Intralot sees net loss widen in Q3

Intralot has reported a 3.5% drop in turnover for the quarter ended September 30, 2018, contributing to the lottery and gaming solutions provider’s loss for the period rising to €7.9m.

The company saw Q3 turnover decline by around €9m to €251m, with the decline blamed on revenue from Turkey and Argentina being impacted by foreign exchange rates and Greek operator OPAP reporting lower sales for the period. Quarterly turnover was also hit by the suspension of the company’s sports betting licence in Cyprus, increased competition in the Polish market and a decline in US turnover. This US decline was attributed to unusually high lottery sales in Q3 2017, as a result of a high Powerball jackpot, as well as the cancellation of its lottery contract in South Carolina.

As a result, net gaming revenue for the quarter fell 7.2% year-on-year to €125.7m, with the decline partially offset by an increase in payout-related GGR, and a better top-line performance of Intralot’s operations in licensed markets.

Cost of sales for the period rose marginally to €205.3m, resulting in a gross profit for the period of €45.7m, down 16.8% year-on-year. Selling expenses declined to €12.1m, while administrative expenses rose to €18.2m.

This contributed to a 14.9% drop in earnings before interest, tax, depreciation and amortisation to €34.8m. As a result, the EBITDA to GGR ratio deteriorated to 27.7%, down from 30.2% in the prior year. The company ultimately saw its post-tax loss for the quarter rise 11.3% to €7.9m.

For the nine months to September 30th, Intralot saw turnover rise marginally, up 0.5% from the prior year at €798.6m. The business saw a 2.7% increase in turnover from licensed operations to €565.2m and a €79.7m contribution from game management contracts, up 0.1% year-on-year, offset by a 6.7% decline in revenue from technology contracts, which fell to €153.7m.

Over the period, the company saw the amount of wagers handled fall 3.2% to €15bn, with all core markets declining, and only African wagers (up 17.6% to €256m) growing during the period.

Sports betting was the largest contributor to Intralot’s top-line growth, comprising 57.8% of turnover, followed by lottery games, which generated 30.5% of the total. Technology contracts accounted for 6.2%, with a further 2.8% coming from video lottery terminals, and 2.7% from racing.

Cost of sales for the nine months climbed to €636.4m, leaving a gross profit of €162.2m, down 0.7% year-on-year. Increased selling expenses of €43.9m and €55.5m of administrative expenses contributed to earnings before interest and tax falling 8.9% to €66.9m. EBITDA for the three quarter period was down 6.6% at €114.9m.

Intralot’s pre-tax operating profit of €46.3m represented a significant improvement on the €25m generated in the first nine months of 2017. However, this was wiped out by taxes of €24.4m and a €32m loss from discontinued operations, resulting in a post-tax loss of €11m for the period.

Despite the losses for the year to date, Intralot chief executive Antonios Kerastaris talked up positive developments since the end of Q3 as evidence of the company moving forward.

“Intralot has successfully won new projects in the past two months such as Lotto Hamburg and the Croatian Lottery as well as extended its New Mexico contract in the US; in the latter case including approval for a new sports prognostics game, available through the entire retail footprint of the lottery,” he explained.

“All these projects will apply new technological solutions developed by Intralot, reflecting the positive prospects created by our significant investments in the last two years.

“We are also looking forward to the commencement of our operations in Illinois, a project that has heavily impacted our financials in 9M18,” Kerastaris added. “Such developments confirm our positive outlook after the current transition year according to our business plan.”