous year • EBIT of € 42.9m, significant increase compared to prior year ( € 19.2m) due to a reduction of gaming duty and other cost savings 1 ‘Normalised’ revenue is defined as statutory revenue adjusted for statistical fluctuation differences 30 March 2016, Earnings Call Annual Report 2015 2

Business Unit and Investments Update (1/2) B2C: • Strong fourth quarter boosted by favourable jackpot situation • Launch of nine Instant Win Games on Tipp24.com • Well received by our customers • Leading to an increase in revenue per customer • For 2016, we expect that recent regulatory changes will allow us to address more marketing channels B2B/B2G: • Deal signed with UNICEF Norway. License application process underway • Significant headway in the development of charity lottery partnerships • Costs incurred in project development are in line with previously approved plans • We expect our Spanish business lines to be EBIT accretive in 2016 30 March 2016, Earnings Call Annual Report 2015 3

Business Unit and Investments Update (2/2) Geonomics and GeoLotto (‘Geo’) Investments Impairment • ZEAL assessed the viability of the business plans for Geo • Management concluded that these no longer supported their carrying value • An impairment charge was recorded against the carrying value of the assets Acquisition • After a comprehensive review of the Geo business model, ZEAL management agreed that having the Geo investments as a wholly owned part of the Group would be beneficial for both parties • As a result ZEAL acquired the remaining shares of Geonomics for a cash consideration of GBP 0.8m, by way of a share purchase agreement which was signed on 10 th March 2016 • Thereby allowing ZEAL to leverage the skills of the Geo Tech team to accelerate the development of the Group’s B2B and B2G products • And also securing the innovative IP which underpinned the Geo24 games for potential future use • Management intends to close down the websites 30 March 2016, Earnings Call Annual Report 2015 4

Development of Revenue and Earnings (1/2) in million € Comments 5.1% (36.8%) 140.7 141.2 131.8 • ‘Normalised’ revenue increased by 7% due to Revenue 89.0 favourable jackpot situation and expanded product portfolio 37.1 35.3 2 34.9 35.9 36.7 36.5 32.1 26.2 29.6 • ≠ Statutory Revenue negatively impacted by higher 1 -9.2 pay-outs compared to previous year Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 1) Negatively impacted by one high prize pay-out of € 47.9m Normalised 2) Negatively impacted by one high prize pay-out of € 15.0m Total Operating Performance 37.9% (3.2%) • Total Operating Performance (down € 4.7m) also impacted by higher prize pay-outs compared to 145.7 previous year 141.0 • Impact was largely covered by hedging instrument income of € 47.9m 1 49.1 35.6 1 2 36.1 29.5 26.4 ≠ Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 1) Impacted by Spanish lottery tax of € 9.6m 2) Negatively impacted by one high prize pay-out of € 15.0m 30 March 2016, Earnings Call Annual Report 2015 5

Development of Revenue and Earnings (2/2) in million € Comments 177.5% 123.4% 47.1 • Normalised EBIT rose in 2015 by 173% from 42.9 EBIT € 17.3m to € 47.1m 1 • 22.2 Strong EBIT growth driven by a lower cost structure, 19.2 17.3 including a decrease in Gaming Duty of € 17.5m 14.1 12.5 11.5 11.2 11.9 8.0 8.4 1 2 4.4 2.2 ≠ Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 1) Impacted by Spanish lottery tax of € 9.6m Normalised 2) Negatively impacted by high prize pay-out of € 15.0m (261.9%) (75.5%) • Net profit decrease of € 4m Decrease driven mainly from the non-cash charge • 9.5 Net profit for the Geo investments in Q4 5.3 4.2 3.3 1.3 • Earnings per share (EPS) of € 0.16 (2014: € 0.63) ≠ • Without Geo investments charges the EPS would -4.6 be € 2.67. -6.8 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 30 March 2016, Earnings Call Annual Report 2015 6

Development of Expenses (1/2) in million € Comments (22.6%) (22.9%) Personnel expenses 1 • Cost increase explained by insourcing of technical (25.4) service provider ( € 2.5m personnel costs of former (20.7) technical service provider in 2015) • Additional increase in headcount ( € 1.3m) (6.5) (6.7) (6.4) • Additional bonus expenses ( € 1.0m) (5.3) (5.9) 19.9% 18.6% 18.1% 17.7% 18.0% 16.1% 15.7% ≠ Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 Marketing expenses 1 • 9.1% 6.5% Marketing expenses broadly flat year on year (10.7) (10.0) (3.7) (2.2) (2.5) (2.0) (1.8) 10.2% 7.4% 6.9% 8.1% 7.1% 5.5% 5.4% ≠ Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 26.0% 41.8% • Gaming duty savings of € 17.5m in 2015 Direct costs 1 (53.9) • Reduction in hedging costs of € 5.4m in 2015 (31.4) • Fluctuations within the year due to ‘natural (13.1) (9.7) hedging’ costs (8.4) (7.1) (6.1) 40.9% 44.2% 26.4% 22.2% 22.1% 23.4% 16.8% ≠ 1 Percentage of normalised revenue Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 30 March 2016, Earnings Call Annual Report 2015 7

Development of Expenses (2/2) in million € Comments (15.6%) 25.8% • Impact by cost shift into personnel costs due to Other costs of (34.5) acquisition of technical service provider ( € 2.5m) operations 1 (25.6) • Decrease of consulting costs ( € 4.3m) in 2015 • Decrease of outsourcing costs ( € 1.4m) in 2015 (7.4) (6.4) (6.2) (6.1) (5.8) 26.2% 18.1% 20.3% 21.5% 17.3% 16.8% 18.0% ≠ Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 • Geo non-cash charges adversely impact financial (737.5%) (247.8%) result Financial result 1 (23.3) (20.1) (6.7) 54.7% (2.4) (1.0) (0.5) (1.7) 16.5% 8.0% 5.5% 6.9% ≠ 4.8% 5.1% Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 • Consolidated tax rate of 93.1% in 2015 (2014: 57.4%) (535.7%) (154.2%) resulted from following effects: Income taxes 2 – Tax losses carried forward ( € 4.7m) (18.3) – Non-deductible losses ( € 4.6m) – Settlement of legal cases and uncertain tax positions ( € 5.3m) (8.9) (7.2) (5.0) • Expected tax rate without tax one-offs would have (3.7) 424.1% (1.4) 93.1% 57.4% (0.7) been 31% for 2015 1185.9% 24.5% 27.9% ≠ 18.1% 1 Percentage of normalised revenue Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2014 2015 2 Tax rate in % 30 March 2016, Earnings Call Annual Report 2015 8

Development of net cash in million € Comments • € 23.5m dividends paid in 2015 • Definition of net cash: Cash (without pledged cash) (11.2%) + Short-term financial assets 43.5 + Other current assets and prepaid expenses 42.9 34.9 33.2 31.0 - Trade payables Net cash - Other liabilities - Income tax liabilities - € 50 million hedging reserve 31/12/2014 31/03/2015 30/06/2015 30/09/2015 31/12/2015 ZEAL’s Net Cash position broadly flat compared to December 2014 despite: • Dividend payments of € 23.5m • High prize pay-out • Unfavorable working capital movements 30 March 2016, Earnings Call Annual Report 2015 9

Dividend Policy Total Dividend of € 2.80 per year Quarterly Interim Dividends End of End of End of € 0.70 Jun. Sep. Dec. 31/03/16 expected expected expected 30 March 2016, Earnings Call Annual Report 2015 10

Guidance 2016 Guidance 2016 in € million Total Operating 140 - 150 Performance EBIT 40 - 50 2016 guidance represents strong growth after normalizing 2015 for higher than expected jackpot situation 30 March 2016, Earnings Call Annual Report 2015 11

Financial calendar Publication of Q1 Report 13 May 2016 Publication of Q1 Report 13 May 2016 Annual General Meeting Annual General Meeting 22 June 2016 22 June 2016 Publication of Q2 Report Publication of Q2 Report 12 August 2016 12 August 2016 Publication of Q3 Report Publication of Q3 Report 11 November 2016 11 November 2016 Annual report 2016 30 March 2017 30 March 2017 30 March 2016, Earnings Call Annual Report 2015 12

Appendix

Consolidated Income Statement and Balance Sheet in € k 2015 2014 Change in % Income Statement Revenue 88,962 140,702 (36.8) Total operating performance 140,986 145,651 (3.2) Other operating expenses (66,878) (99,153) 32.6 EBITDA 50,107 26,829 86.8 EBIT 42,859 19,156 123.7 Earnings before taxes 19,604 12,477 57.1 Profit 1,346 5,317 (74.7) 31.12.2015 31.12.2014 Change in % Current assets 132,156 121,297 9.0 Balance Sheet Non-current assets 8,198 34,109 (76.0) ASSETS 140,354 155,406 (9.7) Current liabilities 43,711 37,471 (16.7) Non-current liabilities 1,474 682 (116.1) Equity 95,169 117,253 (18.8) EQUITY & LIABILITIES 140,354 155,406 (9.7) 30 March 2016, Earnings Call Annual Report 2015 14