News Details

First Half 2007 Revenues of €835 million, compared to €340 million from Lottomatica’s Italian stand-alone operations in the first half of 2006

EBITDA of €381 million and Operating Income of €239 million, compared to €187 million and €156 million from Lottomatica’s Italian stand-alone operations, respectively, in the first half of 2006

Net Income of €68 million, compared to €32 million in the first half of 2006 from Italian stand-alone operations 

Reconfirmed Full Year 2007 Guidance

ROME (ITALY) - PROVIDENCE, RHODE ISLAND (US) – The Board of Directors of Lottomatica S.p.A., chaired by Mr. Lorenzo Pellicioli, approved today the consolidated accounts of Lottomatica Group for the first half of 2007, which ended June 30, 2007.

“We are pleased with the results of our first semester,” said W. Bruce Turner, CEO of Lottomatica Group. “The fundamentals of our business continue to experience positive growth. We defended existing contracts in New York, Kansas, and most recently in the United Kingdom, and we made significant progress toward achieving our strategic goals set out in our three year-plan. Our Italian operations have performed extremely well, particularly in the instants arena, and we are pleased with the recent successful launch of our Italian sports-betting business. With the acquisition of Finsoft, together with the operational experience we are gaining in Italy, we expect to establish a meaningful presence in the sports-betting space for commercial and government-sponsored customers.”

“Lottomatica experienced continuing progress during the first semester, with sustainable high margins in our key verticals,” said Stefano Bortoli, CFO of Lottomatica Group. “As a result, we remain on track in terms of achieving our long-term goals for growth. We are also implementing an ADR program which will allow our shares to be more accessible to U.S. investors.”

Lottomatica Group 2007 First-Half Results

Note: 2006 reflects six months of Lottomatica Italian stand-alone operations. 

*EBITDA represents operating income plus depreciation, amortization and write-downs and other non-cash items.  EBITDA is considered an alternative performance measure that is not a defined measure under International Financial Reporting Standards (“IFRS”) and may not take into account the recognition, measurement and presentation requirements associated with IFRS.  We believe that EBITDA assists in explaining trends in our operating performance, provides useful information about our ability to incur and service indebtedness and is a commonly used measure of performance by securities analysts and investors in the gaming industry.  EBITDA should not be considered as an alternative to operating income as an indicator of our performance or to cash flows as a measure of our liquidity.  As we define it, EBITDA may not be comparable to other similarly titled measures used by other companies.

Revenues for the first half of 2007 totaled €835.5 million, including approximately €427.7 million from six months of GTECH operations and €407.8 from Italian operations. Overall, revenues grew 145.4% year-over-year, while revenue from Lottomatica's Italian operations grew 19.8% year-over-year.

EBITDA was €380.7 million with an EBITDA margin of 45.6%. 

Operating income was €239.4 million for the first six months of 2007 (28.7% margin). Operating income margins, excluding the purchase price amortization of intangibles related to the GTECH acquisition, was approximately 34.6%.

Net income was €68.1 million for the six months ended June 30, 2007, compared to €31.9 million for the same period last year, up 113.5%.

GTECH Operating Results and Business Highlights

Revenues for the first six months of 2007 were €427.7 million, with approximately €374.5 million from the Lottery segment, €29.0 million from Gaming Solutions, and approximately €24.2 million from Commercial Services.

During the first half of 2007, GTECH continued to defend its core lottery business.  The New York Lottery extended its online lottery contract with GTECH for an additional three years, resulting in more than €147 million in expected revenue to the Company over the three-year extension period.

As a result of a competitive re-bid, GTECH received a 10-year online lottery contract from the Kansas Lottery which is expected to generate revenues to GTECH of approximately €60 million beginning in the third quarter 2008.

The Missouri Lottery awarded GTECH an IP-communications system contract, and the Rhode Island and Connecticut lotteries selected GTECH Printing Corporation for instant-ticket printing services. 

In the Gaming Solutions vertical, GTECH and its Spielo subsidiary were chosen to provide a new server-based gaming system and interactive video terminals to Svenska Spel in Sweden. As a result of this contract, GTECH expects to receive revenues of approximately €16 million over a five-year period. In addition, GTECH expects to receive approximately €21 million from the sale of the interactive video terminals, associated hardware, and game content.

After the close of the semester, the Camelot consortium was chosen by the United Kingdom National Lottery for the next lottery operating license, following a competitive procurement. GTECH is a major lottery technology and services supplier to the successful Camelot consortium, and will provide a wide array of the latest lottery technology, interactive systems, integrated IMAGINE terminals, and ongoing services to Camelot over the duration of the license.

Moreover, in Belgium, Denmark, and Western Canada, GTECH was chosen to provide new lottery terminals.

Other Business Developments

After the close of the semester, GTECH and Innova Capital completed the sale of POLCARD to First Data International, on August 1, 2007, for an enterprise value of approximately €237 million, on a debt-free, cash-free basis. In addition, GTECH completed the acquisition of London-based Finsoft Limited, a leading provider of real-time transaction and information management systems for the commercial sports-betting market, on July 2, 2007. 

Italian Operating Results and Business Highlights

For the first half of 2007, revenues from the Italian operations grew approximately 19.8% to €407.8 million, from €340.5 million in the first half of 2006.

Lottery wagers grew approximately 39.2% to €7.3 billion in the first six months of 2007, from €5.3 billion for the same period last year, as strong Instants lottery performance more than offset the slight decrease in Lotto.

Total Lotto game wagers reached €3.1 billion, reflecting a decrease of 10.4% against €3.5 billion in the first half of 2006. Wagers in the first half of 2006 included a record late number, Cagliari 34. Core wagers increased to €2.7 billion compared to €2.6 billion over the same period last year. Lotto revenues were €204.0 million, compared to €227.6 million in the same period last year.

The continued strong performance of instant tickets, resulted in sales of approximately €4.2 billion, compared to sales of approximately €1.8 billion, in the first six months of 2006, an increase of approximately 138% year over year.  Approximately 1.2 billion Scratch & Win tickets were sold in the first half of 2007, compared to 760 million in the same period last year. The average price point grew from €2.3 to €3.4, driven principally by the introduction of the €10 lottery ticket in January 2007, which generated new sales of €1.3 billion during the six months ended June 30, 2007. Revenues for the Instant  Lottery business totaled €147.6 million compared to €63.0 million during the first half of 2006, an increase of 134.5%. 

Revenues from Gaming Solutions were up 113.3% over the same period last year, driven by the increased distribution of approximately 14,000 AWPs installed as of the end of June.

Revenues from Commercial Services improved 7.4% over the same period last year.

The Company commenced Italian sports-betting operations on schedule in August at over 1,000 corner shop locations, out of the 1,145 contracts secured.

Consolidated Cash Flow and Net Financial Position

At the close of the semester, Lottomatica Group had a Net Financial Position of €2.57 billion, with Cash and Cash Equivalents of approximately €289.6 million at the end of period. During the six months ended June 30, 2007, the Group generated €206.6 million of net cash flows from operating activities. 

Consolidated Shareholders' Equity

Consolidated shareholders' equity totaled €1.82 billion.

Additional Information - Second-Quarter Results

Revenues for the second quarter ended June 30, 2007 totaled €400.2 million, including approximately €203.1 million from three months of GTECH operations and €197.1 million from Italian operations.  Overall, revenues grew 166.3% year-over-year, while revenue from Lottomatica's Italian operations grew 31.2% year-over-year.

EBITDA was €169.0 million with an EBITDA margin of 42.2%. Operating Income was €99.3 million for the quarter, up 58.9% over the same period last year.  Net Income was €23.1 million for the quarter ended June 30, 2007, compared to a net loss of €9.5 million in the second quarter of 2006.  The net loss in the second quarter of 2006 was principally driven by foreign exchange losses incurred in connection with the acquisition of GTECH.

Italian operations revenues grew approximately 31.2% to €197.1 million, from €150.3 million in the second quarter of 2006. Lottery wagers grew approximately 51.2% to €3.6 billion in the second quarter of 2007, from €2.4 billion for the same period last year, with Lotto game wagers contributing €1.54 billion, an increase of 5.2% against €1.46 billion in the second quarter of 2006 and instant tickets sales of approximately €2.04 billion, compared to sales of approximately €906 million in the second quarter of 2006. Lotto revenues reached €99.6 million, compared to €95.0 million in the same period last year while Instant Lotteries revenues totaled €71.1 million compared with €31.9 million during the second quarter of 2006, an increase of 122.8%. 

Revenues for the second quarter of 2007 include €203.1 million from GTECH operations, with approximately €174.1 million from the Lottery segment, €16.1 million from Gaming Solutions, and approximately €12.9 million from Commercial Services.

Financial Outlook

Lottomatica confirms its guidance for the full year of 2007.

Lottomatica continues to expect total revenues in the range of €1.665 billion to €1.765 billion, for the year ending December 31, 2007.

Operating Income, excluding purchase price amortization, is expected to be in the range of €490 million to €500 million, with margins of 28% to 29%.

EBITDA for the full year is reiterated in the range of €700 million to €710 million, with margins of 40% to 42%.

Other Information

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.  Pursuant to Italian Stock Exchange requirements, the Company notes that the bond is set to expire in less than 18 months.

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