30 Mar 2016 07:00
30 March 2016
DJI Holdings plc
("DJI" or the "Company")
Significant new contracts for Heilongjiang Province joint venture
Exclusive agreements position DJI in readiness for the return of online lottery sales
DJI Holdings plc (AIM: DJI, "the Group", "DJI"), a licensed promotion solutions and service provider of Chinese sports and welfare lottery products to third party retailers and direct to consumers, is pleased to announce significant new contracts for its joint venture with Heilongjiang Sports Bureau ("HSB") for lottery services.
The addition of new lottery services supported by DJI in this significant province is the latest initiative by the Group in anticipation of the lifting of the temporary suspension of lottery sales in China, whilst central government develops a better regulated lottery landscape. To that end, the joint venture aims to provide a complete lottery solution for Heilongjiang, spanning content, promotion and new media, working with major strategic partners in e-commerce and digital broadcasting.
DJI, through its joint venture with HSB, Longti, has secured an exclusive service agreement to operate sports lottery scratchcard sales across Heilongjiang Province. Under the agreement, Longti has full responsibility for all marketing and promotion of this key lottery product, sales of which totalled RMB 635m (£70m) in 2015, and it will receive both a marketing fee and share of revenues for its services. A further initiative to develop and launch online sales of physical scratchcards is already underway. The incremental revenue generated from scratchcard activity in Heilongjiang is expected to be substantial in the current financial year.
In addition, Longti has been granted a contract by the Heilongjiang Sports Lottery Administration Centre to launch DJI's sports betting platform on the province's official website, along with the provision of news, analysis and exclusive information. The platform will promote sports betting during the forthcoming Euro 2016 football tournament, which is expected to be an important revenue-enhancing event for the lottery industry, and will also support in-store lottery sales throughout the province. The online promotion of this land-based lottery will be enhanced by a new loyalty programme offering bonus points to players, which may be converted to digital game tickets in all lottery stores across the province.
An important aspect of the HSB relationship and these latest contracts is increasing access to data regarding the province's lottery players. When online lottery sales return, such data regarding consumers' activity online and their appetite for gaming will be valuable. DJI will continue to use this key advantage to expand its marketing platform, which may then be used to distribute new, revenue generating promotional content.
DJI will utilise its exclusive Chinese lottery partnerships with both Arsenal and Manchester City football clubs, as well as other sporting relationships, to promote and support Heilongjiang's sports lottery with unique tailored content and 'money can't buy' special football club gifts and prizes.
The JV's provision of content will be extended by the anticipated roll out this year of DJI's high-frequency virtual sports betting game, which was trialled in-store during 2015. Further games are at an advanced stage of development, with approval expected in the second half of 2016.
Heilongjiang, located in the north east of China, is the country's sixth largest province by area with a population of approximately 40 million. HSB operates, or is responsible for, all sports lottery activities in the province. In 2014 revenues from these activities were RMB 7.03bn (£773m), an increase of more than 60 per cent per on 2013.
Update on Heilongjiaing Sports Bureau joint venture
In September 2015, DJI announced a cooperation agreement with HSB to establish a joint venture with the primary aim of providing funding and support services to all of HSB's commercial activities, especially football and Winter sports. HSB owns and/or operates an extensive portfolio of sporting venues and facilities across the province, including Yabuli, China's largest ski resort.
The HSB joint venture includes, for the first time in a Chinese province, a Business-to-Business (B2B) online booking system for sports. The JV agreed terms with three of China's largest online portals to sell and promote its B2B system, based on DJI's technology, from 1 November 2015, giving it direct access to their significant customer bases.
The venture is in its early stages but the bookings to date are in line with expectations and the system is now entering its next phase of development towards a more extensive e-commerce roll-out during 2016. Prestigious channel partners, including leading Chinese online video company LeTV and major B2C online retailer JD.com, have been signed and further revenue enhancing deals with high quality strategic partners are being targeted to drive the JV's progress to profitability in the second half of 2016.
The JV company remains committed to seeking a listing on a New York exchange in due course and it is the intention of both partners to continue to devote all necessary resources to growing existing and new business activities ahead of that event.
Commenting on the expansion of DJI's services in Heilongjiang province, Chief Executive Darren Mercer said:
"We are very pleased to be deepening our relationship with the lottery and sports authorities in Heilongjiang. DJI's aim is, through the HSB joint venture, to provide a complete lottery solution for Heilongjiang, spanning content, promotion and new media, so we are delighted to have secured additional mandates for growing lottery revenues in this important province. Expanding our valuable database of information on all lottery players in the province gives us a key advantage for consumer targeting and engagement, reducing DJI's dependency on B2B sales and enhancing our prospects for developing higher margin B2C operations.
"The JV, working closely with its lottery centre and corporate partners, is well positioned to benefit from the eventual return of online lottery sales. We believe that our unique combination of technology, marketing experience, exclusive promotional content and key relationships leaves us equipped for substantial growth in this exciting market.
"As stated in our announcement on 22 March 2016, we are in discussions with a number of significant partners and provinces in China, and the Company looks forward to announcing these in the near future."
ENDS
For further information please contact:
DJI Holdings plc | +44 (0) 1565 872990 |
Darren Mercer, Group Chief Executive | |
IHA Consulting Ltd | +44 (0) 20 3393 1185 |
Stephen Benzikie | |
Strand Hanson Limited (Nominated & Financial Adviser) | +44 (0) 20 7409 3494
|
Andrew Emmott / Ritchie Balmer
Mirabaud Securities LLP (Broker to DJI) |
+44 (0) 20 7878 3362 |
Peter Krens |
Notes to Editors
DJI's strategy is to capitalise on the rapidly expanding Chinese lottery market and the opportunity to deliver lottery ticket fulfilment sales to its substantial client base of large Chinese corporations (B2B) and individual consumers via the Group's owned and operated websites (B2C), within the online and mobile environment.
Through the Group's long-standing relationships with the Chinese regulators, portfolio of lottery contracts and reliable technology platform, the Group is well positioned to capture the market opportunity.
The principal activities of the Group are the development, promotion and distribution of authorised lottery products in China. DJI's subsidiaries are licensed and/or contractually authorised to distribute and promote Sports and Welfare lottery products online, via mobile and through physical retail outlets across China.
The Group has a differentiated approach to the Chinese lottery market in that DJI operates throughout the promotion and distribution value chain. The Group offers:
· front-end lottery ticket sales via websites owned and operated by the Group, third party websites, mobile applications and physical retail outlets
· back-office lottery ticket fulfilment services to large online and offline lottery partners
Beyond the Group's lottery activities, DJI has a joint venture with the Heilongjiang Provincial Sports Bureau (HSB) to provide support services to all of HSB's commercial activities. These include football and winter sports in the province, including China's largest ski resort, Tabuli.
The HSB joint venture includes, for the first time in a Chinese province, a Business-to-Business (B2B) online booking system for sports, based on DJI's technology. The JV agreed terms with three of China's largest online portals to sell and promote this B2B system from 1 November 2015.