Lottomatica Group announces a 30% rise in 1Q net income

“We delivered another solid set of results in the first quarter. And we made significant progress toward implementing our new operating model, under which we will act as a single, unified customer-facing company that can meet the evolving needs of our customers in an effective and efficient manner,” said Marco Sala, CEO of Lottomatica Group. “The senior leadership of the Company has embraced and adapted to their new roles. Earlier today, our shareholders approved the adoption of the ‘GTECH’ name, effective June 3. Going forward we will operate under the GTECH banner, one of the most respected and valued brands in the global gaming industry, under the ticker symbol GTK.”

“Our first-quarter results were in line with our expectations,” said Alberto Fornaro, CFO of Lottomatica Group. “We generated substantial growth in net income attributable to the parent and EPS, up 30%.  Combined EBITDA growth from both our Italian and International operations positions us to achieve our year-end targets. In particular, we are on-track on our target for net financial position, following the expected deleveraging in the second half.”

Consolidated Revenues were up 2.2% to 798 million euros, compared to 780 million euros in the first quarter of 2012, driven by the sale of VLTs into the Canadian market and a central system sale in Europe. Revenue performance for Italian Operations was in line with last year when we exclude the higher gaming tax on VLTs, and is being sustained by a positive Lotto performance and a more favorable sports betting payout. Excluding the record Mega Millions jackpot in the first quarter of 2012, Gtech Lottery revenues were slightly ahead this year.

EBITDA reached the 300 million euros mark, up 7%, compared to the first quarter of 2012, driven by higher product sales in Canada and higher profits from Italian Operations. Italy benefited from lower sports betting payouts, the continuous effect of cost streamlining actions taken in 2012, and growth in Lotto. GTECH EBITDA was slightly ahead when compared to the first quarter of last year after taking into consideration the prior year’s €4.5 million one-time recovery of a foreign investment.

Operating Income grew 22 million to 192 million euros, which along with a more favorable effective tax rate, contributed to the increase in Net Income attributable to the parent which grew from 58 million euros to 75 million euros. Interest expense was in line with the first quarter of last year at 40 million euros. On a per share basis, EPS grew 30% from 0.33 to 0.43 euros.

Capital expenditures in the quarter were in line with 2012 at 53 million euros.

At March 31, 2013, Consolidated Shareholders’ Equity totaled 2.82 billion euros. Lottomatica Group had a Net Financial Position (NFP) of 2.64 billion euros, compared to 2.55 billion euros as of December 31, 2012, mainly as a result of the timing of working capital.  As previously reported, deleveraging is expected in the second half of 2013 and the Group is on track to achieve its NFP targets by year-end.

First-Quarter results by segment:

Italian Operations     

Total revenues from Italian Operations were 464 million euros compared to 482 million euros in the first quarter of 2012. The reduction in revenues was mitigated by lower sports betting payouts and higher wagers for late numbers and 10eLotto. EBITDA grew by 9 million to 213 million euros.

Overall Lotto wagers for the quarter grew 2% to 1.60 billion euros compared to 1.57 billion euros last year. Lotto late number wagers increased to 120 million euros, compared to 87 million euros in first quarter last year. 

Instant-ticket wagers were in line with expectations at approximately 2.55 billion euros, compared to 2.62 billion euros in the same period last year. Approximately 525 million Scratch & Win tickets were sold in the quarter, with an average price point of 4.85 euros.

Revenues from Sports Betting were up 19% to 57 million euros due to lower payouts.

Machine Gaming revenues were 147 million euros versus 169 million euros last year as a result of the VLT tax increase and productivity impacts.

GTECH Lottery and SPIELO International

Total GTECH Lottery revenue for the first quarter of 2013 was 229 million euros compared to 237 million euros in the first quarter of 2012. Several initiatives have been put in place both in the U.S. and abroad that will further drive same store revenue growth.  The Powerball game was recently introduced in California, with the Florida Lottery joining the Mega Millions game in May. Specific initiatives to grow sales in conjunction with GTECH customers continue to be in place in several US jurisdictions, including innovations and optimizations in lottery and instant games.

Internationally, the U.K. Lottery is benefiting from retailer expansion efforts executed in 2012, while several jurisdictions including the Czech Republic, Slovakia, and Poland are significantly leveraging price-point increases to grow instant ticket sales. Same store revenues in Argentina and Mexico are being driven by price-point increases and jackpot activity, respectively. 

Total revenues for SPIELO International were 112 million euros, a 61% increase versus last year, primarily due to higher product sales which were up 138%.  Service revenue for SPIELO increased approximately 6% in the quarter versus 2012 principally due to higher central system maintenance revenues and higher revenues from the Italian VLT market associated with the deployment of additional VLTs.

Combined EBITDA for GTECH and SPIELO grew 13.4 million euros as a result of higher product sales, partially offset by lower jackpot activity.

Additional information 

Lottomatica Group recently agreed to make a strategic investment to acquire a minority interest in one of the funds that comprise Emma Delta, the successful bidder in the Hellenic Republic Asset Development Fund’s privatization of the Greek state’s 33% controlling interest in OPAP.  The completion of the OPAP transaction is conditional upon regulatory approval and is expected to occur in the second half of 2013. As an industrial partner, Lottomatica Group expects to provide expertise in the areas of technology, operations, and the launch of new products.