Intralot hit by Argentina and Bulgaria B2C declines in H1

2 September 2019

Greek lotteries and gaming solutions provider Intralot has put a 7.6% year-on-year drop in reported consolidated revenue primarily down to declines within its B2C division, specifically in the Argentina and Bulgaria markets.

Reported consolidated revenue for the six months to June 30, 2019 amounted to €378.1m (£343.0m/$415.2m), down from €409.1m in the same period last year.

Sports betting was the main source of income for Intralot, accounting for 44.9% of total revenue for the half, just ahead of lottery with a 42.6% share. Racing was responsible for the remaining 2.5% of revenue.

Although worldwide wagers were up 16.4% year-on-year to €10.5bn, this did not stop Intralot posting a decline in revenue, mainly attributed to a €25.5m drop in revenue from its licensed operations (B2C) activity line.

In Bulgaria, revenue fell €17.8m, mainly due to its sports betting performance as a result of a conservative pay-out strategy, although its numerical and racing performance in the country was on par with last year.

Meanwhile, in Argentina, while revenue was down by €8.7m, Intralot noted that in local currency terms, revenue was up 24.9%. Intralot put this down to the results being heavily affected the hyper-inflationary economy reporting standard, which in turn impacted the foreign exchange currency translation.

Intralot also reported an 8.5% drop in management B2B/B2G contracts during the first half, primarily due to unfavourable exchanged rates in Turkey, as well as a discontinued contract in Russia and a drop in sales in Morocco.

Technology and support services B2B and B2G revenue was down by 1.3%, as Intralot was impacted by lower sales in Greece and Argentina. However, the provider did note that this was partially offset by positive performances in various other regions.

In the US, technology and support services revenue climbed by €11.2m, boosted by a new contract in Illinois and a Powerball jackpot in Q1, while revenue in both the Netherlands and Chile was up year-on-year.

On a global basis, Europe remains Intralot’s core market, with revenue standing at €240.7m for the period, although this is down by 12.6% on last year, mainly due to the Belgium struggles. Americas revenue was up 1.6% to €102.2m, but other regions saw revenue slip 5.0% to €54.8m.

Although Intralot did not set out details of its costs and expenses for the half, it did says spending had an impact on earnings before interest, tax, depreciation and amortisation (EBITDA), which fell 15.9% year-on-year to €58.7m.

Intralot noted increased selling and administrative expenses in the US as part of its preparations for the launch of the Illinois contract in February, coupled with a minimum state guarantee settlement in Morocco and higher marketing expenses related to online sports betting activity in Turkey.

Earnings before tax plummeted from €23.3m to €2m, while gross profit also fell 15,7% from €90.5m to €76.3m. However, Intralot did see its operating cash flow climb €12.3m to €49.0m.

Reflecting on the results, Sokratis Kokkalis, group chairman and chief executive of Intralot, said the business is still absorbing the impact of last year’s negative developments, in which the business lost a number of key contracts and saw sales dip in a number of key regions.

However, he added: "[The H1 results] reflect improvement in operating cash flows and liquidity by successfully implementing our three-pillar strategy for operational improvements, new business, and non-core asset disposals.

“We successfully completed the delivery and transition to the Lotos X new central system for our historic client OPAP in July, and came to an agreement with OPAP for the disposal of our 16.5% participation in Hellenic Lotteries for a consideration of €20.0m,” he said. “The renewal of our contract with the DC Lottery to include sports betting and the award of a new sports betting contract in Morocco demonstrate Intralot’s readiness to tap fresh opportunities with cutting-edge new technological solutions.”

The results come after Intralot in June set out plans to focus its efforts on pursuing opportunities in the US market to help drive growth in 2019-20. At the time, Kokkalis cited the growing legal sports betting market as the primary focus for Intralot in the US.