Zeal Network SE embarked on a cost-management strategy to improve its profitability in 2021, as poor market conditions and lower jackpots thwarted any opportunity for revenue growth.
Publishing its full-year accounts for FY2021, the German lottery provider reported an adjusted EBITDA increase of 118% from €12.7m in 2020 to €27.7m in 2021 as marketing costs were trimmed to reflect lower jackpots.
Full-year revenues remained stable at €86.8m compared to 2020’s €87.0m, owing to ‘unfavourable market developments’. Likewise, the firm’s gross margin remained stable at 12.2% compared to 2020s 12.3%.
As alluded to, Zeal’s marketing costs were slashed in 2021, decreasing by 30.4% year-on-year to €22.4m. However, it did note that once jackpot conditions change more favourably, it plans to increase marketing expenditure once more.
Additionally, the firm made inroads on customer acquisition despite the compressed marketing costs, taking on 544,000 new registrations throughout the year. Although this remains some way short of its 2020 figure of 918,000 new customers, it noted that its business volume remains ‘stable’ and it is ready to kick on when the market conditions improve.
Other profitability indicators displayed that Zeal navigated through a turbulent period with relative success, with EBIT increasing to €19m, a jump of 251.9% on 2020s figure of €5.4m. Similarly, net profit increased too, standing at €11.4m compared to €7.9 in the previous year.
Serving its duty as a lottery institution in Germany, Zeal returned €246m back to fund good causes across the country.
“In 2021 we have proven that we can be successful even in a difficult market environment,” commented Jonas Mattsson, CFO of Zeal Network SE.
Operationally, the firm had to navigate through regulatory change in terms of online gambling in Germany, adjusting its online portals to comply with the Gambling State Treaty. It stated that it is now ‘well prepared for an expansion of its offering into other gambling segments such as virtual slot machines’.
Furthermore, the lottery provider has launched a second new charity lottery after its “freiheit+” with the “German Dream House Lottery”, which it notes ‘strengthens’ its position as the largest provider of online lotteries in Germany.
“Overall, we see ourselves well equipped to successfully continue Zeal’s growth in the future,” added Helmut Becker, CEO of Zeal Network SE.
Looking forward to FY2022, Zeal expects that jackpot development will return to normal, thus issued guidance that revenue and EBITDA will follow suit.
The company expects revenues will jump to €105m in the financial year 2022 and that adjusted EBITDA will be at least €30m, whilst marketing expenditure will increase to at least €30m.