Ladies and gentlemen, thank you for joining us for the FDJ Conference Call. I'll now hand over to Madame Stéphane Pallez, Chairwoman and CEO. Madame, please go ahead.
Thank you very much. Hello. FDJ, H1 2020, Results Conference Call. I'm with Pascal Chaffard, Executive Vice President, Finance, Performance, and Strategy. You have certainly already seen the press release that we published at 6:00 P.M. today after market close. We'll also post on our website our slideshow. I don't know whether it's already posted. What I'm going to do is give you a high-level introduction about those results and the main messages. After that, Pascal will walk you through the slides to describe the different elements of our communication. I want to start, of course, by stating, as you know, that this H1 semester has been rhythmed by the COVID-19 pandemic.
It's been, overall, the results is a drop in stakes, which is limited, I think we can say in this context to minus 18%. Actually, this 18% is the result of three very different moments during this semester that you have, that we have commented, all along in our different communications since mid-March. We had, of course, it's far away now. It's been very far away, but we had a very good start at the beginning of 2020. Up until mid-March, stakes were up 5% in line with expectations. Starting with the French lockdown decision and starting March 16th to May 11th, of course, the lockdown caused a significant decline in activity, due to a very severe shortage of sporting events and the closing of bars, which account for about 20% of our point of sales.
We also decided, as you know, to stop offering our Amigo game on March 19th. On this basis, during this period, as we described previously, the stakes declined by around 60%, with lottery stakes down by more than 40%, excluding Amigo, and sports betting stakes down nearly 95%, due to the very limited offer linked to sports events. This is, as a reminder, you remember that this lockdown period of nearly two months mechanically caused a revenue loss of around EUR 200 million and an EBITDA loss of around EUR 100 million for those two months. Since the end of the lockdown in France, mid-May, we have seen a gradual recovery, which has accelerated in the last period, particularly since mid-June, with the gradual resumption of sporting events, particularly for European football, as well as with the reopening of bars and the relaunch of Amigo.
Really very, very, very differentiated period, the last one being, of course, the most positive, but still short, of course, in terms of impact on the semester. I think the good news also is how we protected our EBITDA, because you have certainly noted that our EBITDA margin has been maintained at above 20% during this first half, which is good news, maybe surprising news. I think one element is, of course, very much linked to the action that we've been taking, and particularly the cost reduction plan that we initiated at the onset of the pandemic. As Pascal will comment, it has been deployed very quickly, and is for two-thirds on this semester. It is also due to low player payout ratios within our sports betting business.
There, of course, you have an element, which is less in our hands, and which is, of course, not easy to reproduce, when we will have a normal sporting offer. Just one word on the cost reduction plan. This cost reduction plan, which has been launched at a level over EUR 80 million, has been designed to cover the entire spectrum of fixed costs that we budgeted for 2020. It's 10% of those fixed costs for the year.
As I said, two-thirds of this plan has been deployed at the end of June 2020 because, of course, it's absolutely logical since our activity was low, we saved as much all the marketing, advertising expenses that are linked to our normal activity, not only to save those but also to keep some margin of maneuver for the re-engine of our activity, that we are now right in the middle. Regarding the sports betting player payout ratio, as I said, it stands at a very low level, 73.1%, 73.1% of 75.5% versus 77.7% in H1 2019.
Of course, the 73% is a level that is, I think, not consistent with the normal sports betting activity, in which you invest, of course, you invest in the payout ratio to attract your and retain your customers. The last comment I will make is that, as I said, since mid-June, FDJ's activity has been back around a level that we've seen in 2019. It is, of course, very good news, but it is limited news in terms of weeks. Given the uncertainties that we are surrounded, for this second semester, we have decided not to communicate at this point a new financial target or guidance for 2020 as a whole, even though, again, we have this positive sign that we expect, of course, to confirm.
We are definitely dependent on the environment, and government, as we all know, is very volatile in terms of sanitary conditions and repercussions of these sanitary conditions to the overall, I would say, social and economic activity in our country and in any country, I would say. I want also, maybe, to reassess our confidence in the strengths of the FDJ's business model in this environment. I think we have seen during this crisis that we have several very key strengths that we can count on, that we've been counting on and that we can count on for the future. Of course, the resilience of our lottery business unit, particularly in its draw games part, it's in its point of sales, in a way.
Of course, some were closed, but again, we had some activity, even in the context of the lockdown. We also saw something that we know is very interesting and positive for the future, which is the growth, the strong growth potential of our online activity, of course, the online lottery in this case, because again, the online sports betting activity was not possible, given the level of sporting events that we had. I think we also showed the benefits of the investment in technology that we did during the last five years in our IT and digital. We definitely showed it through the fact that the company has been able to be managed on a remote basis for 97% of its employees.
We also, of course, saw the benefits in the capacity of our online gaming activity, online lottery activity, to accelerate during this period. We think that this period has validated overall our strategic initiatives for 2025, the fact that we want to continue to strengthen our core activities, namely lottery and sports betting, with sustained digital development efforts and deeper client knowledge. Also, the idea that incremental resilience will be also obtained through the development of more adjacent activities, such as payment and services that we've been talking about for some time.
We have not only been talking about it, but we actually deployed, during this period, we deployed our services for what we call proximity payments, linked to the tender that we won with the Tobacconist Confederation, to deploy this proximity payments for taxes, but also a number of small payments in our point of sales. We announced this week that the generalization of this service, the complete rollout, is now happening. This service is actually accessible on the whole French territory in more than 5,000 point of sale.
We also, I think so that the strong benefits of our financial structure, with readily available cash of more than EUR 800 million, and our capacity to manage this cash generation even in a period where our activity has been low and where there were some tensions with our resellers that we actually manage with them. I think that's an also very good and positive lesson. On this base, clearly, we intend to maintain our investment. I want to stress that the cost savings plan that we did, as I say, has protected our capacity to continue to invest in our development, our marketing development, particularly for this second half, and also in our Capex, because our Capex in H1 2020 have actually increased year on year, over EUR 11 million.
We definitely protected also our capacity to invest, not only in this semester, but for the future. We've been very, very close to our retailers during this period. I think this also was very positive. Of course, we have invested a lot in this network. I think we've been managing the crisis with them. I think we saw that this was positive and actually is very positive today in the way, in their capacity to come back and accelerate their business in the last week.
Of course, we are looking very closely at the potential change in the consumption trends and patterns for French customers, and particularly in our sector, to draw the lesson of this, particularly the fact that, of course, dematerialization, digitalization, electronic payments, have been very important features during this period. Of course, these are some things on which we want to base our future development and investment also. Lastly, I want to stress that during our general assembly, on June the 18th, we had our shareholders vote to include our raison d'être, purpose in English, in our bylaws. This was voted as a very, very large majority. It's the conclusion of the work that has been started to elaborate this purpose for over 18 months.
Of course, it is now the beginning of the concrete implementation of the commitments that we see in this purpose. It is very much, again, in line with what we stated during our IPO, and what we think is the good business model for FDJ , which is not only financial performance, but also capacity to show the benefits of this model to our stakeholders. We think it's an important step that has been actually happening during this first half. That's why I wanted to mention it. We're going to, again, deploy a number of initiatives to implement this now in the second half.
I will now let Pascal Chaffard present to you the main features of this, this H1 and come back for, I will come back for the Q&A. [crosstalk].
Thank you, Stéphane. Before diving into H1 figures, it is worth mentioning that 2019 data and related year-on-year changes have been restated on a comparable basis to consider mainly the new tax regime that came into force on the 1st of January this year, and more anecdotally, Sporting Group data presented as if consolidated from the start of 2019. Now we are on the slide, slide four, with the H1 key figures. I will cover those key highlights before reviewing the results of the first half of the year in more detail. As Stéphane said, stakes in totaled EUR 6.9 billion, down 18% year on year.
Given the lockdown and restricted population movements for several months, activity in point of sales suffered more with a 21% drop as digital lottery increased by 50%. I will come to that a little bit later. The decline in stakes is reflected in revenue, but to a lesser extent. Stéphane has explained why. It's because of the player payout ratio that has been less high than expected. The EBITDA, defined in our case as the recurring operating income adjusted for depreciation and amortization, fell by 16.4% to EUR 174 million, hence a margin maintained at over 20%, to be precise, 20.5% in the first half of 2020 versus 20.9% in the first half of 2019 and 20.6% full year 2019, always on a comparable basis. If now we move to next slide, number five, take a look at the breakdown of the stakes.
The 18% drop in stakes in the first half can be broken down as follows. A 39% fall of sports betting, reflecting the sharp reduction in the number of sports competitions. I will not comment it more because you know that, you know that, also very, very well. We have seen a rebound in betting since the end of the lockdown, reflecting a gradual resumption of competition, notably European football. From mid-June, we have recovered a level of activity comparable to the same weeks of 2019, though still well below the 2020 expectations as the 2020 European Football Championship, due to be held in June, has been postponed to 2021. On lottery, it is a 13% decrease, or we can also say an 8% decrease when adjusted for the Amigo total shutdown. Amigo has been shut down for nearly three months.
This performance clearly illustrates lottery resilience and, in particular, draw games with a limited -2% decrease, excluding Amigo, thanks to a large base of players who remained loyal. In particular, Lotto did very well. The online lottery growth of +50% over the half a year was remarkable. Digital stakes doubled during lockdown, and growth has remained strong since then. This is attributable to most, almost equally, the enrollment of new players as well as the existing players at the end of December customer base activation. The strong online lottery momentum softened the overall decline in lottery stakes by over 3 percentage points. This is to be noted. Finally, over the last few weeks, since mid-June and continuing to date, as Stéphane told you, both lottery and sports betting have returned to the levels of the equivalent period in 2019.
If now we take a look at slide six, the 15% decline in revenue is smaller than the 18% decline in stakes because, as we said before, a lower player payout, which was 67.3% in 2020 versus 68.6% in the first half of 2019. Overall, this decline reflects the change in the lottery sports betting mix as sports betting has a structurally higher PPO, PPO for player payout. Lottery revenue were down 12% versus stakes down 13% because the mix in the lottery game, more Lotto and less Amigo, basically. For sports betting, the difference was very significant with a revenue drop of only 26% versus stakes down 39%. Stéphane explained to you the level of the player payouts in the sports betting area in the first half.
In the first quarter, the player payout was low for FDJ, but for the entire market. I can just comment a little bit more. The player payout in the second quarter of 2020 reflects the scarcity of events, with some exotic games making it maybe more difficult for players to exert their expertise. This situation applies, de facto, as I said, to the entire market. It is important to note that, compared with the regulatory annual player payout caps, this gives us great leeway to have higher PPOs in the second half of the year. This will be the case for all operators who want to entice players back.
Let's be cautious when you think of the second half of the year, the level of the player payouts should not be as low as it has been in the first half of the year. Some more details on our cost reduction plan. This is on slide seven. As Stéphane said, very early on, at the end of March, we announced the implementation of a cost reduction plan amounting to over EUR 80 million, i.e., more than 10% of the group's annual fixed cost, with more than 50% of planned savings related to advertising and promotion expenses, as it is shown on the graphic. This EUR 80 million cost reduction plan is in relation to our 2020 budget, which considered an OpEX increase alongside business development, for example, the 2020 European Football Championship with advertisements specifically for this event.
Compared to 2019, the savings are nevertheless close to EUR 30 million. More than two-thirds of the savings were recorded in the first half, representing 15% of half yearly fixed cost, mainly at the same thing as the whole year related to advertising and promotional expenses. This impact was very important on our EBITDA margin because it helped safeguarding this EBITDA margin by around seven basis points. As a reminder, we define variable cost as cost that automatically adjusts when stakes vary, and fixed cost, those which need management decision to vary, to be clear on what we call fixed and variable cost. If now we move to the slide number eight, from the revenue to EBITDA, the drop in retailer commissions down 21% reflects the drop in POS stakes, point-of-sale stakes, because point-of-sale stakes constitute the basis for retailer commission.
The decrease in other cost of sales reflects a reduced number of promotional events and a decline in game support cost due to the reduction in activity overall. Marketing and communication expenses mainly consist of advertising and promotion on one end and game and service development on the other end. In the first half, advertising and promotion expenses, the costs are down, sharply down, as we stopped all offline product advertisement in March to restart only mid-June. Expenses related to the development of our offer, as Stéphane said, which is, for example, product innovation, platform services, apps digital, are up sharply, which explains why marketing and communication expenses were down by only 3.2% overall. It is a strategic intent that our savings plan does not impact the group's future development. Therefore, development costs have remained in line with our initial budget, particularly on the digital front.
As you can see, administrative and general costs have been reduced following the implementation of the saving plan. Now we move to the next slide, number nine. Looking at our EBITDA margin, it is to be noted that we have been able, thanks to the cost saving plan and also to the low level of player payout on sports betting, to maintain an EBITDA margin at a comparable level with the one of 2019. Looking now at EBITDA itself rather than the EBITDA margin, we see that the lottery contribution margin is falling, but we will see on the next slide that the margin rate has nevertheless been maintained on the lottery business. The sports betting contribution margin was maintained despite the sharp decline in activity, thanks to the combined impact of, as we said before, the lower player payout and also the savings on advertisements and promotions.
We will see in the dedicated slide that the PPO effects translate into an improvement in the margin rate for this H1, not necessarily for the whole year. At the holding company level, cost control was driven by the saving plan. Just one word on slide nine to say that, standing at 32% close to the level of the first half of 2019, the contribution margin rate of lottery has been broadly maintained despite the 12% drop in revenue. This is globally the level that we had on the total 2019 year, this 32%. If we move now directly to slide 11, sports betting's contribution margin increased sharply, up 7 percentage points to more than 31%. We have already explained why, but I think it is important to draw your attention to the following points with regard to the second half of the year.
We should go back to a normative level or even see an increase in advertising and promotional expenses to entice back players for us, but also for the rest of the market. We expect a more competitive market this second half of the year. The PPO should increase, reflecting an expected increase in competitive pressure with operators wishing to gain or regain a market share. We have to be cautious on the player payout of the second half of the year. Now we move to slide 12 to go in detail for the bridge from EBITDA to the net income. Depreciation and amortization are at a comparable level to H1 2019. The EUR 7 million increase is related to the amortization of exclusive rights over full half year in 2020 compared to one month only in H1 2019.
Non-recurring income mainly corresponds to an impairment of Sporting Group sports betting business in the U.K., not United States. For EUR 26 million, it's a goodwill impairment. This subsidiary, you have to keep in mind, it's 100% sports betting and has been particularly touched by the crisis with a remaining level of insolvency on the recovery rhythm. Our net financial income reflects the new loan of EUR 300 million and EUR 800 million for the payment of exclusive rights to the French state, but also the mark-to-market adjustments of our financial investments in the context of a deteriorated financial market. After corporate tax, the group's net income for the first half of the year was EUR 50 million.
Now, if we go to the slide number 13, at June 13, 2020, net cash surplus was close to EUR 300 million, an increase of more than EUR 200 million compared to December 31, 2019. This change is marked by a positive working capital impact induced in particular by the change in the payment schedule for the public levies following the PACT legislation. We pay now our public levy on a monthly basis, and we paid it last year on a weekly basis, as well as the unclaimed winnings that we will pay back to the state at the end of the year. This upward variation was particularly set by the payment of dividends for the 2019 financial year and CapEx.
We have to remind you that the level of this net cash surplus at the end of June cannot be extrapolated to the end of December due to significant calendar effects on the payment of public levies, including an advance that we will have to pay in December for the month of December. We will not have this effect, this calendar effect that we have seen at the end of June by December. Last slide I wanted to stress on is, we have communicated several times during the first half of the year about our short-term available cash of more than EUR 800 million. Stéphane told you that some minutes ago again. It stands at EUR 853 million precisely at the end of June.
We therefore thought it might be useful to present the bridge between these EUR 853 million, the net cash surplus of EUR 298 million I've just commented before, and the amount of cash and cash equivalent as per our balance sheet of EUR 476 million precisely. As you can see on the slide, available cash includes EUR 476 million of cash and cash equivalent plus EUR 449 million of term deposits. In order to close the gap with the net cash surplus position, you add other financial investments and then deduct first the EuroMillions funds that are sequestrated in the trust in Great Britain, the gross financial debt, mainly the loans related to the exclusive rights to the acquisition of Sporting Group and to the acquisition of our head office building, and the last part of the funds to be retroceded to the state as per PACT legislation.
I've ended with this presentation. Thank you for your attention. Stéphane and I will be happy to answer all your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press zero one on your telephone keypad. We have one first question from Mr. Jaafar Mestari from Exane BNP Paribas. Sir, go ahead.
Hi, good afternoon, everyone. I've got three questions, if that's okay. Firstly, today, you're saying that activity levels have recovered and have been comparable to 2019 since mid-June. In this context, could you help us understand what you meant, when you gave an interview in the press on 18 June, saying that you expected the recovery to take 18 months? Is it just that everything particularly accelerated in the days that followed, or you still have any major reservations around the shape of the recovery? That's my first question. Secondly, just on online lottery, the stakes up 50% in H1. I think as of your Q1, you were saying, a run rate of plus 40, so a really, really strong momentum again.
Did that slow down markedly since mid-June as customers go back in point of sales, or do you think you made any permanent online mix gains? And lastly, just a generic question on your regulator. I appreciate that the president of the ANJ has only started four weeks ago, but could you share your initial experience working with her, and with the ANJ in their new shape? How easy is it to discuss new product? How easy is it to tweak player payouts? When you had hiccups like the sports betting player fraud, how stringent have they been with you? And do you think it's gonna be a regulator that's gonna be easy to work with on innovation?
Okay. Thank you for your questions. I will answer to the first one and to the third one about the regulator. Pascal will complement me particularly on the and answer the second one. On your first question about what we say today compared to what I've been saying in my interview around the general assembly, actually, what we see today is positive. Again, as I said, it's positive for since mid-June, we have come back to level of activities that are comparable to 2019.
However, when I was saying that I expect to come back to the level of business that we had at the end of 2019, I was talking about coming back to the absolute figures that we reached at the end of 2019, particularly, for instance, in terms of level of stakes. One thing is to come back to levels in the second half, if everything goes well, that are comparable to 2019. It does not compensate. You do not find at the end of this year the compensation for what you have lost in terms of activity in the first half. I've been, it's true that I've been cautious when I was saying that.
At the moment, I was, I've been making this interview, we did not add the first positive sign that we had since mid-June because it was just before that, in a way. I've been saying that I expect to reach, to come back to the level of activities that we had at the end of 2019, before, at the latest at the end of 2021 and, before if we're able to do so. I'm still completely consistent with that statement. Of course, the key question is how the level of activity is going to be in the second half, whether it's going to continue to grow over the next month. This will, of course, give us a very, very strong indication of where we are compared to this medium-term perspective.
Pascal might give you some more colors on that, but, roughly speaking, that's how I can answer. On the regulator, you have rightly said that the regulator is actually in place, since, roughly, a little more than a month, officially speaking. We have been mostly working with the regulator and with a very good dialogue about how to work together, how to implement the data exchange that they want to put in place on all our online activity, and how they're going to structure the way they will examine our next requirement. Actually, we did not have any, we didn't have any discussion or dialogue about concrete decisions at this point because they're not ready to do that.
Of course, we have anticipated that since our regulator before, the ANJ, has given us all the authorization that we need to have to pursue the activity of the company at this point. Really, the key, the key test is going to be in the fall because in the fall, we will go to the ANJ with a number of authorizations for new games, for instance. They will also have produced a number of frameworks that are not published yet. We're really in the preparation of the framework for our relation.
In this context, I can say, as I have been directly in contact with the Chairwoman of the ANJ, that they are, of course, wanting to set up a very, I would say, serious regulator, serious in the way that they want to really have data to take the decision. They want to have a good legal framework to take those decisions, but with a very good dialogue about what are the constraints of the company. Pascal.
Okay. Just to complement, maybe one figure to explain one thing about the 2019 figures and 2020 figures. In 2019, H2 was 11% gross versus 2018 H2. When we are just now at the level of 2019, to continue to be at the level of 2019, we have to do as good as we did last year, which was 11% gross compared to 2018. Just to have this complement of color to see that it's not done yet. Second thing, to answer your question about digital, lottery digital, yes, we have plus 50% on H1. What we said during the lockdown is that we were 40% ahead of our expectations. This is totally true. What I can say about that is that we have kept a significant part of the activity we had during the lockdown.
We have not kept 100% of this activity, but it's true to say that we are in advance on our plan, on the digitalization. We have maybe gained six months to one year thanks to this lockdown period. We will not lose everything we have gained during the lockdown in H2. We want, on the contrary, to build on this momentum to continue to animate this digital lottery and to continue to have a stronger growth in digital lottery. Maybe a last thing about that. In H1, we have doubled the number of new players compared to H1 2019. This is a little bit more color to understand what we are talking about.
Super. Thank you very much.
Thank you, sir. Next question is from Mr. Ruben Lelouch from Rothschild & Co. Sir, go ahead. Next question is from Mr. Ruben Lelouch from Rothschild & Co. Sir, please go ahead. Mr. Lelouch, your micro has been opened. The next question is from Madame Dalia Famina from Goldman Sachs. Madame, go ahead.
Thank you very much. I have a few questions, if I may. The first one, I guess I'm gonna follow up on Jafar's question, on your very positive comment that from mid-June, you returned to an overall level of activity. Can I ask for a little bit more data around it? If you can comment a bit about the traffic in the shops, in the stakes per customer, just to make sure that we're on the same page, that you're basically saying that in the last few days, the weeks, rather, the stakes levels were in line with the 2019, keeping in mind that obviously annualizing that, that would be too aggressive given that the second quarter was very weak, just in terms of the last few weeks of June and July.
My second question on your marketing expense, can you provide a little bit more color on the marketing, cost pickup that you're expecting in the second half of the year, maybe relative to the levels you delivered in 2019? When I look at your slide seven, to me, that actually implies that you're still expecting a EUR 10 million reduction in advertising cost to come in the second half of the year. Can you marry those two together, if possible? My last question is on regulation. We saw a number of countries introducing limits on deposits or max losses in the last few months in response to users spending or players, sorry, spending more on gambling activity. Can you provide a little bit more color if you are worried or expecting anything to happen in France? If there have been any discussions at all? Thank you very much.
Pascal, maybe you can take the first one.
Yeah. Yes.
The first two questions.
Yes. The first question.
I will, the third one.
First question, if I have well understood, you want to have more color about what we call the normal level of activity. I can comment it differently, talking about lottery and talking about small betting. When we talk about lottery, mainly we talk about retail lottery because normal level of activity, we are aware of this normal on the online. So we talk about retail lottery. What we can say, we do not have a perfect knowledge of our customers. It's very hard to say if the number of customers is the same that it has been before. We know that we are in the process to make some surveys to dig this point.
We know that the really major part of our point of sale are opened, and they have quite a normal number of people visiting them. We can assume that we have, maybe not the same level of players, it's impossible to tell you at this stage, but an important number of players that are back to our point of sale. On the sports betting activity, it's harder to talk about normal, because nothing is really very comparable when you compare 2019 to 2020. In 2019, end of June and beginning of July, most of the football offer was, there was no football offer because all of the championships had been terminated in 2019.
This year, in July, we have most of the European football championships that are in business. On the contrary, we do not have any tennis. It is quite difficult to really have a good base of comparison. Still, if we look at the figures as they are, they are at the level or a little bit higher than they were last year at the same period. You have to understand also that this is significant, yes, because it is some weeks, but usually those weeks for sports betting are low weeks. We are comparing to relatively low weeks of 2019. We will see better. That is why it is difficult to make a forecast for the whole 2020 year.
We will see things better in September when all the championships will have returned to normal, when we will have an, when we will have tennis, and the level of activity will be really higher than it is today. We will see if really we can continue to say at this time that we have a level of activity comparable to 2019 or even a little bit higher. We will see that. I hope it answers your first question. On your second question, you talk about marketing expense, and you referred to page,
Seven.
To page seven. What I can say is that we have, the saving has been done on the marketing on the, on the Q1, and Q1 and Q2, sorry, H1. We have saved quite an important amount of money to be able to support our activity in the, in the Q4. Our activity in Q4 will be extremely high in number of new games, number of new things that we will propose to the market. In September, we have, we have another version of the heritage products. We have major launches of products in October, in November, in December.
We will have a strong marketing activity, and we kept a large part of our marketing budget to spend in Q4 to be sure that we will be able to make the activity grow in Q4 because, as I said a few minutes ago, for sports betting, July is usually a low period for our activity. What is important for us is to make the activity grow for September, October, which are important and more months with an activity higher than we usually have during the summer.
Okay. Just on your third question about regulation, which I understand is, globally speaking, are there any risk or intention to have, coming from the regulator, new limits on stakes or on deposits that can be made? There is no, well, no such intention has been expressed. So there is no current debate about that type of limits. That's a fact. I think it is, it has to be understood that the French market is, I think, in quite a different shape in terms of development and way the operators have been developing the market when you compare, for instance, to the U.K. market. I'm talking about sports betting. The regulation has been definitely stricter. The market is still less developed.
That, I think, is an element of context to understand that we do not have the same debate. However, since you asked the question, I think it is worth mentioning that there was a study published by the Observatoire des Jeux, the Gaming Observatory, which is a study that has been made in 2019. No such study has been made since the last five years. This study points out, underlines that the main, I would say, contribution to the intensification of gaming, although this intensification is still, I think, quite at a low level in the French market from the sports betting activity. This certainly has put some focus on that. I would say there is no very lively debate on this at this point. No risk identified at this point.
That's very helpful. Can I ask just to clarify on advertising? Did you want to imply that those, again, referencing to slide seven, those EUR 40 million roughly annual target saving in advertising is gonna be spent in Q4? Is that what you're saying, that that will be reinvested?
I want, I don't know if I want to answer really this question, but you can assume that we will have an important advertisement plan in Q4. I think I will stay with.
Thank you. Thank you.
Thank you, Madame. We have one last question from Mr. James Andy.
Bonsoir. Bonsoir.
We have one last question from Mr. James.
From Citi?
Andy from Citi. Sorry. Go ahead.
Thank you. Good evening. Three questions, please. First, could you talk about whether you've seen any closures or distress across your point of sale network during the crisis, whether you've seen any closures, whether you were left with any bad debts from struggling point of sale owners? Second, can you talk about maybe how you think your competitors have fared through the crisis? Are you seeing any greater M&A opportunities as a result? The third question, there was clearly some political pressure around paying dividends earlier in the year, and you reduced your payout. Can you confirm that you're not planning to make any changes to the dividend policy, and that you haven't received any government support during the crisis?
Maybe to start with the last question, as you saw, I think we definitely reiterate our guidance for dividends. In fact, at the time of the General Assembly, it's 80% of our net result. There is no interference or no injunction for the government, which is, of course, only a minority shareholder of Française des Jeux. Clearly, this guidance has been reiterated. We kept by 30% the dividends that were distributed this year, again, in order to be cautious in terms of difficult times and to be prudent about the financial situation of the company. This was a decision that was made at the board level. I think that was well understood by our environment.
To come back to your two other questions, for the point of sales, we've been, of course, we've been watching and monitoring closely what has been happening in our point of sales. We've been actually managing with them their liquidity situation, for instance, by deciding not to make any, not to, not to make any cash call from point of sale that were closed. We did that on a voluntary basis because we thought it was not, it would not be very smart from us to accelerate the failures of those point of sale if they can reopen and get back to that business after the crisis. This has been, I think, this has worked very well, because we started to make those regular cash calls in the last weeks.
Actually, we've been, we're, we are having already a very low level of bad debts. Pascal might,
Yes, yes.
a number.
If I can just complete, we have accounted nothing for bad debts in our H1 accounts, which means that we are quite, quite, not, I'm sure it's not,
Confident.
Confident on the fact that we will be able to recuperate everything. If I think, I can give these figures. We had EUR 11 million in our point of sales, and we have already recuperated EUR 9 million.
Yeah.
In some weeks, we did a, I can say that we did a great job on this matter because we gave some flexibility to the point of sale that they needed. As the business has now restarted, as we spoke before, we have been able to recuperate the major part, and we will recuperate in H2 the rest of the amount.
On this question also, I think it's interesting to say that we are, of course, we continue to watch closely what happens to them, given that the shock that they had. We don't see a major trend in failures, which is good news. Actually, the number of point of sale at the end of H1 is still very close to 30,000. This is good news. It's a good news because, of course, on the other hand, it's been quite difficult for us to create new point of sales during this period. We will, of course, restart to do that now for the second half. We don't see a major negative trend in the number of point of sales.
We'll continue to watch this very closely because this might, of course, this is a risk that can materialize later in the year. We have also, but we'll communicate when it's ready. We are thinking about the type of mechanism that we could support if we think their situation is sound in the medium term, to support them if they have short-term difficulties. At this point, it is not necessary. I think that's a very good deal. I think the best thing that we can do with them is relaunch and stimulate their activity. This is what we've been able to do in the last weeks. This is also good news for the retailers.
On your second question, which was about how our competitors have been going through the crisis, as you know, it's a question that can have different types of answers regarding different types of, you know, who are our competitors. In the French market, of course, I'm not going to talk about the activity where we don't have competitors because we are a monopoly. On the online market, and sports betting particularly, it's fair to say, first, we don't have numbers because they don't publish anything. We give much more information than them.
It is fair to say that we know that some of them, and particularly the ones that are strong in poker, have been using online poker to compensate for the drop of their stakes on sports betting and to animate and even retain and attract new customers. We do not know the exact numbers. We will have more indication at the beginning of the fall because the regulator will publish some figures about the market. What we know seems to indicate that they had a shock, but some of them, and probably Winamax, for instance, has been able to compensate partly this shock with poker.
We don't see, I would say, we don't see people that are really in a difficult or distressed situation on the market, at least in the big players. The smaller players, I don't know, but frankly speaking, I don't think it's really the issue. I think the big players had the shock, but managed through the crisis. We don't see anybody in distress. I don't think there is, I would say, direct consequence in terms of M&A that you could draw from that. Of course, it does not change our medium-term point of view, which is that the online sports betting market is due to consolidate, and we would want to be part of it.
Very clear. Thank you very much. It's very helpful.
Thank you, sir. Next question is from Mr. Alexandre Gerard from CIC . Sir, go ahead.
Good afternoon. I have just one question on what you just said regarding poker. I mean, if there is no M&A opportunity, would you be ready to diversify your revenue in poker, but through, I mean, going in that category organically? This is my first question. My second set of questions are related to some of the numbers in your P&L and your P&L and balance sheet, more for Pascal. The first one is on the depreciation charge, which seems to me to be just a bit high compared to what you guided at the time of the IPO. Can we count on the double for the full year? This is my first question. Second thing is on the income tax rate also, which is slightly high on the first half of the year.
What is the normative level for the full year? My last question is on the net cash, which is shown on page 14 of the presentation. How do we reconcile that net cash with the one which is shown on the balance sheet, which is on page 18 of the presentation? Thank you.
Okay. On your first question about poker, it is a good question. Of course, we have, I think we have identified this question. We are not ready to answer it yet. I think the question for us is really, is there a way to go into poker at, I would say, quick and good economic conditions? We are, I would say, dealing with this question, but we have not come to an answer. We do not rule out the question, as you understand. I will end with Pascal for answering about,
About the depreciation.
Depreciation.
I can help you a little bit about depreciation. I remember we had a specific call last year to guide you correctly about depreciation. Look, if you take the number that you have in first half, which is EUR 50 million in my remembrance, you have to more than double it to have the number of the full year, but not by an important factor. Double it and a little bit will be great. This is for the depreciation charge. For the income tax rate, the reason why you think it is quite very high is that our non-current charges were non-tax deductible. If you deduct this thing, you will see that our tax rate is a normative tax rate, French income tax rate.
Should it be below 30% for the normative tax rate and going down to 28% in two years' time?
Yes, yes. We take the level of tax rate that is written in the law or is set by the government, and we take nothing else. You have to do your attention with what the government said for the tax rate. We will globally follow the French income tax rate. For the net cash, you want to reconcile by page, if you can help me, page 18, the cash and cash equivalent, we show that, EUR 476 million. I have done this page 14 to make this reconciliation. We begin the page 14 with the EUR 476 million, which are the cash and cash equivalent in our balance sheet. This is the exact number of the balance sheet.
Then we add those term deposits that are available within 32 days. On the IFRS way to account it, it is not accounted as cash and cash equivalent. It is accounted as non-current assets, financial assets. This is why you add this amount. We deduct a part of our cash that is in cash and cash equivalent but is not available for us because it is the cash that is only used for EuroMillions, and it is in the trust, and we cannot use it as we want. We add the term deposit, and we deduct what we cannot use in our cash, which is the EuroMillions cash. Then you have this EUR 859 million and EUR 53 million. Apart from that, we have other investments, but more long-term investments, which are amounted to EUR 224 million.
You have some financial debt with our three loans I commented earlier for more than EUR 300 million. The cash, the amounts that have to be paid to the state, the regulatory funds before the end of 2022, which makes you the complete bridge to the net cash surplus. I hope I have answered your question. I am very happy to have made this bridge, because I knew that it was something that you wanted to have. Yeah. Thank you very much. Thank you.
Thank you, sir. We have one last question for Mr. Marco Baccaglio from Kepler Cheuvreux . Sir, go ahead.
Yes. Good afternoon. I will be very quick as many things have been clarified. One is, can you be a bit more precise about what part of this roughly EUR 200 million working capital push you had in, in, H1 on your net financial position, will, will disappear in the full year? Is it still going to be a positive net working capital, or, it will go away in total? Secondly, is it correct to assume that the lower payout ratio in sports betting in H1 was pushing your results by about EUR 20-25 million as a forecast? Thank you.
Mm-hmm. Yeah. On the first question of working capital, it will not disappear totally at the end of the year. What is true is that you cannot assume that we will have working capital valuation of more than EUR 200 million at the end of the year, because we will have in December, we will pay the public levies of November, as it is, it is every month. Every month, we pay the public levies of month, less one at 24 of the month. In December, we will pay the public levies of November and an account on public levies of December. Basically, we will normalize this, this, this cash, this variation of working capital. This is the reason why I haven't said that before, but it's maybe interesting to say that.
This is why we do not present our EBITDA to cash conversion on a semestrial basis because it has no interest. It means nothing. We will keep, as we had in mind at the beginning of the year, a part of this working capital variation, but not all the amounts that you can see here. Sorry, I forgot your second question. It was around,
No, no. Just the H1.
Yes. On H1, could you repeat the question?
Yes. The low payout in sports betting. Yeah. If it was giving you what, my calculation was about EUR 25 million improvement in your results contribution. Is it correct?
Yes. The assumption is correct. Yes.
Thank you.
It's correct. Twenty-fourth if you want to, to be totally precise.
Thank you, sir. We have no other questions.
You have no other questions?
No, no. Yeah. No further questions. All right.
Okay. Thank you very much.
Thank you.
Thank you. Thank you for your questions. And of course, we look forward to continue this dialogue and particularly, of course, in Q3.
In Q3, and the figure will be reported the 14th of October after market.
Bye-bye.
Thank you very much.
Good evening.
Good evening.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.