Intralot sees net loss widen in “transitional” 2019

Greek gaming and lotteries giant Intralot has seen its net loss from continuing operations grow to €111.9m (£97.8m/$121.8m) in 2019, after what the business described as a “transition year” in which group turnover and gross revenue both fell.

While amounts wagered through Intralot’s platforms and brands grew 21.0% year-on-year to €18.3bn, reported consolidated revenue (or turnover) was down 8.1% at €720.6m for the calendar year.

The business blamed this on declines from its licensed operations (B2C) and management (B2B/B2G) reporting segments, mitigated in part by an increase in revenue from its technology and support services (B2B/B2G) division.

Turnover from licensed operations fell 9.9% to €442.8m, which Intralot blamed predominately on the poor performance of the Eurofootball sportsbook brand in Bulgaria.

Argentinean operations, meanwhile, were impacted by foreign exchange fluctuations, which resulted in turnover declining by €9.0m, though the market’s contribution would have been up 22.7% year-over-year in local currency.

The turnover decline steeper for Intralot’s management division, falling 23.0% to €69.5m. This, it said, was largely down to a weaker performance in Turkey, after its Inteltek joint venture lost the contract to power the national Iddaa sports betting monopoly to a Scientific Games-backed consortium in March 2019, and the end of contracts in Morocco and Russia.

The sports betting sales agency Bilyoner saw its market share decline, while revised commercial terms in the wake of the Iddaa contract loss also contributed to an overall €16.0m decline in Turkish turnover.

Moroccan turnover was down 11.3%, due to a decline in numerical game sales, and the discontinuation of a contract with Société de gestion de la loterie nationale marocaine (SGLN). Another discontinued contract in Russia also contributed to the division’s struggles.

The technology and support services segment, on the other hand, saw revenue grow 2.7% to €208.3m. The division benefitted from a new contract signed with the Illinois Lottery in 2018, which launched in February 2019, as well as an equipment sale in Arkansas, and a large Powerball jackpot in Q1 2019.

Technology and services was also boosted by a strong performance in the Netherlands, especially in sports betting, and a marginal increase from Chile. This mitigated lower sales in Greece, following the transition to a new contract with OPAP, and the impact of Argentinean currency fluctuations.

Gross gaming revenue, or turnover minus payout, was down 6.0% year-over-year at €409.1m, with the biggest decline reported for licensed (B2C) operations. GGR for that segment declined 7.4% to €128.6m, while management and technology (B2B) operations’ contribution fell 5.2% to €280.5m.

“2019 has been a transition year for Intralot,” chairman Sokratis Kokkalis, who spent much of 2019 as the business’ interim chief executive, commented.

During the year, Intralot carried out large-scale restructuring of the business’ product portfolio, as well as divesting stakes in assets such as Gamenet in Italy, Totolotek in Poland and Greece’s Hellenic Lotteries.

It also refocused attention on North America, where it will power the DC Lottery’s sportsbook product and launched in Montana in March 2020. March also saw Christos Dimitriadis named chief executive of the business.

These developments, Kokkalis said, “set the cornerstones” for the business’ transformation.

“With the appointment of Mr Christos Dimitriadis as Group CEO in 2020, Intralot is enabled towards technology-driven evolution, leveraging his long experience and global expertise to achieve growth and value creation,” he added.

Turning to expenses for the year, cost of sales fell 5.1% to €594.6m, leaving a gross profit of €126.0m, down 20.2%. While other operating income, thanks to an increased contribution from equipment leasing in the US, rose to €19.5m, operating expenses climbed 16.4% to €140.4m.

Earnings before interest, tax, depreciation and amortisation fell 25.4% to €87.8m for the year, while earnings before interest and tax were down 90.4% to €5.1m.

Increased income from investments of €16.8m was then wiped out by losses from asset disposals, impairments and write-offs totalling €30.7m, while interest expenses grew to €52.7m. After all finance-related costs, Intralot’s pre-tax loss amounted to €70.6m, compared to €14.6m in the prior year.

Tax paid by the operator rose to €19.2m, up 44.5%, after which the operating loss grew to €89.8m. While this was offset by a €7.7m profit from discontinued operations, the net loss after tax and minority interests from continuing operations widened to €111.9m, for a total loss of €104.2m.

For the fourth quarter of Intralot’s fiscal year, turnover was down 12.1% to €165.0m, with gross revenue declining 14.1% to €91.1m. EBTIDA for the quarter fell 54.1% to €9.0m, with net loss for the quarter rising from €14.7m in Q4 2018 to €72.4m.