ROME (ITALY) - PROVIDENCE, RHODE ISLAND (US), March 06, 2008 – The Board of Directors of Lottomatica S.p.A., chaired by Mr. Lorenzo Pellicioli, approved today the consolidated accounts and the draft financial statements of Lottomatica S.p.A. for fiscal year 2007. The Board of Directors will submit the draft financial statements and a proposed €0.825 per share dividend to the Annual General Meeting scheduled for April 15, 2008 also in extraordinary session.
“Lottomatica delivered impressive results in 2007, driven by solid contributions from GTECH and our Italian operations. The integration of GTECH is now complete. Key accounts were secured, new lines of business were successfully launched, and a new senior management team took over leadership of the Company,” said Lorenzo Pellicioli, CEO of Lottomatica Group. "Significant actions have been taken to improve our competitive position and targeted acquisitions have helped us enter new market sectors. As I look to the year ahead, I am confident in our ability to produce results in line with our commitments."
“Lottomatica’s financial performance for 2007 was very good, despite a challenging international environment. We kept our commitments and delivered results in line with our stated expectations,” said Stefano Bortoli, CFO of Lottomatica Group. “Earnings per share were €0.49, which substantially exceeded our guidance of €0.35 to €0.37. In addition, the recent release of funds in Brazil more than offset our one-time restructuring charge. We have established a high margin business that, we believe, is sustainable over the long term.”
Lottomatica Group 2007 Full-Year Results
Revenues for the full year of 2007 totaled €1.66 billion, including approximately €839.8 million from GTECH operations and €821.6 million from Italian operations. For the same period in 2006, total revenues were €938.9 million, including approximately €649.6 million from Italian operations and €289.3 million from four months of GTECH operations. Overall, revenues grew 77.0% year-over-year, while revenues from Italian operations grew 26.5% year-over-year.
EBITDA was €701.5 million with an EBITDA margin of 42.2%.
Operating income was €394.9 million for the full year of 2007, with a 23.8% margin.
Net income was €106.0 million for the full year ended December 31, 2007, compared to €0.8 million for the same period last year, of which €74.0 million for 2007, compared to a loss of €6.6million for 2006, attributable to the parent company. Last year net income was impacted by transaction costs related to the GTECH acquisition.
GTECH Operating Results and Business Highlights
Revenues for the full year of 2007 were €839.8 million, with approximately €745.0 million from the Lottery segment, €72.8 million from Gaming Solutions, and approximately €22.0 million from Commercial Services. Commercial Services reflect seven months of revenues from POLCARD, sold on August 1, 2007.
During the year, GTECH maintained its leadership position in the lottery industry by winning new contracts and retaining existing businesses, both in the U.S. and internationally. Long-term online lottery contracts were secured with existing customers in the United Kingdom, Oregon, Kansas, and contract extensions were obtained with lotteries in New York, New Jersey, Illinois, and Finland.
As part of a joint venture in Taiwan, GTECH signed a contract with Taipei Fubon Bank to become the sport betting solutions and services provider for the operation of the first legalized sports lottery in Taiwan, which is expected to begin operation in April 2008. GTECH also announced a joint venture with China LotSynergy to provide a nationwide KENO system for Welfare lotteries throughout China.
GTECH’s Printing division received contracts to provide a portion of the instant-ticket printing business from the Connecticut and Rhode Island lotteries.
In the Gaming Solutions vertical, GTECH’s subsidiary Spielo was chosen to provide Svenska Spel in Sweden with a new server-based gaming system and video lottery terminals (VLTs). Spielo was also selected by Manitoba Lotteries to supply slot/bingo gaming terminals for installation in two casinos operated by the lottery, while Canada’s Atlantic Lottery Corporation received WinWave VLTs.
During the year, GTECH closed on the acquisitions of Finsoft, a leading provider of real-time transaction and information management systems for the commercial sports-betting market; and acquired substantially all of the assets of instant-ticket printer, Creative Games International (now known as GTECH Printing Corporation). GTECH also completed the sale of POLCARD to First Data International in August 2007.
After the close of 2007, the West Virginia and Pennsylvania lotteries awarded GTECH new facilities management contracts. Both of these contract awards represent new online lottery business for GTECH.
GTECH also furthered its growth strategy by expanding in the regulated interactive gaming and sports betting markets, as well as the global machine gaming and instant-ticket printing markets, through acquisition-related activities.
Also after close of the year, GTECH announced it had acquired a 50 percent controlling interest in gaming machine supplier Atronic, and plans to acquire the remaining 50 percent of the company during 2008. In addition, GTECH, as part of a jointly-owned company with Medstroms AB, will have a controlling interest in Boss Media, a leading developer of innovative software and systems for digitally-distributed gaming entertainment.
Italian Operating Results and Business Highlights
For the full year of 2007, revenues from Italian operations grew approximately 26.5% to €821.6 million, from €649.6 million in the full year of 2006.
Lotto and instant ticket wagers grew approximately 33.7% to €14.0 billion in 2007, from €10.5 billion for the same period last year, as strong Instants lottery performance more than offset the slight decrease in Lotto.
Total Lotto wagers reached €6.2 billion, down slightly against €6.6 billion in the full year of 2006, when wagers had included a record late number, Cagliari 34. Core wagers were down slightly over last year at €5.2 billion. Lotto revenues were €398.1 million, compared to €411.3 million in 2006.
The continued strong performance of instant tickets resulted in sales of approximately €7.8 billion, compared to sales of approximately €3.9 billion in 2006, an increase of 101.5% year-over-year. Approximately 2.3 billion Scratch & Win tickets were sold in 2007, compared to 1.6 billion in the same period last year. The average price grew from €2.4 to €3.4, driven principally by the introduction of the €10 lottery ticket in January 2007. Revenues for the Instant Lottery business totaled €277.8 million compared to €139.5 million during 2006, an increase of 99.1%. Pool games and betting revenues increased by 218.9%, due to the commencement of fixed odds sports-betting operations in August 2007, which generated €32.5 million of revenues from €126.2 million of wagers. As of the end of 2007, approximately 1,100 of the fixed odds sports-betting points-of-sale were operational, out of the 1,145 contracts secured. Revenues from fixed-odds sports-betting is equal to gross wagers net of prize payouts.
Revenues from Gaming Solutions were €28.6 million, up 237% over last year, driven by the increased placement of Amusement with Prizes (AWP) machines, from approximately 10,000 machines installed at the end of 2006, to approximately 32,000 machines installed as of the end of 2007. Revenues from Commercial Services were stable compared to last year, despite the negative impact of regulatory changes.
Consolidated Cash Flow and Net Financial Position
At December 31, 2007, Lottomatica Group had a Net Financial Position of €2.23 billion, with Cash and Cash Equivalents of approximately €434.1 million at the end of period. During the full year of 2007, the Group generated €503.8 million of net cash flows from operating activities, compared to €208.3 million in the same period last year.
Consolidated Shareholders' Equity
Consolidated shareholders' equity totaled €1.73 billion.
Lottomatica S.p.A. 2007 Financials
Lottomatica S.p.A. had total revenues of €484.7 million in 2007, compared with €488.8 million in 2006. Net Income was €69.0 million, compared with €2.3 million as of December 31, 2006.
Additional Information
Call of Shareholders Meeting -Proposed Dividend
The 2007 draft financial statements approved by the Board of Directors of Lottomatica S.p.A. will be submitted for approval at the shareholders’ meeting scheduled for April 15, 2008, along with a share buy-back plan, two new stock based incentive plans, slight amendments to the Company’s By-laws.
The Shareholders meeting shall be also convened to resolve on the renewal of the Board of Directors and of the Board of Statutory Auditors, both expiring upon the approval of the 2007 financial statements. At the Shareholders meeting the Board of Directors will propose a dividend distribution of €0.825 per share to shareholders for a total amount of approximately 125 million euros. If approved at the meeting, the dividend will be paid on April 24th 2008, by means of the existing liquid assets of the Company, with an ex-dividend date of April 21st, 2008.
The documentation required by current law provisions for the matters and the proposals on the agenda will be timely made available to the public at the registered office of the Company and of Borsa Italiana S.p.A., as well as placed on the website www.gruppolottomatica.it/eng/index.htm .
Share buy-back plan
The April 15, 2008 Shareholders’ meeting will be requested to authorize the Board of Directors to purchase and dispose, on a revolving basis, up to a maximum number of own ordinary shares representing 10% of the from time to time paid in share capital, keeping into account any financial covenants undertaken by the Company. The proposed authorization includes the faculty to perform the purchase in any ways as are permitted by applicable law, to the sole exclusion of public tender or exchange offer. The purchase price for each single transaction shall not be lower nor higher than 25% of the (reference) price of the preceding market day. The proposed buyback is mainly aimed at allowing the Board to stabilize the Lottomatica’s share price in the event of unusual stock market conditions or lack of liquidity in the stock market. In addition, the purchased shares will be available, among the others, in accordance with Lottomatica’s strategic guidelines, for future transactions on its share capital and/or other transactions which may involve exchange or sale of shares. Authorization to make purchases will be requested for a maximum period of 18 months from the time such authorization is granted by the shareholders’ meeting. Lottomatica and its subsidiaries do not currently own own shares.
New Stock-based incentive plans
The Board of Directors also resolved to propose to the Shareholders meeting a 2008 2016 stock option plan, and a 2008-2011 stock granting plan, both reserved for Lottomatica’s and its subsidiaries’ employees. For further details please refer to the information memoranda on the Company’s web-site: www.gruppolottomatica.it/eng/index.htm .
Changes to the Company By-laws
The Board of Directors will further propose to the Shareholders’ meeting in extraordinary session to slightly amend Articles no. 13 and 20 of the By-laws respectively relating to the appointment of the Board of Directors and of the Board of Statutory Auditors.
Lottomatica’s expiring bonds
In December 2003, Lottomatica issued a €360 million bond due December 22, 2008. The Euro bond has a fixed coupon payment of 4.80%, payable annually each December.
Declaration
The manager responsible for preparing the Company's financial reports, Stefano Bortoli, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books, and accounting records.
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