“During 2013, Gtech met or exceeded its key performance objectives and made significant gains in strategic growth segments while successfully executing a major reorganization,” said Marco Sala, Ceo of Gtech S.p.A. "For the coming year, we expect to sustain our momentum as we build on these achievements. We continue to advance our interactive capabilities, notably in the mobile gaming space, to address some of the fastest growing areas of the market. We are also well positioned to secure new international operator opportunities."
“We generated full-year significant levered free cash flow of €326 million, up 8% over 2012,” said Alberto Fornaro, Cfo of Gtech S.p.A. “Our Net Financial Position improved to €2.51 billion compared to €2.55 billion. Over the next two years we expect to achieve approximately €50 million of annual recurring cost savings, through a number of initiatives that we have identified and started to implement.”
FOURT QUARTER CONSOLIDATED RESULTS - Consolidated Revenues were €773 million compared to €813 million in the fourth quarter of 2012. At constant currency, revenues would have been €790 million. Total Service Revenues were in line with the prior year level at €722 million. Product sales were €51 million versus €90 million in the same period last year when the Company recorded significant machine gaming product sales in Canada.
Ebitda, at €245 million, was in line with the 2012 fourth quarter level.
Operating Income was €104 million, versus €126 million in the fourth quarter of 2012, principally due to lower product sales and €15 million in restructuring charges related to the 2013 group-wide reorganization.
During the quarter, the Company reached an agreement to resolve three tax matters in Italy resulting in a one-time settlement of €34.7 million, of which €6.3 million had previously been provisioned by the Company.
Net Income attributable to the owners was €1 million, compared to €63 million in the 2012 fourth quarter, due principally to the lower level of operating income and the one-time tax settlement.
Diluted Earnings-Per-Share (EPS) was €0.01, compared to €0.36 in the fourth quarter of last year.
Capital Expenditures in the quarter were €73 million.
Net Financial Position (NFP) in the quarter improved by €86 million.
FOURT QUARTER SEGMENT COMPARISON
AMERICAS - Revenues in the Americas segment were €238 million versus €242 million in 2012. At constant currency, Americas’ revenues would have been €252 million. Service revenues were €209 million, up €23 million compared to the prior year. The higher revenues were driven by an increase in same store revenues of €7 million along with higher service revenues from lottery management agreements in Illinois, Indiana, and New Jersey. Same store revenue growth was principally driven by the Mega Millions game, which had the second largest jackpot in history at $648 million in December 2013, the introduction of Powerball in California, higher instant-ticket sales, principally in California where they were driven by the introduction of a $20 price point ticket, and higher revenues in Latin America. Product sales were €29 million in the quarter compared to €54 million last year, when the Company recorded significant product sales in Canada. Ebitda in the Americas segment was €57 million in the quarter compared to €60 million in the prior year.
During the quarter, Gtech signed contracts to provide lottery technology and services to the Colorado Lottery and additional VLTs to the Oregon Lottery.
INTERNATIONAL - Revenues from the International segment were €85 million, versus €103 million in the prior year when Gtech recorded a peak in product deliveries in France, Lithuania and other countries. Revenues were also impacted by lower EuroMillions jackpot activity and foreign exchange. Ebitda in the International segment was €23 million in the quarter compared to €21 million in the prior year.
Gtech recently launched 65 interactive games for Norsk Tipping in Norway, the largest launch of its kind in Norsk Tipping’s history. The Company was also selected by Opap as its strategic partner for OPAP’s expansion into online betting in Greece.
ITALY - Revenues from the Italy segment were €450 million, compared to €467 million in the fourth quarter of 2012. Higher total core wagers and lower sports betting payouts partially offset the reduction in revenues from gaming machines.
Lotto wagers for the quarter were up 3.2% to €1.68 billion, compared to €1.63 billion in 2012, driven by higher wagers from 10eLotto, partially offset by lower late numbers. Instant-ticket wagers were €2.41 billion compared to €2.44 billion last year. Early results from the re-launch of the Miliardario ticket-family are encouraging.
Machine gaming revenues were €151 million versus €170 million in the previous year, mainly due to the impact of the VLT tax increase to 5% from 4% last year.
Revenues from sports betting were in line with last year at €44 million.
Ebitda was stable at €172 million. The positive Lotteries performance and the favorable impact of cost reduction actions taken during the year offset the full impact of higher VLT taxation.
FULL YEAR CONSOLIDATED RESULTS
For the full year 2013, Revenues were €3.06 billion, compared to €3.08 billion in 2012. At constant currency, revenues would have been €3.11 billion. Service revenues were €2.78 billion versus €2.82 billion in 2012. Product sales were up 10% to €279 million driven by a higher portion of the Canadian replacement cycle taking place in 2013 compared to the prior year.
Americas Lottery same store revenues grew 3.1% to €518 million, benefiting from multistate jackpot activity, as well as continuous growth of instant ticket sales principally in Texas, California and North Carolina.
Despite unfavorable jackpot activity, International Lottery same store revenues were up slightly to €109 million when compared to 2012, driven by continued strong performance in the Czech Republic.
Lotto wagers in Italy were up 2% to €6.33 billion compared to €6.22 billion in 2012. 10eLotto wagers totaled €2.97 billion, up over 6% versus the prior year. Lotto late number wagers grew 21% to €654 million, compared to €540 million in 2012. Instant-ticket wagers were €9.57 billion, compared to €9.73 billion in the previous year. Machine Gaming wagers were €11 billion versus €12 billion in 2012.
Ebitda was up approximately 1% to €1.04 billion. Excluding the €30 million one-time machine gaming settlement in Italy in 2013, Ebitda was €1.07 billion compared to €1.03 billion in 2012. Operating Income of €559 million was approximately 4% ahead of the 2012 level when taking into consideration the machine gaming settlement and restructuring costs related to the 2013 group-wide reorganization.
The Company’s effective income tax rate was 46.8% compared to 37.4% in the prior year. Absent the tax settlement announced in December 2013, the Company’s effective tax rate was 39.8% in 2013.
Net income attributable to the owners was €175 million, compared to €233 million in the full year 2012.
Diluted Earnings-Per-Share (EPS) was €1.01, compared to €1.35 in 2012. Pro-forma EPS was €1.59, in line with 2012 pro-forma EPS of €1.59.
Cash from Operations was €696 million, compared to €763 million in the prior year. Cash from operations, adjusted for the one-time tax and machine gaming settlements in Italy, was in line with 2012.
Capital Expenditures were €359 million. Of that amount, €92 million was used for the up-front payment under the 15-year services agreement with the New Jersey Lottery. This was partially funded by a €62 million equity contribution from other Northstar New Jersey joint venture members. Net of such equity contribution, Capital Expenditures totaled €297 million.
Levered free cash flow reached €326 million in 2013, up 8% from €303 million in 2012.
The Board will propose a dividend distribution of approximately €131 million, or 40% of 2013 levered free cash flow, consistent with the Company’s dividend policy.
At December 31, 2013, Consolidated Shareholders’ Equity totaled €2.60 billion. GTECH had a Net Financial Position (NFP) within the guidance range at €2.51 billion, compared to €2.55 billion as of December 31, 2012.
FULL-YEAR STAND ALONE RESULTS - Gtech’s stand-alone Net Income in 2013 was €34 million compared to €38 million in 2012. Total Equity and Liabilities in 2013 were €5.55 billion versus €5.55 billion in 2012. Cash and Cash Equivalents at the end of 2013 were €159 million compared to €315 million in 2012.