Welcome to the FDJ United half year 2025 results. My name is George, and I'll be coordinating today's event. For the duration of the call, your lines will be in listen-only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this will be done by pressing star one on your telephone keypad to arrange your question. If at any point you require assistance, please press star zero and you'll be connected to an operator. Please note this conference is being recorded. I will now hand the call over to your host, Madame Stéphane Pallez, Chairwoman and CEO, and Mr. Pascal Chaffard, Senior Vice President and CFO. Please go ahead.
Thank you. Thank you very much. Good evening or good afternoon to everybody according to your time zone. Thank you for joining us for the presentation of FDJ United 2025 half year results. I will start by commenting the key highlights, and then hand over to Pascal Chaffard to cover half-year results in more detail and comment on the outlook of the second half. We will then, of course, conclude by a Q&A session. Let's turn to each one, key highlights. As you know, and as you have seen, this first half has been very busy for us, with major milestones on our identity and strategy.
Early March, we launched our new corporate identity, which reflects the group's new dimension reached with the acquisition of Kindred, both internationally and in terms of gaming verticals. At the end of June, we held the Capital Market Day to present our new Play Forward 2020 strategy plan. On this occasion, we affirmed our ambition to assert our leadership in Europe as a unique sustainable lottery gaming and betting operator. During this Capital Market Day, along with our strategic roadmap, we communicated our new medium-term objectives beyond 2025, which is obviously a transition year, and we'll come back to that. We aim, in the medium term, to deliver an average annual all-and-equivalent growth of around 5% over 2025-2028. We target a recurring EBITDA margin above 26% in 2028.
We are committed to continue to increase the dividend year after year with a minimum payout ratio of 75% of adjusted net income. At the same time, we intend to remain best-in-class regarding sustainability commitments. As we explained during the Capital Market Day, we intend to continue to grow our voluntary contribution to society and the environment from 2.7% of reported net income in 2024 to 5% by 2030. As the only operator with clear targets for reducing the share of revenue from iris failures, we will communicate early 2026 our new targets to quantify this objective. With this brief recap of our key mid-term targets, let's now turn to key H1 financial highlights. In terms of revenues, we were at nearly EUR 1.9 billion, up 31% on a reported basis and down 2% on a restated basis, as if we had integrated Kindred on the 1st of January 2024.
I think it's worth noting that Q2 2024 was Kindred's best quarter ever, which is setting, obviously, a tough comparable base for this year, hence this 2% revenue contraction year on year. However, we saw already a sequential improvement in the second quarter with revenue of EUR 942 million, up 2% versus EUR 925 million in Q1. Turning to EBITDA, recurring EBITDA was EUR 441 million. It was down 10%, which is a 23.6% margin. It's important also to note that it would actually be 24.4% if you exclude the one-off impact of our successful employee share ownership plan, which counts for EUR 14 million and which is, of course, something quite exceptional. We also made good progress on the execution of our cost efficiency plan, and we, of course, reiterate our target of EUR 20 million for this full year. Net income reached EUR 136 million. I think two important impacts.
One is, of course, that net financial income was impacted by the Kindred acquisition financing. Therefore, we switched from EUR 23 million in H1 2024, plus, to a net loss of EUR 37 million. Again, a new financial structure. Of course, corporate tax has to be taken into account with the one-off of EUR 20 million additional tax on large foreign companies. That is also a one-off impact since everything to be in the plans of government to go on, and it was accounted fully in H1. When you calculate the adjusted net income, with adding back the amortization of 5% purchase allocation, net income reached EUR 222 million, down 5% on a reported basis. On this basis, and we will explain further why we are definitely confident in our capacity to achieve our full-year guidance. Those H1 results are in line with our expected trajectory for the full year.
Given the positive second half outlook that Pascal will detail later, it is consistent with the achievement of our full-year guidance, which, of course, is detailed here with stable full-year revenue versus 2024 pro forma, recurring EBITDA margin above 24%, and a reduction in net financial debt of more than EUR 150 million. This first half was also significant, as always, in terms of continuous sustainability achievements. With the Kindred acquisition, we revised slightly our corporate purpose, and it was included in our bylaws in our annual general meeting in May. On the responsible gaming front, we started deploying FDJ Protect within our iLottery business in France. It is a best-in-class proprietary tool that is designed to monitor player behavior and alert on at-risk gaming practices in real time. That is very critical in our plan.
Regarding environment, we again obtained the highest carbon score A from responsible finance from Excelia for the fourth consecutive year. We also invested in a new nature-based solution fund, EUR 5 million. Again, this is part of our mid-term trajectory to generate high-quality carbon credits. In H1, there was also, I mentioned this in terms of financial impact, a very important feature for the company with a new employee share ownership plan adopted that is called FDJ United Invest. It was, of course, accessible to more than 5,000 employees in 13 countries, the whole group. We definitely thought it was an important milestone to give the opportunity to all our employees to be part of the group's ambition and performance. It was a great success with the take-up rates above 50% for a total equivalent to 1% of the share capital.
As a result, our employees represent now around 4.5% of our share capital. Now let's look at our two main business units, starting with LSF, Lottery and Retail Sports Betting Activities in France, and their exclusive rights first. Total revenue for LSF reached EUR 1.3 billion, up 4% year on year. It is a combination of the lottery revenue that grew by 6% to nearly EUR 1.1 billion. It was actually driven by all our games, draw and instant games, and our two channels of distribution. Draw games, of course, benefited from an excellent dominion performance as we saw 27 draws that crossed over EUR 75 million, of which 18 over EUR 130 million. Instant games growth was also driven by a number of new games and also by our core games. I won't quote all the names.
At the same time, we were very satisfied by the growth of the iLottery, which has been particularly strong with revenue up 16%. Online penetration is now at 15% versus 14% one year ago. Your median contributed to that in terms of recruitment. We are now in, I think, a good momentum with online players exceeding 6 million players for the first time in FDJ history. At the same time, point of sale growth remained good with revenue up 4%. Very good performance of the lottery. Retail sports betting revenue were down 6%, which is mainly explained by the decrease in the operational margin versus H1 2024, due to unfavorable sports results for the operator, notably because of the strong performance of French football clubs, particularly Paris Saint-Germain. Actually, the new tournament formats of the leagues supported a 4% increase in stakes.
The underlying activity is actually quite good despite year-on-year comparable base with the Euro 2024. We definitely think that there is a good trend, a positive trend, which, of course, could give better results in the second half, in terms of return to failures. On this basis, recurring EBITDA for LSF was EUR 464 million, up 5% year on year. EBITDA margin reached 36%, owing to, again, a good business model with strong operating leverage in iLottery and cost efficiencies in the BU as such. On OBG, we have a more tough comparable basis that I will try to make clear. OBG, which is online betting venues which is open to competition, has H1 revenue down 12% year on year on a restated basis. I think there are two important elements of context to bear in mind.
First, Q2 2024 was Kindred's best quarter ever, thanks to the Euro 2024 tournament, which had contributed to the 21% increase in the number of sports betting active players versus the previous year. Therefore, it is definitely a very challenging base of comparison for Q2 this year. However, we saw in Q2 versus Q1 an improvement of 2%, which we think is a positive indication. We also, I think, need to look at what this would have been without the UK and Netherlands that are both strongly impacted by regulatory headwinds. Actually, if you exclude those, you have 5% growth year on year on H1, with notably strong growth in France where our business is performing very well. We have launched a number of initiatives to sustain growth in the future and for the second part, to have a better trend the second part of the year.
In sports betting, we released several new features, and we improved a lot from user interface with the launch of the match of the day of the home screen, for instance. In casino, we delivered a complete refresh of our casino lobby with better visibility. We launched new exclusive games, developed by Reliax Social Design Anarchy. We think we have, again, set the base for a better trend in the second part of the year. As for EBITDA, it was down. The recurring EBITDA margin was only 20.3%. You have to bear in mind, on that, that we reduced marketing spend by 8% to adjust to the reduced level of activity. We also reduced personnel costs by 6% as an impact of the performance plans that was launched by Kindred.
At the same time, IT service costs increased by 15% as we continued to roll out KSP in parallel with the consolidation of our defense platform in France. You have a definite high level of IT service costs in those numbers. Talking about Kindred's integration, it's worth underlining that the integration is well on track, and particularly, of course, the deployment of Kindred's proprietary sportsbook platform, KSP. We aim to achieve full end-to-end product control by the end of 2026 with KSP for the sportsbook and PAM Live for all brands in all markets. It's a very strategic process, and it is well engaged. We have started to migrate some of our countries onto KSP and KPAM at the end of 2024, such as Kenya. We also migrated 32Red UK for casino in Q1 this year, and all this worked well.
In France, we have been consolidating our player account management, PAM platforms, and we merged Payone Sport Only and Vetter PAM to be in the best condition to migrate by the end of 2026 on KSP. We are, again, well on track and very focused on achieving that. Now, going to hand over to Pascal for more details on our financial performance. Okay.
Thank you, Stéphane, and good evening, everyone. I'm on slide 14. Since Stéphane has already commented most of the KPIs that are on this slide, I suggest diving into our H1 in more detail, immediately moving to slide 15. H1 revenue reached nearly EUR 1.9 billion, down 2% year on year on a restated basis. As Stéphane previously commented, the revenue of our two largest BU, I'm going to say a few words about the two others, namely International Lottery and Payments and Services. Revenue from these totals EUR 111 million, down EUR 17 million to H1 2024 restated. While Payments and Services revenue was nearly flat year on year, International Lottery revenue was impacted by the following. First, the forecasted disposal of Sporting Group's B2B activities at the end of 2024. It was totally anticipated, and it has a positive impact on EBITDA. We will see that in a minute.
Regarding PLI, year on year growth resumed in Q2 after a challenging Q1. We have explained that during our call in April, mainly because of non-recurring factors, particularly an unusually high number of major lotto winners that has impacted the turnover. Overall, PLI recorded high single-digit revenue contraction in H1 solely due to Q1. Again, the growth is back to normal since the beginning of Q2, and it's still true in July. Now let's move to the EBITDA. The recurring EBITDA of EUR 441 million was down 10%, implying a 23.6% margin. Here again, I'm not going to come back to LSF and OBG as Stéphane commented it. I will have a comment on the two other BUs and the central costs.
Beginning with the two other BUs, International Lottery recurring EBITDA was EUR 15 million, up EUR 6 million year on year, thanks to the impact of the disposal of Sporting Group B2B activities, as I said before, and also to the positive impact of the performance plan that has been put in place in PLI since 2024. The BU's recurring EBITDA margin of over 18% was up significantly from less than 9% a year ago, so it has doubled. Central costs totaled EUR 130 million versus EUR 113 million in H1 2024. These are broadly stable, excluding the EUR 14 million costs of the employee share ownership plan that Stéphane has also commented on. Now let's consider, on slide 17, the bridge from revenue to recurring EBITDA at the group level. Cost of sale amounted to EUR 790 million, an increase of 2%. This includes EUR 536 million in retailers' remuneration, up 4%.
They're driven by the increase in POS stakes in France and in Ireland. Marketing costs totaled EUR 160 million, down 8%, reflecting a decline in online betting and gaming activity due to the regulatory constraints we have talked about. The IC services reached EUR 88 million, up 6%, as we continue to roll out, notably, KSP sportsbook platform, as it has been mentioned by Stéphane, and consolidate globally all our platforms. The personnel expenses remain perfectly stable at EUR 302 million. Finally, the general and administrative costs, mainly comprising consulting fees, central function, and building costs, rose by EUR 4 million- EUR 85 million. Half of this increase is related to the employee share ownership plan. Stripping this out, the year-on-year increase is only 2.5%. As a result, the recurring EBITDA amounted, as I said, to EUR 441 million, a 10% decrease compared to the restated first half of 2024.
The recurring EBITDA margin was 23.6% compared to 25.7% a year ago. Excluding the employee share ownership plan cost, this margin would have been 24.4%, a better reflection of the underlying performance of the group in H1. Now, considering the rest of the income statement on a reported basis, depreciation and amortization increased by EUR 86 million to reach EUR 171 million, mainly due to the amortization of intangible assets recognized as part of the Kindred acquisition. Non-recurring costs amounted to EUR 10 million, less than EUR 21 million in H1 2024. If we recall, those numbers were inflated by the cost related to the Kindred acquisition, which is not the case in 2025 indeed. I would expect H2 to be broadly like H1 this year, if I want to help you to make your forecasts.
We switched from net financial income of EUR 23 million in H1 2024 to now a net financial loss of EUR 37 million, reflecting the debt financing of the Kindred acquisition. I would expect a net financial loss below EUR 70 million for the full year. It's not exactly doubling. We have some one-off impacts in H1. The group's income tax expense amounted to EUR 900, no, not EUR 990.
90.
It's, you will see it's quite heavy, sales. EUR 90 million represented an effective tax rate of 40% for H1 2025 compared to 27% in H1 2024. This increase is mainly due to the one-off additional income tax on large French companies that has been put in place for only 2025 so far, for which a EUR 21 million charge was recorded solely on H1. It will not be exactly the same impact on H2 because of how this tax is calculated. As I said just now, the full-year impact is strongly H1 skewed. I would therefore expect our full-year effective tax rate to be around 33%. It should then come down to below 30% in 2026 and after that, 2027. As a result of all that, the net income was EUR 136 million.
The adjusted net income as defined in the appendix of this presentation, but mainly it includes excluding PPM optimization, reached EUR 222 million, down 5% year on year. Now let's conclude this section with a few words on our financial position. Starting with the first bridge on top of this slide, we are at page number 19. Gross financial debt of EUR 2.354 billion decreased by EUR 120 million compared to the 31st of December 2024, reflected debt repayment. Available cash and cash equivalent declined by EUR 267 million, mainly due to the EUR 379 million dividend payments, also the EUR 997 million additional equalization payments following the EC decision, and the EUR 91 million of unclaimed winnings paid to the French state as it is done in H1. As a result, net financial debt stood at EUR 1.964 billion at the end of June 2025 compared to EUR 1.818 billion at the end of December 2024.
With the second bridge at the bottom of the slide, you can see this net debt variation during the first half. The positive free cash flow of EUR 430 million was more than offset by tax for EUR 481 million, as part of those is seasonal, as I've already explained. Other items for EUR 56 million, dividends for EUR 379 million, and a share buy related to the employee share ownership plan for EUR 60 million. It's important to note that these two last items are markers of seasonality. Dividends are always paid in H1, and in H2 this year, cash will be received from employees in exchange to their FDJ United shares. Therefore, we remain confident, totally confident in our ability to reduce net debt by at least EUR 150 million year on year at year end, which is part of our guidance.
Now moving to the outlook, I'm going to provide you a more detailed outlook for the second half of the year as announced by Stéphane at the beginning of our presentation. I have moved to page 21, and I will start with a couple of slides regarding OBG, complementing what Stéphane has already shared regarding both current activity and more broadly our second half outlook, which underpins the reiteration of our full-year guidance. On a restated basis, H1 2025 revenue was down 11% versus H1 2024, but up 5% excluding the UK and the Netherlands. To normalize a strong growth recorded in H1 2024, notably thanks to the euro, let's compare 2025 with 2023 using Q1 2023 as base 100 on the graphs.
You can see both Q1 2025 and Q2 2025 total OBG revenue are above Q1 2023 by a high single-digit percentage or by more than 20% excluding the UK and the Netherlands. You can also see the sequential improvement Q2 2025 versus Q1 2025 with a growth of 2%, both with or without the UK and the Netherlands. We expect to reduce the gap versus 2024 in the next quarter and to be back to growth versus 2024 in Q4. Moving to the next slide, we will now focus more specifically on the UK and the Netherlands. These two graphs illustrate the expected lapping of regulatory measures as we enter in H2, gradually throughout H2 in the UK and specifically from Q4 in the Netherlands. You can also see a stable revenue in both countries, Q2 2025 versus Q1 2025.
Finally, and more importantly, you can see strong active players' momentum in both markets, even more so in the Netherlands. Growth resuming gradually in Q3 and more in Q4 on those two jurisdictions, plus growth momentum maintained or increased thanks to various marketing and commercial initiatives in other jurisdictions, are the key levels of the expected performance in H2. To conclude now on slide 23, here is an overview of all the reasons for a positive second half outlook and the reiteration of our full-year guidance. Regarding lottery and sports betting retail, we have a strong H2 pipeline with over 10 game launches, the launch of Crescendo, a new draw game, and various special lotto and Euro Romanian draws. We also expect growth in retail sports betting.
Regarding OBG, the lapping of regulatory restrictions, as I just mentioned, and for the most part in Q4 in the Netherlands, as well as various initiatives such as multi-licensing in Sweden and the launch of 32Red in Romania. International lottery will continue to benefit from the margin of split related to the existence of sports B2B activities and the normalization of PLI player payout ratio after the exceptional high number of lotto jackpot winners in Q1. Finally, at the holding level, we will continue to rationalize costs while H2 will compare more favorably versus H1 without the EUR 14 million of the employee share ownership plan. As we've said before, 2025 is a transitional year, and it's developing as expected. I thank you very much for your listening, and with Stéphane, we are now ready to answer your questions.
Thank you very much, sir. Ladies and gentlemen, as a reminder, if you have any questions, please press star one on your telephone keypad and just make sure your line is not muted nor that your signature is present. Our first question is coming from Estelle Weingrod of JPMorgan. Please go ahead. Your line is open.
Oh, hi. Thanks for taking my question. Just to start on the top-line momentum in France, the lottery was quite supportive. I think around 7% growth in Q2. Just to understand a bit better how to expect this to evolve in H2, you mentioned a strong pipeline, but things actually come a bit challenging in Q3. That's my first question. I've got a second question on the Netherlands, the interior market that has been difficult. Any incremental color on what's happening there in terms of, I don't know, regulation policies since the CMB? Yeah, that's it for me for now. Thank you.
Okay. The next one.
You want to start? Yeah?
Yes, I would start with the lottery and retail sports betting outlook in H2. In H2, what we expect is to continue to have, globally, in lottery and sports betting the same kind of growth that we had in H1. In H1, it was 3.6% overall. Taking into account two elements, first, we will have more important growth in retail sports betting. It was a decline of 6% in H1, but we expect growth in H2. The decline in H1 was solely due to the payout ratio, and it will normalize in H2. We will have, therefore, slightly slower growth in lottery. Above all that, you have to take into account the fact that since the 1st of July, we have to face the increase of the tax rate in France. It will reduce by two points the growth that we can have in H2 in lottery.
If you do the calculation, we should expect lottery between 1% and 2% growth in H2. The second question was regarding Netherlands. There is no news about any regulatory changes in Netherlands. It's globally stable to date. We have seen that also in our numbers. We have stabilized our numbers and are still working on how we can better work on the way to get our customers ready to give the elements that they have to give to us, to the operator, to be able to go over the site threshold limits that have been put in place.
Okay, thank you.
Thank you very much, Madam. Our next question will be coming from Ed Young, calling from Morgan Stanley. Please go ahead.
Thank you. First of all, you mentioned there the pipeline, you broke it down into instants, Crescendo, and then special draws. I wonder if you could perhaps give us some color on which of those is the most meaningful or which is something that will continue to build into next year. I wonder if you could touch on when your new multi-channel arrangement might become meaningful. Is that the best story for next year more than anything? The second is, you said throughout H2 for the UK. I wonder if there's any more specificity on timing around moving to a more even footing in line with the voluntary code stance, i.e., are you expecting a settlement to be done soon, or is that just out of your control and you can't comment?
The third is, Stéphane, I think you were at a Senate hearing earlier this month discussing the prospects for online casino where I think your temperature is perhaps a bit lower than some others in Hassell. Could you say whether you think there's any scope for the consultation to be relaunched soon? Do you think there's appetite for that, or is this very much a long-term possibility around online casino in France? Thanks.
Okay. Maybe I can start. Pascal, you could come with me on the last one, which is on online casino consultation. I think it's fair to say that, whatever you think, there is, I don't think, very low probability of a consultation to come back at this point. I would say more because of the political environment than anything else. I think you can think about what you would like to do, the collaboration you want to have. To have a public consultation now, with, in the short term, some legal vote by the parliament, I think is rather unlikely, again, given the political context. I think that's my basic thing, my comment. Second, on instant, on the lottery, I think Crescendo is a very interesting, of course, feature of our program of this year, in terms of complementing and renewing our draw-based game for the future.
It will, however, have a very minor impact on 2025 because it's going to be launched in Q4. I don't remind the exact date right now, but it's basically in Q4. It's more an investment for the future, and a good investment for the future. That's how we will, of course, manage it. It's not very significant in terms of change of our trajectory for this year. I think your other question was on our,
Settlements on the.
Not channel. No, no, no, there was a.
Channel. Yeah, channel.
There was a question on distribution channel. I think as we explained at the Capital Market Day, I think we already started to implement this extension of the type of channel we are present. It's definitely something that will not become very significant in this year. I think we'll be more able to see potential impact in the years after 2025. Again, we started. We did some. We are at the beginning, and we think it's a good start, but it's not very significant in terms of numbers at this point. And settlement,
Yeah, the next one, preview.
You can.
Yeah. What we expect is that it will be done by the end of Q3. This is the expectation that we have. It means that we'll not give all the details, but it means that it's going on quite, quite, quite,
We're confident.
Yeah.
We're confident.
We're confident on the fact that it will be okay by the end of Q3.
Okay. Very useful. Thank you.
Thank you. That's your question, Mr. Young. Ladies and gentlemen, as a reminder, if you have any questions or follow-up questions, please press star one at this time. We'll now move to Sabrina Blanc of Bernstein. Please go ahead.
Yes. Good evening, everybody. I have a few questions for my part, if it's okay. The first one is regarding the cost evolution. Notably, could we have more color on the cost evolution in OBG? The question behind that is when shall we see the impact of the wins, the initiatives that you have taken? The second key question is regarding the regulatory environment. You have mentioned that the Netherlands looks like stable, but could we have more color in the UK? Have you seen any further pressure recently? Lastly, regarding the deployment of KSP, I would like to have more details regarding the slide that we call Kindred Integration, to see which country is going to need upgrades before the end of this year.
I think maybe on cost evolution in OBG, Pascal, you might want to take this one.
Yes, yes. Cost evolution in OBG, what you have seen in our figures is that we have a decrease on the marketing costs. We have a stabilized or decrease on the personnel costs and an increase on IT costs. It will continue like that for a moment. Your question was to have a sense of when we will see the impact of the cost reduction. It will be more in 2026, beginning in 2026, because it is related to two very important triggers. The first trigger is, in France, the merger of the offer of Unibet and Payone Sport Only. The second trigger is the end of the rollout of KSP sportsbook platform, which will at the same time lower the investment on IT and also lower the external cost that we are spending today with Cambly.
Until the end of the KSP migration, we have not yet reduced the cost of Cambly. It will be done by the end of 2026. You will see gradually in 2026 and more heavily in 2027 full year the impact of the major measures that we have taken to obtain a cost reduction, medium term.
For your question on the regulatory environment, I think that they are not specific to me. As we say, we just commented, the UK where we think we will be able, as Pascal was saying, would like it to move to the application of the code of conduct for the industry, which will be, of course, a positive element in the management of this business. In the Netherlands, as we said earlier, there is no new, there is no news or new rumor. It's really how we can stabilize the situation and implement in the most efficient way the affordability controls that we have to put in place. We've been progressing on that. Again, no change from the regulatory to the application.
As a matter of fact, in the Netherlands, the figures that have been published show that the illegal market has grown to a very, very high percentage, which should not be an incentive for the regulator to become more stringent on the contrary. We don't expect it to move in a positive way. Again, we don't see any change. I would say stable, which is good news, which is good news. On KSP, I think we did not say, and of course, I understand your curiosity. We did not reveal country by country the dates on which we will deploy KSP. Actually, we have a number of big markets that are going to move in the beginning of 2026, actually. I don't think we've been giving a lot of details on this at this point.
We have some H2 and others, H1, next year. We don't provide the detail of the market by market for obvious competition reasons.
Thank you very much.
Thank you very much for your questions, ma'am. As we have no further questions at this time, I'll turn the call back over to Ms. Stephane Pallez for the additional or closing remarks. Thank you.
Thank you very much for listening to us. I hope it was helpful. We are very determined and confident in our capacity to reach our guidelines. I want to thank you for attending this call. Of course, we are at your disposal to answer further questions, if any. See you soon and have a good summer.
Goodbye.
Goodbye.
Thank you. Thank you.
Thanks very much, ma'am. Ladies and gentlemen, that will conclude today's conference. Thank you for your attention. Have a good day and goodbye.