FDJ United’s Earnings Call: Growth Amid Challenges

La Francaise des Jeux SA ((FR:FDJ)) has held its Q4 earnings call. Read on for the main highlights of the call.

The latest earnings call from La Francaise des Jeux SA (FDJ United) painted a picture of robust financial performance, tempered by looming challenges. The company reported strong revenue and EBITDA growth, driven by strategic acquisitions and a focus on sustainability. However, it also acknowledged significant headwinds from tax increases and tighter regulations, which are expected to impact future EBITDA margins and growth projections.

Successful Acquisition of Kindred

FDJ United announced the successful acquisition of Kindred, securing more than 90% control by October 2024. This acquisition has led to the formation of a diversified and balanced group, enhancing the company’s market position and growth potential.

Record Revenue Growth

The company reported a remarkable turnover of €3,065 million, marking a 17% increase. Even excluding Kindred, the growth was notable at 10%, with gaming activities in France alone seeing an 8% rise.

Strong EBITDA Performance

FDJ United’s recurring EBITDA rose to €792 million, up 21%, with a margin of 25.8%. This strong performance underscores the company’s operational efficiency and strategic focus.

High Cash Conversion

The company achieved an impressive EBITDA-to-cash conversion rate of 85%, reflecting its strong cash flow management and operational effectiveness.

Positive Integration Outcomes

The integration of Kindred is progressing well, with synergies and cost optimizations identified, expected to generate an additional €50 million.

Sustainable Commitments

FDJ United continued its investment in responsible gaming and sustainable practices, dedicating over 10% of its advertising budget to responsible gaming initiatives.

ESG Leadership

The company maintained top ratings in ESG from major agencies, highlighting its commitment to sustainability and responsible business practices.

Omni-channel Strategy Launch

FDJ United introduced ‘FDJ & Moi,’ a strategic project aimed at creating an omni-channel account, allowing customers to play both online and at physical points of sale.

Impact of Tax Increases

Tax increases in France and the Netherlands are expected to have a significant impact, with projections of a €90 million negative effect in 2025.

Regulatory Challenges

Tighter regulations in the Netherlands and the UK are affecting the online betting and gaming segments, with additional impacts estimated at €30 to €40 million.

Reduced EBITDA Margin Guidance

For 2025, the EBITDA margin is expected to be over 24%, down from 25.8% in 2024, reflecting the challenges posed by tax and regulatory changes.

Debt Increase from Acquisition

The acquisition of Kindred has increased FDJ United’s net financial debt to €1.818 billion, though the leverage ratio remains within the company’s target.

Forward-looking Guidance

FDJ United provided comprehensive guidance for 2025, projecting a turnover of approximately €3.8 billion, indicating a stable outlook. The company expects slight growth in the French lottery and retail sports betting, while the online betting and gaming business unit may see a slight decline. Despite tax increases, FDJ United is implementing a mitigation plan to achieve €20 million in savings by 2025 and at least €100 million by 2027. Strategic initiatives include the rollout of the KSP sportsbook and the introduction of the ‘FDJ & Moi’ omni-channel account to boost customer engagement.

In summary, FDJ United’s earnings call highlighted a strong financial performance, driven by strategic acquisitions and a commitment to sustainability. However, the company faces challenges from tax and regulatory changes, which are expected to impact future margins. Despite these hurdles, FDJ United remains focused on strategic initiatives to drive growth and enhance customer engagement.