FDJ sees growth stopped by Covid-19 in Q1

21 April 2020

French gaming giant La Française des Jeux (FDJ) has reported a 5.4% year-on-year decline in stakes, and 0.9% decline in revenue, for the first quarter of 2020.

The operator said it had enjoyed strong momentum in the early months of the year, which had been checked by the novel coronavirus (Covid-19) pandemic, with France going into lockdown from 16 March.

Since then, FDJ has seen stakes fall by almost 60%, with amounts wagered on lotteries down by more than 40%, excluding the Amigo lottery game, which has been suspended since 19 March.

Sports betting handle, meanwhile, has fallen almost 95% since major sports around the world were postponed. This contributed to total stakes for the quarter falling 5.4% to €4.11bn.

Lotteries still contributed the vast majority, at €3.33bn, though this was down 1.5% from Q1 2019. Draw-based game sales declined 2.0% to €1.31bn, with instant win sales down 1.2% to €2.03bn.

Amounts wagered on sports betting suffered the biggest year-on-year decline in Q1, falling 18.1% to €766.5m.

Looking at stakes by channel, the biggest decline was predictably seen in retail - which nevertheless still accounted for the majority of the company total. Amounts wagered across FDJ’s retail network was down 6.5% to €3.80bn, while digitalised stakes - comprising online and retail stakes placed via apps - fell 1.2% to €823.4m.

FDJ, which has projected a total impact of up to €192m on revenue and a €50m reduction in earnings as a result of the pandemic. For one month of lockdown alone, beginning from 16 March and going into Q2, the impact on revenue is expected to be around €100m.

Looking at Q1 in isolation however, the operator paid out €2.77bn in player winnings, down 6.4%, leaving gross gaming revenue of €1.33bn, down 3.1% year-over-year. Its contribution to public levies declined to €837.6m.

FDJ’s net gaming revenue from other sports betting activities - which appears to be its B2B operations - was up 8.6% to €3.9m, while net revenue from its core activities was down 1.1% to €500.7m.

Revenue from other activities, meanwhile, was up 9.8% to €10.6m, with the group total falling 0.9% to €511.2m.

To mitigate the impact of the pandemic, FDJ has started to implement an action plan through which it aims to save more than €80m - equalling 10% of its annual fixed costs - over the rest of 2020.

The operator’s board of directors has also postponed its annual general meeting, originally scheduled for 18 June, and will still pay a dividend for 2019, albeit at a reduced rate of €0.45 per share.

With more than €800m in available cash as of 20 April, the operator has not asked to take advantage of state support or temporary furlough schemes. Assuming social distancing measures are relaxed and sporting events return from mid-May, it expects monthly cash burn to be limited to around €10m for May and June.

It has also taken out a loan to pay in full the €380m due to the French state for the exclusive operating rights to lottery games in country.

To support its retail network, FDJ has provided nearly 3m masks free of charge to its 30,000 points of sale, and is ramping up its responsible gaming safeguards online. This has seen it enhance monitoring of player behaviour, with a view to identifying significant changes in activity during lockdown, and ramped up responsible gambling messaging.

Finally, the operator has donated €1m to the Tous unis contre le virus Alliance, and the FDJ foundation has proved a €200,000 to the anti-poverty and discrimination charity Secours Populaire Français.

“Since the beginning of this unprecedented health crisis, the FDJ Group has strengthened its mobilisation to limit the effects on the company, its employees and its stakeholders in a spirit of responsibility and solidarity,” FDJ chair and chief executive Stéphane Pallez explained. “The exceptional situation is already having very significant effects on the company’s activity.

“That is why we have decided to draw up a substantial cost-savings plan to limit the impact on the company’s results while preserving its ability to resume all of its activities as soon as possible. At the same time, we are continuing to take practical initiatives in support of our stakeholders, and above all our retailers.”