Tipp24 forecasts growth in 2014 and readies international expansion

26th March 2014 1:25 pm GMT

German lottery brokerage operator Tipp24 said Wednesday that it expects to return to growth this year, having seen revenue fall by 9 per cent to €129.9m and net profit slump 75 per cent to €40.9m in 2013.

Tipp24 CEO Hans Cornehl said that 2013 was a “successful year “from both a strategic and operational perspective, with the company laying the foundation for a “successful repositioning” on the international lottery market.

The company is now focusing on its international business activities, especially in the UK and North America, which will be developed from its base in the UK.

“Our relocation to London has created the ideal conditions for the further implementation of our internationalisation strategy,” he said. “We are planning, for example, to market our extensive expertise as a partner for state-owned and private lottery companies in the online segment.”

Tipp24 will be focusing on three main directions. Firstly, to continue with the operation of its MyLotto24 minority shareholdings in the UK. Secondly, to continue acting as a partner for lottery companies and major portals and “help them to market lottery products online by offering our leading technological and marketing expertise as a service provider.”

“We believe the American lottery market in particular – where we see a clear trend towards deregulation – offers great opportunities,” said Tipp24.

Finally, the company wants to become a lottery operator itself in the medium to long-term. It has already taken a major strategic step towards acquiring its own licences and establishing a business division dedicated to providing internet services to lottery companies through the acquisition of a stake in UK-based Geonomics, inventor of the geo-based online lotto game.

“We plan to acquire a majority shareholding in the medium term,” said the company. “This investment represents a key element in the implementation of our international growth strategy.”

2013 Results

Euros (€) 20122013
Revenue 142.7m129.9m
Personnel Expenses (10.8m)(11.1m)
Other Operating Expenses (93.8m)(97.6m)
Other Operating Income 6.5m5.6m
Dividend Income from Lotto24 18.9m--
EBITDA 63.5m26.8m
EBIT 56.5m19.5m
Net Profit 40.9m10.2m
Basic EPS 5.121.23

In its results for 2013, full year revenue fell by 9 per cent to €129.9m despite two high winning payouts of MyLotto24 of €6.8m in August and €15.7m in December. The company said that adjusted for “random statistical deviations”, revenue was up 3 per cent to €133.1m.

Total operating expenses climbed 30 per cent to €103.1m, with personnel expenses rising 3 per cent to €11.1m, and other operating expenses up 4 per cent to €97.6m.

Consolidated earnings before interest and tax (EBIT) fell by 66 per cent to €19.5m but was ahead of the company’s previous forecast of approximately €17m.

In addition to jackpot payouts, the year-on-year decline was due to additional, mainly non-recurring expenses of €14.5m resulting from the relocation of the company's registered office, the preparation of new business fields, the necessary adjustment to hedging structures in the secondary lottery business and investments in its IT platform

Tipp24 said that the prior year period was also influenced by unusually low winnings payouts and a positive special item of €18.2m relating to the spin-off of Lotto24. Profit for the year fell by 75 per cent to €40.9m.

Tipp24 said that in view of the “positive development” of its business, the company’s executive board is considering the payment of a one-off special dividend in the form of an interim dividend in late April amounting to €7.50 per share. The board also resolved to propose annual dividend payments for shareholders in future as of 2015.

Tipp24 said that on the basis of its “solid performance” in 2013, it expects further “encouraging” figures for this year with revenues likely to rise to between €135m and €145m, and EBIT reaching €25m to €35m.

The forecast takes account of costs for the re-adjustment of hedging structures in its secondary lottery business, as well as additional, mostly non-recurring costs of €10m for the preparation of its new business fields.

As at December 31st the company held cash of €85.5m compared to €77.9m a year ago.

Shares in Tipp24 SE (Co. Data) (FRANKFURT:TIM) are currently trading down 0.45 per cent at €56.69 per share in Frankfurt today.

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