La Française des Jeux (FDJ), France's leading lottery and gaming operator, today announced that the Autorité des Marchés Financiers (“AMF”) had approved its Registration Document as of 17 October 2019, under registration number I.19-035.

The approval of FDJ’s registration document is the first step in the planned privatisation of FDJ via an initial public offering on the Euronext regulated market in Paris. Definitive completion of this transaction is subject to the AMF’s approval of the prospectus relating to this IPO and to favourable market conditions.

“This privatisation project opens a new chapter in the company’s history,” says Stéphane Pallez, Chairwoman and CEO of FDJ Group. “Thanks to its robust and innovation-driven business model, the Group will pursue its strategy of balanced growth, combining strong economic performance, responsible gaming and social commitments. Our ambition is to strengthen our position as the #1 lottery and sports betting operator in France and become a key international player in games and services.”

#1 lottery and sports betting operator in France with an international reach

Successor of the National Lottery, created under authorisation from the French state in 1933, FDJ is now the foremost player in the French lottery and gaming sector, accounting for 51% of Gross Gaming Revenue (GGR)1 in 2018. It is also the #2 lottery provider in Europe and #4 worldwide in terms of GGR2.

FDJ employs 2,500 people across two main business lines: lottery (draw games and instant games3) and sports betting (at points of sale and online). Under the French “Pacte” Law, enacted in May 2019, the government granted FDJ 25-year exclusive rights over lottery games, both at points of sale (PoS) and online, and over PoS sports betting.

FDJ offers the general public a range of around 85 enjoyable, responsible games:

  • Lottery: draw games (Loto, Euromillions, etc.) and instant games (Millionnaire, Cash, Mission Patrimoine, Astro, Vegas, etc.)
  • Sports betting: Parions Sport Point de Vente (PoS) and Parions Sport en Ligne (online).

FDJ also develops three adjacent activities: international B2B services, payment and services at PoS, and entertainment.

FDJ's performances are driven by its portfolio of iconic brands, the largest proximity network in France, a growing market, investments, and a strategic innovation drive enhancing the appeal of its offer and distribution network.

FDJ had 25 million players and over 30,000 points of sale in 2018, and:

  • Collected €15.8 billion in stakes, of which 15% were digitalised;
  • Distributed €10.7 billion in winnings to players;
  • Contributed €3.5 billion to the public finances4. These tax levies and other public levies are to be maintained following privatisation;
  • Paid out €0.8 billion to its distributors network.

FDJ has devised a 2020-2025 strategy plan taking into account its exclusive rights to operate the lottery and sports betting at points of sale, as well as the new tax regime and regulatory framework. This plan will build on the momentum generated by the 2015-2020 strategy plan, notably in terms of digitalisation and international expansion.

FDJ's aims to strengthen its position as the #1 lottery and sports betting operator in France and to become a key international player in games and services.

The Group’s strategy is based on three main pillars:

  • Keep up momentum in the lottery business by strengthening customer relations and stepping up digitalisation of usage;
  • Speed up the drive to win market share in online sports betting, while maintaining growth in PoS sports betting;
  • Strengthen the resilience of the Group’s business model by developing adjacent activities.

To this end, FDJ will be focusing on three key priorities:

  • Expanding and enhancing customer relations;
  • Pursuing its drive to modernise the distribution network and to transform its sales model;
  • Reinforcing its Responsible Gaming policy.

A robust business model, with a proven ability to generate profitable growth over the long term, showing resilience through economic cycles

The Group has demonstrated its ability to grow over the long term, its business showing resilience to economic cycles.

In the last 25 years, this has enabled stakes to increase by an average of 5% p.a. They have more than doubled since 2000 and were not significantly impacted during the 2008-2009 financial crisis.

This resilience is mainly attributable to the modest share of French income spent on games, as well as to the appeal and success of FDJ's diverse range of games, reaching a large number of players.

The Group's profitability is solid and generates cash:

- Between 2014 and 2018, stakes increased at an annual average rate of 5%, revenue by 4% and EBITDA by 6%. EBTIDA margin came to 17.7% in 20185;
- This performance was obtained despite the steady decline in the FDJ’s remuneration (Net Gaming Revenue) decided by the state over that period;
- The Group's cost structure is flexible, with variable costs accounting for an average of 60% of operating expenses over the period 2016-2018.

The cash conversion ratio came to 79% in 2018, in line with the average rate for the previous four years (80%).

Forecasts for 2019 and 2020

  • Player stakes up by over 7% in 2019

FDJ expects to record stakes of around €16.9 billion for the full 2019 financial year, up by over 7% compared to 2018 and driven by Sports Betting and Lottery.

The Group also expects revenue of around €1.9 billion. With adjusted revenue6 of €2 billion:

- Lottery should generate revenue in excess of €1.55 billion;
- Sports Betting should generate revenue of around €370 million;
- Revenue from other activities should amount to around €50 million, including the integration of Sporting Group over the whole financial year.

Group EBITDA7, excluding costs related to FDJ’s privatisation and IPO, is expected to reach €3258 million vs. €319 million in 2018, hence an increase despite the rise in distributors commission rates introduced at the beginning of the year.

  • Positive outlook for 2020

For 2020, the Group is targeting growth in player stakes at the upper end of the +4% / +5% range, benefiting in particular from the UEFA Euro 2020 football tournament, as well as growth in revenue of around 5% like-for-like4 with c.+5% for Lottery and c.+6% for Sports Betting. EBITDA margin should be in line with that of 2019 on an adjusted basis (i.e. 19%).

Availability of Registration Document - La Française des Jeux's Registration Document is available on the website dedicated to FDJ's privatisation (www.fdj-devenir-actionnaire.com) and on the AMF's website (www.amf-france.org) and can be obtained free of charge upon written request to La Française des Jeux, 3-7 quai du Point du Jour 92100 Boulogne-Billancourt, France.

Risk factors - The Company draws potential investors’ attention to Chapter 3, “Risk Factors”, of the Registration document approved by the AMF.

About Française des Jeux (FDJ)

FDJ is the historical and unique lottery operator in France, the #2 in Europe and #4 worldwide. It is also the main sports betting operator in France. FDJ offers a range of around 85 enjoyable, responsible games to the general public, both at points of sale and online.

FDJ had some 25 million players and over 30,000 points of sale in 2018, when it collected €15.8 billion in stakes, contributed €3.5 billion to the public finances and paid out €800 million to its offline distribution network.

For further information, see the Group website at: www.groupefdj.com

Disclaimer

The information contained in this press release does not constitute an offer or invitation to acquire or subscribe to the sale of securities, nor is it part of any such offer or invitation, in France, the UK, the USA, Canada, Australia, Japan, or any other country. No communications material or information concerning this press release or concerning the Group may be published in a country or region requiring registration or authorisation. No action has been taken (or will be taken) in any countries (other than France) in which such steps are required. An offer for the purchase of securities in France shall only be launched after the Autorité des Marchés Financiers (AMF) approves the corresponding prospectus.

This press release does not constitute a prospectus within the meaning of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017.

This press release has not been issued or approved for issue by an “authorized person” within the meaning of Article 21(1) of the Financial Services and Markets Act 2000. Consequently, this press release is intended solely for (i) persons located outside the United Kingdom, (ii) investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (iii) persons referred to in Article 49(2) (a) to (d) companies with significant shareholders’ equity, non-registered associations, etc. of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or (iv) any other individual to whom this press release may be lawfully addressed (persons cited in paragraphs (i), (ii), (iii) and (iv) all of whom being designated as “Eligible Persons”. This press release is not a prospectus approved by the Financial Conduct Authority or any other UK regulatory authority for the purposes of Section 85 of the Financial Services and Markets Act 2000.

Transferable securities may not be offered, subscribed to or sold in the United States of America unless they have been registered or an exemption from said registration has been obtained under the U.S. Securities Act of 1993, as amended (the “US Securities Act”). This press release may not be published, transmitted or distributed, either directly or indirectly, in the United States.

Distribution of the present press release in certain jurisdictions may constitute a breach of applicable law and regulations. The information contained in this press release does not constitute an offer of securities for sale in Canada, Australia or Japan. This press release should not be published, transmitted or distributed, either directly or indirectly, in Canada, Australia or Japan.

Forward-looking statements

This press release contains guidance on the Group’s targets and forward-looking statements. These statements do not reflect historical data and must not be interpreted as guarantees that the facts and data mentioned will occur. The information contained herein is based on what the Group considers to be reasonable data, assumptions and estimates.

The Group operates in a competitive, fast-changing environment. As such, the Group is not in a position to anticipate all risks, uncertainties or other factors likely to impact its business activity, their potential impact on its activity or the extent to which the materialisation of a risk or combination of risks may have materially different results to those mentioned in any forward-looking information. The information contained herein is provided solely as at the date of the present press release. The Group makes no commitment to update these forward-looking statements or the assumptions on which they are based, aside from the fulfilment of any legal and regulatory obligations incumbent upon it. In respect of the transaction note to be established and with a view to the admission of its shares for trading on the Euronext regulated market in Paris, FDJ will publish any update of the information presented and likely to have a material impact on its business activities, financial situation, outlook and results, in accordance with the regulations in force, and will respect the continuous disclosure obligations applicable to any company the shares of which are admitted for trading on the Euronext regulated market in Paris.

1 Difference between player stakes and winnings.
2 Source: FDJ and H2GC.
3 Includes scratch cards, instant win games and other instant games.
4 Of which €3.3 billion in gaming taxes and €0.2 billion in other public levies.
5 Excluding costs relating to the company's plans to open up its share capital and the change in regulatory framework, for a total of €4 million.
6 Adjustments include:
- integration of Sporting Group, acquired in May 2019, over the whole financial year, representing a positive impact of c.€15 million;
- full-year impact of the new tax regime based on gross gaming revenue (GGR) applicable as from 01 January 2020. The c.€50m positive impact on revenue represents the elimination of allocations to counterparty funds (requiring a new insurance policy to cover these risks) and the change related to the accounting of promotions with regards to the elimination of player funds. In 2018, the new tax regime would have had a €50m positive impact on FY revenue.
7 Current operating profit before depreciation and amortisation.
8 Note that the costs of the IPO and the offer reserved for employees - expected to reach around €30 million - do not affect EBITDA as these are booked to non-recurring items in operating income.