Substantial setbacks for FDJ.
The French lottery company FDJ (Française des Jeux), which was privatized not long ago, is taking a beating from the Covid-19 pandemic. Although their retail operations are largely intact, they're looking at losses of over 200 million euros. What's next for this struggling company?
A Difficult Future Ahead
The once state-owned lottery provider was put up for sale in November, and now it's facing a big challenge. The newly privatized gambling company is predicting losses of at least 200 million euros because of the virus. Their first dividend payment as a listed business, scheduled for June 30th, has been postponed.
Stéphane Pallez, CEO of FDJ, acknowledged the difficult situation they're in, commenting: "We're now facing an unprecedented and exceptional situation that demands the involvement of everyone and will put a lasting strain on our business." The long-term implications of the crisis are hard to predict, and losses could end up much higher than estimated.
Lottery Lane Closed
Several lottery games have stopping being offered because of stricter hygiene measures. The Amigo lottery game, played at touchscreen terminals in places like bars and cafes, is taking the biggest hit. It's expected to cause a loss of about EUR 17 million, while EBITDA (earnings before interest, taxes, depreciation, and amortization) will be reduced by nearly EUR 10 million.
The sports betting division is also feeling the pain, with potential losses of up to 120 million euros and a profit loss of 50 million euros. Some of these losses could be offset if major sporting events like the European Football Championship or the French Open are rescheduled at a later time. Sports betting makes up 20% of FDJ's total revenue.
The expected drop in total sales is now at 192 million euros, with a drop in profits of 77 million euros. The lottery segment, which accounts for 80% of their total revenue, is taking a big hit. Since March 13th, only essential services like public services, supermarkets, pharmacies, petrol stations, banks, and tobacco and newspaper stores have been open.
Online Business Stays Strong
Nearly two-thirds of all sales outlets are still in operation. However, EBITDA is still expecting a drop of EUR 27 million. This loss is partially due to the curfew in place until at least March 31st, which has led to a decline in people's willingness to socialize and conduct business.
However, the Group also stated that their online lottery service "is still performing well." They have enough cash to deal with the current situation and will even be donating 200,000 euros to Secours Populaire Français, a non-profit organization that fights poverty and discrimination in public life. They said in a press release:
"In response to this unprecedented health crisis, the FDJ Group has taken swift and responsible action to limit its effects on its employees, customers, retailers, and shareholders."
Digitalizing their Products
The downturn in online business is unlikely for FDJ, even during the crisis, as their products have been increasingly digitized in recent years. Part of their "FDJ 2020" strategic plan, introduced in 2015, involved expanding their online activities. They launched a 30 million euro start-up investment fund in July 2019 as an "open innovation" strategy led by Managing Director Stéphane Pallez. The goal was to transform FDJ into a digitally controlled company. In total, over 400 million euros was invested in these measures, including a redesign of the company's website, FDJ.fr.
Since 2018, the introduction of a mobile app called Mission Patrimoine has significantly boosted their online business. FDJ's online sales now account for more than 15% of total sales. Their plan predicts that at least 20% of their sales will be from the online sector by 2020.
Paying Off Their Investments
A downturn in online business is unlikely for FDJ, even during the health crisis. Thanks to their recent digitization efforts, their online business has been thriving. The investments seem to be paying off, as they were still forecasting growth of 5% for 2020 in February. Their net revenue reached 1.96 billion euros by the end of 2019.
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Source: www.onlinecasinosdeutschland.com
