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ZEAL Network SE (-) ZEAL Network SE: Adjustment of EBIT Guidance 19-Nov-2018 / 08:29 CET/CEST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. *ZEAL Network SE: Adjustment of EBIT Guidance* As the following forecasts are prepared on the basis of assumptions about future events and actions, it naturally entails substantial uncertainties. The forecasts constitute the forecasts for the financial year 2018 of Earnings Before Interest and Tax (the '*ZEAL Profit Forecast*') and of Total Operating Performance (the '*ZEAL Revenue Forecast*'). Because of these uncertainties it is possible that the actual revenue and/or profit of the ZEAL Network SE ('*ZEAL*') group may differ materially from the forecasted numbers. Based on the following factors and assumptions and associated uncertainties, ZEAL expects for the financial year 2018 that Earnings Before Interest and Tax (EBIT) will range between EUR 33 million and EUR 38 million, and Total Operating Performance (TOP) between EUR 150 million and EUR 160 million. This is not a statement about facts and should not be interpreted as such by potential investors. Rather, it is a statement about the expectations of ZEAL's management in respect of EBIT and TOP of the ZEAL group. ZEAL defines EBIT as Earnings Before Interest and Tax and Total Operating Performance as the sum of revenue and other operating income. In this context, ZEAL considers EBIT to provide a measure of the ZEAL group's ability to increase the economic value of its operating activity over a period of time and TOP to provide a measure of the statutory revenue and other operating income (including income from hedging activities) of the ZEAL group. The ZEAL Profit Forecast is based on the assumptions set out below made by ZEAL's Executive Board for the development of the influencing factors of EBIT and TOP of the group. The assumptions used in the ZEAL Profit Forecast relate to factors which (i) cannot be influenced by the ZEAL group and those which (ii) can, even if only to a limited extent, be influenced by the ZEAL group. Even if ZEAL believes that these assumptions are reasonable at the time of the estimate of EBIT and TOP by ZEAL's management, they may prove erroneous or unfounded. If one or more of these assumption(s) prove(s) to be erroneous or unfounded, the actual result could deviate materially from the ZEAL groups' current EBIT and TOP. The members of the Executive Board of ZEAL confirm that the ZEAL Profit Forecast is valid, has been properly compiled on the basis of the assumptions stated and that the basis of accounting used is consistent with ZEAL's accounting policies. These forecasts relate to EBIT and TOP in line with guidance previously provided by ZEAL and as a means of evaluating the financial performance of the ZEAL Group. Generally ZEAL releases profit forecasts annually. When ZEAL released its preliminary results for the financial year 2017, it released its first profit forecast for 2018 - of EBIT between EUR 33 million and EUR 43 million, and Total Operating Performance (TOP) between EUR 150 million and EUR 160 million. The profit forecast was confirmed in each case when ZEAL released its results for the first three, six and nine months of 2018. The adjustment of the upper end of the EBIT forecast range for the financial year 2018 in the ZEAL Profit Forecast in comparison to the previously released and confirmed profit forecasts for 2018 from EUR 43 million to 38 million, while maintaining the lower end of the range of EUR 33 million, includes the impact of transaction costs in connection with the announced intention of ZEAL to make a public takeover offer for Lotto24 AG as well as restructuring expenses in connection with an internal cost savings programme initiated on the date of the announcement. Except for the narrowing of the previously forecasted EBIT range, the Executive Board of ZEAL confirms its previously published guidance and expects the ZEAL group to generate Total Operating Performance (TOP) of EUR 150 million to EUR 160 million in the financial year 2018. *Explanatory notes to the ZEAL Profit Forecast* _Basis of Preparation_ The ZEAL Profit Forecast was prepared on the basis of management forecasts of the results of ZEAL for the financial year ending 31 December 2018. The accounting policies applied in the preparation of the forecast are consistent with the accounting policies applied in the preparation of the ZEAL's annual report for the year ended 31 December 2017 which are explained in pages 77 to 90 of ZEAL's annual report for the year ended 31 December 2017. The intended takeover offer for Lotto24 AG is not expected to complete until after the end of the period covered by the ZEAL Profit Forecast and so, with the exception of transaction costs of EUR 3.5 million, the impact of the intended takeover offer has not been included in the ZEAL Profit Forecast. Additionally, the ZEAL Profit Forecast for EBIT in the range between EUR 33 million and EUR 38 million includes restructuring and severance costs of approximately EUR 4.5 million which will also be treated as Exceptional Items in ZEAL's results for the year ended 31 December 2018. *Assumptions* The ZEAL Profit Forecast is based on the following assumptions: _Factors outside ZEAL's influence or control_ The ZEAL Profit Forecast is subject to certain factors outside the influence or control of ZEAL. The relevant assumptions are described below: While preparing the forecast, ZEAL's Executive Board assumes that no significant unforeseeable results will occur that could lead to significant constraints in its ongoing business operations. In particular, ZEAL's Executive Board assumes that no or only insignificant changes will occur in respect of current legal and regulatory framework as it pertains to ZEAL. - It is assumed that there will be no material changes in legislation or regulatory requirements impacting on ZEAL's operations or its accounting policies. - It is assumed that the market for secondary lotteries, especially in Germany, will not suffer any negative developments, and that ZEAL will be able to retain its current competitive positions in the markets in which it operates. - It is assumed that the occurrence and size of jackpot prize events in the markets in which the ZEAL group operates will be in line with long term trends. - The ZEAL Profit Forecast is susceptible to the level of pay-outs won by customers. In preparing the ZEAL Profit Forecast, ZEAL's Executive Board assumes that statistically expected pay-out levels will be incurred in the forecast months. - It is assumed in the ZEAL Profit Forecast that no individually-significant jackpot prize wins will be borne by ZEAL group in the forecast months before the end of 2018. - It is assumed that no financial or economic crisis will occur that affect Europe and specifically Germany, and that the economic conditions in Germany will not suffer any negative developments. - It is assumed that there will be no other material changes to the conditions of the markets in which ZEAL operates. - It is assumed that the principal exchange rates to which ZEAL's results are exposed to fluctuations will remain materially unchanged from the prevailing rates. - It is assumed that there will be no material change to the competitive environment leading to an adverse impact on customer preferences. _Factors within ZEAL's influence or control_ Other factors that can be influenced or controlled by ZEAL affect the ZEAL Profit Forecast. The relevant assumptions are described below: - It is assumed that there will be no material change in ZEAL's ability to negotiate new business, and that there will be no material change to the ZEAL's customer base or the ability or willingness of the customer base to meet its obligations to ZEAL. - It is assumed that there will be no material change in ZEAL's go-to-market approach, and that historic trends of customer retention and acquisition will remain materially unchanged. - It is assumed that the scale and type of marketing activity to retain existing customers and acquire new customers will not materially change. - With the exception of the exceptional transaction and restructuring costs described above, it is assumed that the level of cost incurred by ZEAL will not materially change over the remainder of the financial year 2018. *Examination and Reporting Accountant's Report of the ZEAL Profit Forecast* The Reporting Accountant's Report by Ernst & Young of the examination of the ZEAL Profit Forecast for the financial year 2018, which is available for inspection at the Company's offices, reads as follows: The Directors ZEAL Network SE 5th Floor - One New Change London EC4M 9AF Lazard & Co. Limited 50 Stratton Street London W1J 8LL 19 November 2018 Dear Sirs We report on the profit forecast comprising forecast of EBIT of Zeal Network SE (the 'Company') and its subsidiaries (together the 'Group') for the year ending 31 December 2018 (the 'Profit Forecast'). The Profit Forecast, and the material assumptions upon which it is based, are set out in the announcement titled 'ZEAL Network SE: Adjustment of EBIT Guidance' released by the Company on 19 November 2018 pursuant to Article 17 MAR of the Regulation (EU) No 596/2014 (the 'Announcement'). This report is required by Rule 28.1(a)(i) of The City Code on Takeovers and Mergers (the 'City Code') and is given for the purpose of complying with that rule and for no other purpose. Save for any responsibility that we may have to those persons to whom this report is expressly addressed, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other
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November 19, 2018 02:29 ET (07:29 GMT)