Update on lottery regulation in China

16 October 2015  

DJI Holdings plc

("DJI" or the "Company")

Update on lottery regulation in China

Further to the announcement from DJI Holdings plc (AIM:DJI, "the Company", "DJI") dated 10 March 2015 regarding the Chinese government's Notice on "Issues Related to Self-Inspection and Self-Remedy of Unauthorised Online Lottery Sales", the Company welcomes the State Council's Public Announcement of 14 October outlining its commitment to reducing the time required for the approval and administration of lottery sales and pay-outs by cancelling 62 central authorisation requirements and devolving responsibility to Provincial finance departments.

Significantly, the ability of provincial lottery centres to increase pay-outs on their own games will, DJI believes, allow greater innovation in game development and drive greater demand from players.

Although the temporary suspension of online lottery sales that followed March's government Notice has not yet been lifted, DJI regards the latest Public Announcement as an important step in the process towards better regulation and the elimination of a large number of unauthorised operators undermining the integrity of the market. 

The Board of DJI believes that the Company will benefit significantly from the positive long-term effects of robust regulation on the industry and that, together with other previously authorised operators, it will be well positioned in the new regime. The Company continues to engage actively with all relevant authorities and will provide a further update when additional information is available.

In the absence of a firm timeline as to when online sales will resume, the Company continues successfully to diversify its activities outside lottery sales, seeking to exploit the strengths of its technology platform to generate significant complementary revenues, as supported by its deep and long-standing relationships in China with Government agencies and key channel partners.

Commenting on the development, CEO Darren Mercer said:

"We are pleased to see the first major policy change for China's lottery industry since online sales were suspended in March and we view this as significant progress towards the announcement of new regulation and the recommencement of sales. It is clear that the internet is recognised as an important channel for the lottery. Reducing the length of approval and administrative processes for operators, while allowing provincial lottery centres more flexibility in determining their own lottery sales and pay-out structures, is a great step forward. Though we are optimistic that this is a sign that tangible steps are being taken towards the resumption of trading, we continue to develop new channels as evidenced by our recently approved trial of Sports Lottery sales via mobile phones in Qingdao City, Shandong Province and our previously announced JV with Heilongjiang Sports Authority, which included applications for new games. Ultimately, we believe that DJI is well positioned to become a leading player in the new landscape."

ENDS

For further information please contact:

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, Yabuli.

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 has agreed terms with three of China's largest online portals to sell and promote this B2B system from 1 November 2015.