SBC News Voice of the Sports Betting Industry
A post-COB statement issued on Valentine’s Day placates investors but reveals uncertainty about an enlarged Française des Jeux (FDJ) mitigating its long-term tax exposure.
A sell note issued by Goldman Sachs last Thursday is the most likely explanation for Française des Jeux issuing a results preview after close of business on Friday that praised its strategic progress in 2024, but also priced the EBITDA impact of France’s gambling tax rises at €90m.
Goldman Sachs said FDJ’s profile had risen considerably since its acquisition of Kindred Group and was “positive on the strategic rationale for the deal”.
“But it also shifts the equity story from its past positioning as a monopoly offering a secured stream of cashflow with an attractive dividend yield, and introduces greater competitive and regulatory risk,” added GS.
Taxes on EuroMillions, instant games and contributions for social security have all increased in France, but the tax rise from 10.5% to 15% of online sports betting GGR and a new 15% levy on marketing are the key measures that will “automatically reduce revenue and recurring EBITDA by nearly €45m” in FY25, “equating to a full-year impact of nearly €90m”, FDJ said in its statement on Friday.
The optics do nothing for France’s reputation as a high-tax country. One investment executive told Gaming&Co: “Investor sentiment has been impacted negatively, whether that’s for local operators looking for potential acquirers or for international groups assessing a potential entry in France.”
That view is compounded by the fact that online casino regulation, which would enable operators to balance high OSB taxes with iCasino revenues, looks increasingly unlikely in 2025. According to industry sources, PM François Bayrou is not thought to look favourably on gambling.
Still, as a ‘local’ operator, the tax rises consolidate FDJ’s position in France by “making it harder and less attractive for intentional competitors; but also less interesting for investors or potential acquirers of leading French brands such as Betclic or Winamax”, noted G&C’s investment contact.
More ominously, FDJ and others will try to generate higher OSB margins, “which will mean either worse prices for players or more emphasis on bet builders”, they add. “But the impact of those measures will be to make illegal operators’ offerings, which will include better sports betting odds, online casino and no tax worries; even more attractive.”
More balance, but risks are real
Another investment contact notes that the news is “more of a negative, and while we don’t want to be in this situation, we had estimated the hit (from the tax rises) to be close to €110m”. FDJ also stated that it plans to fully mitigate the impact of the tax rises by 2027, “much better than our estimate of ~50% mitigated in two years”.
FDJ’s shares were up 4% following its announcement and the executive added: “We thought this (the tax rises) would have a c€50m impact to EBITDA in 2027 (approximately 4-5% of FDJ’s total EBITDA), and now it looks like it will be close to zero if the mitigation plans are to be believed”.
On the positive side, France finally has a budget and FDJ has beaten guidance and says it can take the EBITDA hit. However, “the risk is that France’s budget situation worsens and that it revisits taxes again in 2026. It would be unprecedented, but not impossible,” added G&C‘s contact.
FDJ’s acquisition of Kindred means that alongside France, it is active in the Netherlands, Sweden and the UK, and from a strategic perspective enables it to exploit online casino in those countries, while benefiting from offering instant games and scratchcards on an exclusive basis in France.
It recorded a 17% YoY rise in FY24 revenues to €3bn based on the integration of Kindred from last October (€3.8bn if Kindred contributions were included from Jan24). EBITDA was up 21% to €792m. Excluding Kindred, FDJ revenue was up 10% and +6% in France.
