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US – GTECH revenues up slightly despite huge fall in net income

By - 11 March 2015

GTech has reported that revenues in 2015 were up slightly to €3.07bn, compared to €3.06bn in 2013 despite year-on-year net income falling by 52.5 per cent.

Net income dropped to €83.3m from the €175.4m reported in 2013, due to the cost of acquiring IGT, whilst improved product sales pushed revenues up 4.7 per cent to €809.5m for the final quarter and 0.2 per cent for the full year.

Marco Sala, CEO of GTECH, said: “We ended 2014 on another robust quarter, with strong product sales in the Americas and International and steady service revenues overall. We are finalising the acquisition of IGT, ready to initiate the integration of our two companies, and to consolidate our leadership of the global gaming industry.”

“Our underlying operating performance was very solid in the fourth quarter,” said Alberto Fornaro, CFO of GTECH S.p.A. “Excluding one-off items primarily related to the IGT acquisition, we achieved or exceeded guidance in all our key full-year metrics: EBITDA, CapEx, Operating Income, and Net Financial Position.”

Consolidated Revenues were €809m, up approximately five per cent from €773m in the fourth quarter of 2013. This increase was principally driven by product sales which rose to €86m in the quarter from €51m in the fourth quarter of 2013, chiefly reflecting higher product deliveries in the International and Americas segments. Service revenues were up slightly to €723m versus the same period last year.
EBITDA was up seven per cent to €261m compared to €245m in the fourth quarter of last year.
Operating Income was €97m compared to €104m last year. Operating Income was up 22 per cent to
€127m excluding one-off items which consist of transaction costs of €22m associated with the pending IGT acquisition and an €8m adjustment to goodwill related to the sale of the ticketing business in Italy.

Revenues in the Americas segment were up 10 per cent to €262m in the quarter, compared to €238m in the fourth quarter of 2013. Product sales in the quarter were €43 million, up €14m compared to the same period last year, mainly attributable to VLT sales in Oregon. Strong instant ticket sales revenue offset the drop in multistate jackpot activity.

The increase in Operating Income from the Americas segment to €25m, from €20m in the fourth quarter of last year, was due to product deliveries in Oregon and Latin America casinos, as well as the contribution from a larger installed base of gaming machines. Operating income was impacted by the settlement related to the termination of Northstar’s private management agreement in Illinois.
During the quarter, Pronosticos Para La Asistencia Publica in Mexico awarded GTECH a new long-term facilities management contract. After the close of the quarter, the Company was also awarded a new contract from the Minnesota Lottery. Additionally, GTECH provided interactive technology and content for the Georgia Lottery’s interactive games, and signed an agreement with MGM Resorts International for GTECH’s first planned Nevada land-based Sports Betting and GTECH OnPremise mobile gaming deployment in the US.

Revenues in the International segment were €113m versus €85m last year, up 34 per cent, driven by product sales in Belgium, higher machine sales to casino customers in EMEA, and higher systems sales in Europe.

International Lottery same store revenues were up approximately five per cent compared to the same period in 2013, driven by jackpot game performance across the region and by growth in instant ticket sales in the United Kingdom with the rollout of GTECH’s compact terminals to new retailers. SAZKA in the Czech Republic launched the multijurisdictional game EuroJackpot and also experienced strong instant ticket sales growth.

Operating Income in the International segment was €35m versus €10m in the fourth quarter of last year, principally due to higher product sales, the prior year restructuring of a contract in Spain, and cost synergies.

During the quarter, the company was awarded up to 5,550 of the initial 16,500 VLTs by OPAP in Greece.
Revenues in Italy were €434m compared to €450m in the fourth quarter of 2013, principally due to a higher sports betting payout.

Total Lotto wagers for the quarter were up four per cent to €1.75bn, compared to €1.68bn last year, driven by 10eLotto, which more than compensated for a weaker late-number pattern. Instant-ticket wagers were up over one per cent to €2.44bn versus €2.41bn last year, due to the successful launch of a new family of tickets under the brand “Super Settimana,” a new concept of “Annuity” tickets with a weekly prize over a 20-year period.

Machine gaming revenues were €148m versus €151m last year. Revenues from sports betting were €36m versus €44m last year, a decrease entirely driven by a higher payout versus the same period last year, while wagers were up seven per cent mostly driven by virtual betting.

Operating Income of €93m compared to €115m last year was impacted by the decrease in gaming machine wagers combined with higher remuneration of the retail chain in order to protect the long term relationships with key partners, and by relevant marketing costs associated with the launch of the new annuity tickets.

For the full year 2014, Americas’ service revenues grew over three per cent to €828m.
Despite unfavourable jackpot activity, Americas Lottery same store revenues were up slightly to €516m, benefiting from instant ticket performance in multiple jurisdictions including California, North Carolina, Indiana and Michigan.

International Lottery same store revenues grew two per cent driven by continued strong performance in the United Kingdom, Czech Republic and Poland. Product sale revenues were up nine per cent to €91m primarily due to a delivery in Belgium.

Lotto wagers in Italy were up five per cent to €6.6bn compared to €6.3bn last year. 10eLotto wagers grew 22 per cent to €3.6bn, compared to €3bn last year. Instant-ticket wagers were €9.4bn, compared to €9.6bn last year. Total betting wagers were up 15 per cent to €893m versus the same period last year, driven by the take-up of virtual betting.

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