Ladies and gentlemen, thank you for joining us for the FDJ Conference Call. I now hand over to Stéphane Pallez, Chairwoman and CEO. Madam, please go ahead.
Thank you, thank you very much. Hello, good evening, good morning, probably good evening to most of the people. Welcome to this FDJ Conference Call. I am Stéphane Pallez, Chairman and CEO. I am with Pascal Chaffard, Executive Vice President, Finance, Performance, and Strategy. You may have read the press release that was actually released a few minutes ago, I think, after market close. Of course, the slideshow that we will comment is available on our website. I am going to start this call by commencing our activity for Q1 2021 in the context of the sanitary crisis. Pascal will go into more details about our revenue figures. To start with, I want to underline that the health crisis, as we all know, is not yet over in France.
Its consequence, both direct and indirect, remain difficult to assess, and of course, difficult to forecast, since, again, things are not completely clear in terms of the next weeks and months. I think it's maybe useful to remind you what are the main measures that do have, that do have an impact, significant impact on us, or at least which are clearly negative for us. It's mainly the fact that, due to the close of bars and restaurants and to most shopping centers that have been closed, first the ones in excess of 20,000 sq m, since end of January, and more recently, also the ones in excess of 10,000 sq m. It means that, right now we have 10% of our outlets that are closed in Q1 2020 on average.
In terms of impact on us, these closures have clearly notable impact on our Amigo game stakes, which are down 50% in Q1. As a reminder, this game was stopped on, by our own initiative, last year. So it's, today it's theoretically, I would say, opened and offered, but since it's a game that is most practiced in bars and where people have to stay to play it, it's definitely suffering a lot from this situation. The other measures that have an impact, although it's maybe more difficult to quantify precisely, are the curfew that we enjoyed since mid-January at 6:00 P.M. and now it is 7:00 P.M., which is a little better, but at the same time, it is now a nationwide measure, with some, of course, some partial lockdown and restriction of circulation.
I think, again, each country has its own rhythm, and its own measures, so I thought it was useful to remind you where we are, and again, what were the main things that might have an impact on us, again, even though some are less significant than others. On the contrary, compared to what we had one year ago, we have a normal schedule of sporting events, even though they are without public. I remember you that, actually, last March, they were beginning to disappear, and they almost completely disappear during this last month of March, 2020. In this context, and I'm turning now to activity. In this context, we can, however, say that our top line momentum remains well oriented in this beginning of the year.
We have taken the liberty to compare it not only with Q1 2020 but also with Q1 2019, because, as you might understand, it's not easy to compare Q1 2021 to Q1 2020, since we had, of course, in Q1 2020, two very different periods, one a good and, I would say, normal period, and a month of March that began to be completely different. We gave both comparisons. When we talk about Q1 2020, you will see that stakes are up 12%, and revenue is up 5%.
However, when you, I think it's, in fact, more significant in a way to compare it with Q1 2019, which was, of course, completely out of the COVID crisis, we are up 6% in terms of stakes and 4% in terms of revenue. We could even, we could also say, again, with some treatments on both sides that when we compare it on a most comparable base, we are probably broadly stable year on year, when we, again, we exclude the elements that are not comparable, but I would not dwell on this one. I think it's worth highlighting, it's worth highlighting that we have there, of course, very positive trends.
The first one, and remarkable is, of course, the continuation of the strong growth in online stakes, that are actually, this, Q1, up nearly 90%, which are supported both by lottery and sports betting. It means that right now our online stakes represents, roughly, 20%, sorry, not 20%, 12% of, of the, total stakes of FDJ compared with 7% in Q1 2020. It also, I think, quite remarkable that, despite, this, strong growth in online stakes, our point of sale activity has actually, been quite, positive, despite, again, the health measures impact that I, mentioned, up, up 6%. In terms of, our different, segments of, of games, of course, the sports betting momentum, has been, has been confirmed with stakes up 20% at mid-March.
Of course, we take into account the fact that we have, again, a very different period between beginning of March and mid-March. I think this is, again, more interesting to talk about this 20% than the level at the end of Q1. We have, on the lottery side, very positive trends also on our draw games, Lotto and EuroMillions. Those two games recorded close to 25% increase in stakes. They, of course, this performance has been fueled by the relaunch of those games that we did in the past, but also by several long cycles, notably for EuroMillions with an all-time high prize of EUR 210 million.
We also have seen our instant games coming back to a rather normalized trend, up 5% over the quarter, with good success of some of our games, and particularly the annuity game that we launched, Objectif Maison in January, but also followed by others, such as MegaGoal and relaunch of Banco. Something that is sort of going back to normal growth trends for those type games. I might also spend a little, spend some minutes on the online lottery growth. There on this slide, you see that there is really, I think, a change, a structural change in terms of level of growth of the online lottery and in terms of level of activity, therefore.
Of course, in 2020, we had a very strong growth of this online lottery, but I think it's remarkable that it is continuing in 2021 with this increase of nearly 90% in Q1 2021. Over the past quarters, it means that the rhythm of growth of this online lottery is roughly three times higher than the one recorded over the four preceding quarters. This acceleration reflects the investment that we did over the last years in this business, and that is clearly now giving fruits. We are now, in terms of online lottery, going to a level which was 5% of our total stakes in 2019, to almost 9% in 2020, and we are now again close to 12% at the end of this Q1 2021. Definitely a near doubling of the share of total lottery stakes compared to Q1 2020.
I think some of the reasons that are interesting in terms of growth factors is the fact that, of course, Lotto and EuroMillions are long cycles where, of course, positive to this online lottery growth. We also use some targeted advertisement to drive our customers to this channel. I think it's also interesting that it's not only draw games, but actually our instant lottery games have been growing faster than the draw games, coming from a higher—from coming from a lower share of those online stakes. We again worked on this. For example, we launched our first online exclusive games at EUR 5, and this was again a way to stimulate this growth.
It's also important to note that we have now also an average annual online spend which is growing, but which is still 40% below our point of sale. We have definitely an increase in the player base online, up 70%. We think that it's a sound trend. It's very positive for this quarter, for this quarter, but also for the future. It is, of course, well in line with our plans to grow this part of our business during this year and forward. With those comments, I will hand over to Pascal to come back to our stakes and revenues. Thank you.
Thank you, Stéphane. Hello, everyone. I'm going to detail now our Q1 top line performance and the bridge from stakes to revenue, and we are now at slide number six. Stéphane has explained the changes within our operating environment that impacted our activity with the complexity of not having a clean comparable basis. Given the 12% increase in stakes to EUR 4.6 billion, Q1 revenue was up 5% at EUR 538 million. The difference in growth rates is due to the 120 basis point increase in the player payout from 67.5% in Q1 2020 to 68.7% in Q1 2021. This is entirely attributable to sports betting, and I will come back to this on slide eight. Before that, let's take a look at slide seven.
Beyond the stressful factors mentioned also by Stéphane, notably with regard to our online business, these slides come back to the year-on-year variations, not only versus 2020 but also versus 2019 for a cleaner comparable basis, as mentioned before by Stéphane. Compared with Q1 2019, despite Amigo stakes down more than 50% on the quarter, the growth in stakes reached 6%. Versus Q1 2020, Q1 2021 stakes reached EUR 4.6 billion, as I've previously mentioned, up 12%, of which lottery stakes of EUR 3.5 billion, up 4% year-on-year. Within lottery stakes, stakes from draw games amounted to EUR 1.3 billion, up 3% and more than 20% if we exclude Amigo. Stakes from instant games amounted to EUR 2.1 billion, up 5%.
The stakes from sports betting increased by 46% to EUR 1.1 billion, benefiting from, first, dynamic markets, second, a higher player payout ratio enticing players to put winnings back to play, and also a favorable, favorable comparison basis as most of sporting events were canceled in the second half of March 2020, as Stéphane mentioned it before. The growth versus 2019 on a more comparable basis is still a 20% increase. Now we are on slide number eight. In Q1 2021, winnings totaled EUR 3.1 billion, up more than 14%, hence a player payout ratio of 68.7%, near, near 120 basis point increase year-on-year. This player payout PPO, if we say it in short, increase is related to sports betting for two reasons. First, mixed effect. Sports betting accounted for more than 24% in total stakes in Q1 2021 versus less than 19% in Q1 2020.
Second, the sports betting PPO itself increased by 600 basis points to reach 80%. In parallel, the lottery PPO was down slightly because of the mixed effect related to Lotto and EuroMillions share in the total lottery stakes, as their PPO is low, and Amigo declined as its PPO is above lottery average. The increase in the sports betting PPO is not exceptional at this stage of the year and is the result of many betting outcomes favorable to the players with the most expected winners coming through, particularly in football. We think it applies to the entire sports betting market in France. We have already had the chance to detail the quarterly variations in PPO, notably for sports betting, and the Q1 2021 PPO remains below the 69.3% recorded in Q3 2020 or the 69% in Q2 2019.
Largely expected, winners came through in Q1, but it won't necessarily be the case over the whole year. It's on a yearly basis that we manage, the metrics of yearly average PPO, and you can see that annual ratios on this slide are quite similar regardless of the quarterly fluctuations. To conclude on slide nine, the gross gaming revenue, stakes minus winnings, stood at EUR 1.4 billion, up 7.7%. The net gaming revenue, which is the GGR, gross gaming revenue minus public levies, was up 5.1%, and the revenue, total revenue, up 5.2% year-on-year. On lottery, increases in stakes and revenue were broadly similar, while the rise in sports betting PPO translated into a lower growth in revenue versus stakes, plus 11% versus plus 46% in stakes. Thank you very much, and Stéphane and I are now ready to answer your questions.
Thank you, ladies and gentlemen. If you wish to ask a question, please press 01 on your telephone keypad. We have a first question from Jane Galway from Bank of America. Please go ahead.
Oh, hi. Hi. I just wanted to talk about your sports betting results. Is there any update on where you see your market share? Was this an outperformance versus market? I can also see that your online stakes rose again this quarter to 12% of total stakes. What do you think, where do you think they'll head once the markets reopen? Thank you.
I think your first question was about our market share on the online sports betting market. As you might know, or as I will state again, we don't communicate on the exact level of our market share, per se. We, however, can say that our market share has been probably globally stable, regarding where we were at the end of the year. I would say no major change in terms of our market share. Your second question, I'm not sure I got it completely. Can you repeat your second question, please? Sorry, the sound was not very helpful.
No problem. No problem. Just your overall stakes. I can see about 12% of your total stakes now for the group came from online. That's an increase versus 11% in Q4 and 9% in Q3. You know, we'll hopefully be coming out of lockdown in a few months' time. Where do you think that share will go, that share of online? What do you think the new base is?
Okay. We have not, we have not given a target for the year, in terms of share of our online, at this point, because precisely, we were cautious about what was linked to the specific period that we've been going through and what was a more structural trend. We will probably come back to that at the end of this semester. However, I think what we've definitely seen during this first quarter is that we have changed our rhythm of development of this online part of our business, particularly in the lottery, in our lottery business. We definitely expect to keep some of this higher trend over the year.
I think that, at the end of last year, we were saying that probably, our trend for online, for online stakes, should be between 20% and 30%. We believe that we will be actually more on a 30% increase this year of our online lottery stakes, and probably overall in our online business than 20%. It will be, I think, easier to see how we land on that at the end of the semester since we hope, as everyone, that we will probably be coming out of this very specific period.
Perfect. Just one last question. Did you comment, I think you commented on the sports growth win improvement. I missed that earlier.
Oh, the PPO? On the PPO?
Yes.
Sorry.
Yes. Pascal, you want to,
Yes, yes, yes. We commented, yes, on the growth of the sports betting PPO. This quarter, sports betting PPO was quite high, 600 basis points higher than the one in Q1 2020. It explains the gap between the growth in stakes, 46%, and the growth in revenue, which is 11% on the quarter. We think it is the case of all the French markets, as we think that. It is not especially FDJ, and it is not exceptional, as we had this type of PPO, for example, in Q3 2020.
Okay. Got it. Thank you very much.
Thank you. For the moment, we have no more questions. Ladies and gentlemen, I remind you that if you wish to ask a question, please press 01 on your telephone keypad. Next question from Alexandre Girard from Exane Paribas. Please go ahead.
Yes, good evening. Three questions on my side, regarding sports betting. Can you please give us a vague idea of the difference in performance in terms of stake for sports betting between point of sale and online? This is my first question. The second question is related to that also. I mean, you are highlighting the fact that that performance is also driven by a higher number of clients over the quarter. Can we have also an idea of that increase in number of clients on the sports betting side? Third question is related to the Olympic Games. There are still rumors on the market about a likely cancellation of that event.
Is it possible to have an idea of what is the weight of such a major event on your annual revenues forecasted for 2021 if it were to be canceled?
Okay. On this last point, I think to my knowledge, well, it's not going to be canceled. Of course, I have no, I have no clues, more than you. The Olympics is not as significant in terms of events as are a lot of other events in our schedule, and particularly, of course, the football Euro competition. I don't know whether Pascal is able to give you a figure, but I don't think it's very probable, and I don't think it would be very significant.
If I confirm, it will not be significant as there will be other offers instead of Olympic, Olympic Games. Some football championship will reopen in August. We have seen, for example, in last June, June 2020, that the players play on what is available on the site. If the Olympics are available, they will play on Olympics, but it's not as important as football, obviously. If there's no Olympic Games, they will play on other events. It is not a big issue for us.
On the other question.
Yes. On the other question you asked about the difference of performance between point of sale and online. I will not give you a precise number, but it's obvious that we have not the same level of growth in point of sales and online on the sports betting side. First, we have a difference, a gap between the two growth, each growth in each side, which is an important factor, very important factor. We have a gap on the growth of each channel since several years now, and it's quite normal, quite very understandable.
The fact is that in Q1 2021, as Stéphane mentioned it, the curfew was a little bit a problem for sports betting offline because when you have a shop retailer closed at 6:00 P.M., it's a problem when most of the events are, in football for example, over 8:00 P.M. We have a little, a little impact about that, but still, we have a growth in point of sales and a growth higher online. If we talk about number of clients, it's the same. We don't tell precise numbers about that. We have really an impact on the client base in the first quarter. It's more important on the lottery side than on the sports betting side.
On the lottery side, we have more than 600,000 new players coming to our lottery offer online in the first quarter of 2021. It's in line with the 1 million new players that we had last year. This is the first explanation of why we had this important growth in online lottery.
All right. Maybe just one last question on my side, if I may. Can you remind us what is the weight of, in a normal year, Amigo, let's say, in 2019? What was the weight in your stakes of that game?
something a little bit less than 10%.
All right. Thank you.
Thank you. Next question from James Ainley from Citi . Please go ahead.
Great. Thank you. Good evening, everybody. Three questions, please. The first, could you give a little bit more flavor about how the variations in, in lockdowns in France have impacted activity through the quarter? Should we think that the Q1 sort of run rate in activity is, is that a good guide for, sort of activity levels as we go into Q2? Second, marketing spend, over the last couple of years has been ticking up, was 15.7% of NGR last year, I think. My understanding was that we might expect to see some more efficiencies coming through in marketing in the year ahead. You know, should we expect that ratio to, to fall, by 10 or 20 basis points? The third question is, could you just remind us what the D&A guidance, depreciation, and amortization guidance is for the year, please?
Okay. On your first question, which is, what are the main impact, the main impact of the restrictions that we have now? I think where we see, where we're able to see some impact is definitely the fact that we have this 10% of our shops that are closed. However, it seemed that the impact on our activity has not been proportionate to that level because, in fact, our clients have been going either to other shops or online. It's the impact of this 10% of shops that are closed does not seem to be, again, as we measure it, that significant compared to this 10%.
There might be, there might be, as we said, and there is probably some impact of the curfew on sports betting in the point of sale because, as Pascal was explaining, sports betting is something that is more practiced at the end of afternoon and, or in the evening. Therefore, the fact that we have curfew, we had curfew at 6:00 P.M., at 6:00 P.M., and now at 7:00 P.M. is definitely not favorable for our point of sale, although they have been, again, they have been positive in terms of growth of activity on sports betting, but probably at a lower level than they could have, they could have been, if we did not have this curfew.
Of course, players, probably some of the players have been going online, but of course, we do not have 100% of the online sports betting market. It means that suddenly, we have some impact on our sports betting activity as a whole, which is definitely more easy to measure on our point of sale sports betting activities. I think, under the control of Pascal , this is really the main element that we can mention that I cannot, in terms of impact of lockdown, on our activity. On marketing spends, I am not sure I completely got the exact figure that you mentioned.
I think that we are, again, what we see in the figures that we commented is that we've been going back to some, I would say, normative trends in terms of activity, again, when we compare it to normal, quote-unquote, periods. I think the same is for market expense. As you might expect, we have relaunched or launched a number of new games, which have been very efficient in driving this back to growth in our stakes. I think our market expense level has been quite, I would say, going back to normal level. This is not where we might have some efficiency gains that we have used last year to protect our profitability and that we expect to have still this year.
It's not in marketing spends as such. It's more in other types of spends, particularly related to the way we interact with our point of sales where the situation has probably given us opportunities to continue to make some savings since, for instance, the number of visits that we do, that our commercial people do to the point of sales is, of course, lower. Also, the rhythm of and the volume of tickets that we have been sending to our point of sale has been also a little bit lower due to the closing of 10%. Yes, we do have some savings, but not so much on marketing spends as I can comment at this point.
Maybe I can add one or two things about marketing spend. We have the Euro football. It will not be canceled as is.
As we expect.
As we expect. This is quite an important impact on our marketing spends because it will be a real battlefield between all the sports betting operators in June. Maybe a last point about our marketing spend. As we become more and more online, the level of marketing spends and percentage of the revenue will be higher because we spend more of marketing expenses when we are online than when we are offline. It will be gradually higher as we come more and more online. On your third question, if I well understood, you asked about the level of depreciations in 2021. We did not give a guidance for 2021, but I can help you a little bit. We had 100 million, 102 million of depreciation in 2020, and it will be a little bit higher than that, but not a lot higher than that, some millions higher than 100 million.
Great. Okay. Thank you very much.
Thank you. Next question from Sabrina Blanc from Société Générale. Madame, please go ahead.
Yes. Good evening. I have three quick questions. The first one is regarding the, for Q1, the trends between the beginning of the quarter when we had no lockdown and the end of the quarter. Have you noticed any big differences? The second question, sorry, perhaps I missed this figure, but could you repeat the part of the lottery which is currently online? I would just would like to come back on one of the sentences of your press release saying that sports betting calendar is now normal calendar. Can you confirm that there is no, no more catch-up in terms of sports events?
Okay. First question is, difference of trend between the beginning of the quarter and end of the quarter, I think there is, known, that we know, no, nothing significant. That's quite, quite easy. Second question is.
On the lottery number.
share of, on online lottery.
Online lottery stakes.
It is 12%.
Yes.
right now.
Just before 12, 12%.
Yeah. It's, it's a little below 12%. So it's 12, 12% in arrondi. Third question was,
Is there any catch-up?
Any.
On sports betting events? The answer is no.
No.
Thank you very much. Thank you. Next question from Jaafar Mestari from Exane BNP Paribas. Sir, please go ahead.
Hi. Good afternoon, everyone. Two questions for me, if that's okay. Firstly, I wanted to come back on the different points you mentioned about the cost items this year, and tie it all up together. It sounds like marketing costs are going to be like a normal year or maybe a little bit above because of the euro. It sounded like costs of visitations to the network, etc., could still be below. If we take this all together, the EUR 80 million of cost savings you had last year, do you still think they'll be mostly reinvested this year, or will you still be operating with some cost savings in what is still a disrupted year? Second question on capital allocation and the potential for you to deploy some of that balance sheet headroom.
I think recently you've been saying, well, one, the environment is still uncertain, and two, M&A is a bit blurry right now. No obvious pipeline. Now you will have had 12 months of track record of operating in a very disrupted environment and managing through complete lockdowns, partial lockdowns, etc. Now the private competitors will also have had 12 months of clarity in a way. At which stage, what's a timeline for you to actually say, well, you know, we know the current environment, and if there's no pipeline, there's no pipeline? At which stage do you actually start thinking about shareholder returns even in that environment?
Pascal, on the on the cost savings, maybe?
On the cost savings, yes, we said EUR 80 million last year. We said that EUR 30 million, versus 2019, and we will keep half of them, so EUR 15 million, in 2021. We are still on this type of figures. Yes, we are still on this type of figures. We have not changed our mind about that.
Okay. On capital allocation, I don't think I have much to add to what we said in the past months. The environment is what it is for all of us. Yes, we have learned to manage through it. However, it is obviously, again, in France, but not only in France, still uncertain. You can see it both ways. Yes, we are more confident in our capacity to manage it, but we don't think that uncertainty is out of the way. I think we have still the same, I would say, objective in terms of continuing to grow, and in our online business, and particularly in our sports betting online business.
We know that, yes, it does go through organic growth, but it could also go through some M&A or partnership if we were to find good opportunities. We would definitely continue to look at potential opportunities. I think it's really too early to talk about shareholder return. However, I want to stress that this year we have announced that we'll, of course, fulfill the promise of dividends that we issued before the crisis, after this year, 2020. This is going to be put to vote to our General Assembly in June. For, I would say, extra or other type of shareholder return, I think it's too early.
Maybe I can just add one thing about one of the questions of Sabrina Blanc just before that. When she asked about the trends beginning or end of the quarter, the trends on our activity are the same, but when we compare it to 2020, it's quite different. Maybe it's quite interesting to have in mind that the growth at mid-March, when you take only not the quarter in total but from January to mid-March, is 5% except Amigo, and 0% when we include Amigo, because, as we explained, the comparison basis was very favorable on the end of the second half of March.
Thank you. Next question from Joanna Jourdain from Oddo BHF. Madame, please go ahead.
Yes. Could you hear me?
Yes.
Yes.
Okay. Two questions for me, please. The first one is, could you give us a view on the player's payout evolution that we could expect around Q2, Q3, this year? Does the assumption of going back to Q3 2020 level at 69.3% could be a fair assumption? My second question, I calculate an increase in online stakes of plus 3 percentage points, compared to the end of 2020. Could you give us a sense of how does it translate into the VD? Thank you.
Okay. On the first one, I think your question was, what is our assumption in terms of PPO for the year? For the whole year?
for the whole year and especially for Q2, Q3, yes, please.
For Q2 or Q2, Q3. I think that what Pascal explained is that we have, in front of us, particularly in Q2, but actually, it is also partly in Q3, some very big sports events, particularly, of course, the euro, which is at the end of Q2 and beginning of Q3. It is clearly a period in which you might have, of course, with a lot of dependency on the results of the competition, but you might have some very high level of PPO. That's part of the scheme of this, of that type of competition. I'm not sure we're able to give,
No, no. What's the figure for? It's very, it's very difficult to give a figure, quarter by quarter. We don't, we don't pilot it, manage it, quarter by quarter, but on a yearly basis. It happens that this quarter is quite high. We can expect then the second quarter, as Stéphane said, could be high, depending on what the French team of football will do on the euro of football. Globally, on the whole year, we don't expect figures very, very higher than it was last year. Regarding sports betting and regarding lottery, we had a particularly low PPO this quarter because, as I explained, Amigo was down.
When Amigo will be there again, as the Amigo PPO is higher than, is above the average PPO of the lottery, and, technically, the PPO of lottery will get a little bit higher. On the sports betting, we manage it on a yearly basis, not on a quarterly basis.
Your second question was about the level of online, online stake or online lottery stakes. I'm not sure. Sorry. And the impact on our margin?
Joanna, can you repeat your second question?
That's right. Yes, that was the question, actually.
Okay.
Indeed. Your question was, what type of impact, in terms of margin and EBITDA should we expect from the higher percentage of online lottery stake? I think, again, we're not giving, we have not given any guidance for EBITDA this year. We have not, and we're not actually commenting EBITDA at the end of Q1. However, I think we have explained several times that, of course, the online lottery stake has a relative impact on our EBITDA. Pascal, I don't know whether you want to repeat what we've said. It's,
Yeah.
1 point,
We said that it's between 1.5 and 2 times the margin on the online stakes than on the offline stakes. It is quite good news for us that we have this solid trend of online stakes.
It's definitely positive on our profitability. It's actually even a little more positive since it is driven at this point, again, a lot by draw games, which have even a better margin as such. I think we'll come back to that at the end of the semester in terms of what it means in terms of EBITDA guidance for the year because, again, this is a little bit changing in this quarter in terms of trends. We'll going to see where the.