Reduced costs help push net profit up 44.5% at Zeal in FY21

Revenue, including income from jackpot insurance, for the 12 months to 31 December 2021 amounted to €86.8m, only marginally down from €87.0m in the previous financial year.

Zeal said the majority of its revenue for the full year was generated within its core German business, with this amounting to €78.5m of total revenue. The remaining €4.9m came from other activities.

The business also revealed total group billings, which comprise all stakes from customers, edged up 0.6% year-on-year to €656.5m, despite what Zeal said were “weak” jackpots when compared with the previous year.

Zeal noted a number of major achievements in 2021, including making 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. After settlement on 23 September, Zeal now holds 1,527,520 Lotto24 shares, which corresponds to a share of approximately 94.9% of the total share capital of Lotto24.

Zeal also made a number of changes to its senior management team, including the appointments of Paul Dingwitz as its new chief technology officer and Sönke Martens as chief operations officer.

In addition, Zeal was able to make cost savings across a number of areas, such as marketing for certain lottery games due to weaker jackpots. Zeal said this limited the opportunities for market, meaning it spent less as a result.

As such, total operating costs were cut by 23.0%, with personnel expenses down by 12.9%, marketing spend 27.0% lower, direct operating expenses down 11.6% and indirect operating costs 30.8% lower.

This led to a 117.6% year-on-year rise in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to €27.7m. After including €8.7m worth of depreciation and amortisation expenses, this left €19.0m in earnings before interest and tax, a 254.3% jump from €5.4m in 2020.

Zeal also reported €2.1m in financial expenses and a €300,000 in share loss from associates, which left a pre-tax profit at €16.7m.

The business paid €5.3m in income tax, meaning that it ended the financial year with a net profit of $11.4m, up 44.5% on 2020.

“In 2021 we have proven that we can be successful even in a difficult market environment,” Zeal chief financial officer Jonas Mattsson said.

Looking to 2022, Zeal said it expects revenue to amount to at least €105.0m, which would be an approximate increase of 21.0% on 2021, while adjusted EBITDA is likely to increase by at least 6.0% to €30.0m.

“Overall, we see ourselves well equipped to successfully continue Zeal’s growth in the future,” Zeal chief executive Helmut Becker said.