News Details

Consolidated Financial Highlights

• Operating income up 40% to €539 million in 2011, versus €386 million last year
• Net income attributable to parent of €173 million and EPS of €1.01
• Levered free cash flow of €281 million
• Group announces new guidance; targeted EBITDA for 2012 above €1 billion
• Proposed dividend of €0.71 per share; new share buy-back plan and stock-based incentive plans

Lottomatica Group 2011 Fourth-Quarter and Full-Year Results Comparison

EBITDA is principally comprised of operating income plus depreciation, amortization, and impairment. 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.

ROME (ITALY) – PROVIDENCE, RHODE ISLAND (US), March 08, 2012 – Lottomatica Group S.p.A.’s Board of Directors, chaired by Mr. Lorenzo Pellicioli, today approved the consolidated financial statements and the draft stand-alone financial statements for the full year which ended December 31, 2011, and reviewed 2011 fourth-quarter results. The Board will propose to the Annual Shareholders’ Meeting a cash dividend of €0.71 per share.

“Lottomatica Group had a good year in 2011,” said Marco Sala, CEO of Lottomatica Group. “Overall, our performance exceeded expectations in all major categories. Revenues totaled €3 billion, a significant milestone for the Group. EBITDA approached the €1 billion mark. And, our focus on deleveraging allowed us to reach our 3-year plan goal, two years ahead of schedule. As our revised guidance for 2012 indicates, we are confident that we can sustain the momentum we created in 2011 and look forward to another good year.”

“We had a robust and higher than expected cash flow generation in 2011,” said Alberto Fornaro, CFO of Lottomatica Group. ”This resulted in levered free cash flow generation of €281 million and a material improvement of our Net Financial Position. Nonetheless, our commitment to deleverage and improve our credit metrics remains very strong. The proposed cash dividend payment of €122 million, or €0.71 a share, is 43% of levered free cash flow, which is in accordance with the Group’s dividend policy.”

For the year ended December 31, 2011, Revenues increased across all business segments. Revenues totaled €2.97 billion, compared to €2.31 billion in 2010, up 28.5%. At constant currency, revenues were €3.02 billion. Service revenue grew 29.6% to €2.78 billion and product sales grew 15.1% to €194.0 million.

EBITDA increased 19.5% in 2011 to €970.4 million versus €812.3 million last year. The increase in EBITDA was driven by higher revenues and profits from the Group’s Italian Operations.

Operating Income was €539.3 million in 2011, compared to €386.0 million last year, up 39.7%.

Income before income tax expense totaled €365.9 million, compared to €113.5 million in 2010.

Net Income attributable to the parent was €173.1 million in 2011 versus €0.5 million in 2010, resulting in EPS of €1.01. In 2010, the Group incurred certain non-recurring costs, €2.65 billion of its debt.

Net Cash Flows from Operating Activities generated €850.0 million in 2011, compared to €768.3 million in 2010. The increase is due to higher EBITDA generated by the Italian Operations segment. Taking into account changes in working capital, capital expenditures, and interest €281.3 million in 2011, compared to (€678.9) million in 2010.

During the year, Capital Expenditures totaled €345.0 million, down from €1.22 billion in 2010. Capital expenditures in 2010 included €800.0 million and €80.7 million for the Italian Scratch & Win concession and the Italian VLT licenses, respectively.

At December 31, 2011, Consolidated Shareholders’ Equity totaled €2.61 billion. Lottomatica Group had a Net Financial Position (NFP) of €2.74 billion, compared to €2.98 billion as of December 31, 2010. The change in NFP was principally due to higher cash generated from operating activities that was used, in part, to repay existing indebtedness. Leverage ratio (the ratio of Net Financial Position to EBITDA) decreased to 2.8x as of December 31, 2011, compared to 3.7x in 2010.

Taking into account the Group’s strong performance in 2011 and robust cash flow generation, which also benefited from favorable timing on taxes paid, the de-leveraging process is ahead of schedule, compared to the target set in February 2011 of a 2.6x – 2.8x leverage ratio by the end of 2013.

2012 – 2013 Guidance

The Board of Directors also reviewed a guidance update which is being provided today. The Group expects to build upon the 2011 performance of its Italian Operations through the completion of the 3/10 VLT rollout, product innovation, and retailer optimization. The Group also will continue to develop the business and further streamline costs, with the aim to more than offset the impact of the increased VLT taxation on Italian Operations’ profitability and a reduced contribution of Lotto late numbers in 2012. Late numbers accounted for 24% of wagers in 2011, and are expected to contribute approximately 16% in 2012, back to the last five years’ average contribution.

GTECH’s same store sales are expected to benefit from continued improvements in California and Illinois, and an increased customer focus on growth to help offset budget deficits. GTECH will also continue to pursue lottery operator opportunities in the U.S. and abroad. With the next rebid cycle now years away, GTECH is set for contract price stability during which it can focus on initiatives to stimulate same store sales growth. At the same time, the amount of capital required to renew the existing portfolio of contracts is now expected to be significantly lower than the last few years’ average.

SPIELO International is benefiting from the expansion of the Italian gaming machine market where it supports Lottomatica and three other operators, and the Canadian replacement cycle. In the latter, SPIELO has been awarded contracts in each of the first four gaming machine/system procurements and is confident in being successful in the remaining six RFPs to which it has responded. SPIELO International expects to pursue further opportunities in Europe and the U.S., leveraging on its expertise as one of the worldwide leaders in distributed gaming and Government sponsored business.

As part of an ongoing integration, SPIELO International and GTECH G2 are working together to better exploit synergies and to coordinate a unified market approach with customers. GTECH G2 expects to see additional rollouts in the Interactive market in support of GTECH lottery customers’ entrance into the Interactive space, and the adoption of national regulations in Europe.

Continued improvement in cash flow generation will be supported by capital expenditure reductions which will materially decline in 2012 and further decrease to a level of 20% – 22% of EBITDA beginning in 2013. The Group will continue to focus on de-leveraging, with targeted Net Financial Position to EBITDA of 2.4x – 2.5x by 2013.

2011 Full-Year Results Revenue by Segment Comparison

Italian Operations

Total revenues from Italian operations were approximately €1.88 billion in 2011, compared to €1.25 billion in 2010, up 49.8%. Lottery revenues from Italian operations totaled €825.4 million, compared to €677.4 million last year, up 21.9%. Lotto wagers for the year were €6.81 billion, up 30.2% over €5.23 billion last year. Instant-ticket wagers were approximately €10.11 billion in 2011, compared to €9.32 billion in 2010, up 8.5%.

Machine gaming wagers more than doubled in 2011 to €11.06 billion from €5.07 billion in 2010, due to the deployment of VLTs beginning in July 2010. At December 31, 2011, a total of 56,300 AWP machines and 8,635 VLTs were installed.

Wagers from sports betting in Italy were €917.5 million in 2011, compared to €1.03 billion last year, which was mainly driven by the World Cup Soccer tournament. Interactive wagers totaled €1.39 billion, up over 200% versus €410.9 million in 2010. The increase was principally driven by the July 2011 launch of regulated cash poker and casino games.

GTECH Lottery

GTECH domestic same store service revenues grew approximately 4% in 2011 versus the prior year. GTECH benefited from higher jackpot activity and the continued growth of instant-ticket sales, particularly in California where sales increased 34%, and in Illinois where sales grew 16%.

International Lottery same store service revenues also benefited from jackpot activity and grew approximately 3% compared to last year. The bankruptcy of GTECH’s customer in the Czech Republic materially affected sales in the first half of 2011. Excluding this impact, International Lottery same store service revenues were up 7%.

Total GTECH lottery revenues grew from €842.1 million in 2010 to €857.4 million in 2011. Service revenue was €763.4 million in 2011. Product sale revenue totaled €94.0 million in 2011, up 17.8% versus last year. Product sales during 2011 included the sale of new lottery equipment for GTECH customers in Israel, Turkey, Malaysia, and Canada.

In 2011, GTECH successfully completed 26 system conversions and integration projects for its customers across the globe. GTECH won lottery contract rebids in Colombia and Turkey and received extensions from customers in several jurisdictions including Georgia and Jamaica. In Illinois, Northstar took over operations of the Lottery on July 1, 2011. By applying new innovations and proven best practices, overall lottery sales growth in Illinois since July 1 was approximately 16%, while instant ticket sales have increased 27% versus the same period last year.

During the year, GTECH also supported the Powerball consortium in its efforts to increase its price from $1 to $2 per ticket, as well as adjust the payouts and prize levels. The $2 price point change commenced on January 15, 2012. Initial results are encouraging and are expected to drive growth for GTECH’s customers in the U.S. market in 2012 and beyond.

SPIELO International

2011 revenues for SPIELO International (“SPIELO”) were €198.3 million, up 4.2% versus last year, despite lower product sales, which are cyclical. Service revenue increased €18.2 million in 2011 versus 2010 principally due to central system support fees from VLT concessionaires in Italy.

In Italy, SPIELO is supplying equipment and services to the VLT market and has deployed, to Lottomatica and three additional operators, in excess of 10,600 VLTs.

During 2011, SPIELO also completed responses to 10 separate RFPs as part of a major system/machine replacement bid cycle in Canada. To-date, it has been 100% successful in being awarded the first four central system and machine agreements with Loto Quebec and the Alberta Gaming and Liquor Commission. In three of these contracts it was the incumbent with the fourth contract being a new award. SPIELO has confidence that it will continue to be successful in the remaining six RFPs.

In addition, SPIELO continues expanding in its commercial casino and AWP business units, introducing products in North America, and launching its AWP business in Italy.

GTECH G2

Revenue contributions from GTECH G2 in 2011 were approximately €81.2 million, up 8.9% versus the prior year. Service revenue in 2011 increased €7.6 million over 2010, principally due 5/10 to intersegment sales of new casino and poker products to the Italian Operations segment, and continued strong performance from the interactive video terminal market in Central Europe.

In 2011, GTECH G2 secured 12 Interactive customers in Spain, representing approximately 30% of the Interactive market that will open in the country in 2012.

Additional Information: 2011 Fourth-Quarter Results

For the fourth quarter ended December 31, 2011, Revenues totaled €828.1 million, compared to €642.7 million in the fourth quarter of 2010, up 28.9%.

EBITDA was €232.1 million in the fourth quarter of 2011, up 7.8% compared to €215.2 million in the same period last year. The increase in EBITDA was primarily driven by higher revenues and profits from Machine Gaming as well as Sports Betting in Italy, partially offset by higher costs in the Italian Lotto and instant tickets businesses.

Operating Income was €117.2 million in the fourth quarter of 2011, compared to €45.9 million in the same period last year, up 155.6%. The fourth quarter of 2010 included €46.3 million of net impairment charges.

Net income attributable to the parent was €46.6 million, compared to a loss of €50.6 million in the same period last yeartrong>Group Revenues (€/M)

4Q 2011

4Q 2010

Increase /Decrease

% chg

Italian Operations

509.0

366.4

Italian Operations

509.0

366.4

142.6

38.9

GTECH Lottery

249.2

216.4

32.8

15.2

SPIELO International

58.7

60.7

(2.0)

(3.4)

GTECH G2

22.1

20.7

1.4

6.5

Subtotal

839.0

664.2

174.8

26.3

Eliminations/Other

Total

828.1

642.7

185.4

28.9

Italian Operations

Total revenues from Italian operations grew 38.9% to €509.0 million, from €366.4 million in the fourth quarter of 2010. Instant-ticket wagers were up slightly to €2.35 billion in the fourth quarter of 2011, versus the same period last year. Lotto wagers increased approximately 9.0% to €1.70 billion, from €1.56 billion in the fourth quarter of last year.

Machine gaming wagers were €3.29 billion in the fourth quarter of 2011, up 96.0% over the fourth quarter of 2010. Revenues from machine gaming were €202.2 million in the fourth quarter, compared to €101.3 million in the same period last year. In terms of the number of connected machines, Lottomatica is the second largest overall operator in the Italian market, while in terms of VLT wagers, it maintains the largest market share of 45%.

Wagers from sports betting in Italy, including pool games, totaled €258.9 million in the fourth quarter of 2011, compared to €292.8 million in the fourth quarter of last year. Sports betting revenue in the fourth quarter of 2011 was €59.2 million versus €31.7 million in the same period last year.

Wagers from the Interactive segment totaled €635.6 million, versus €104.8 million in the fourth quarter of 2010. Revenues for the fourth quarter of 2011 were €26.2 million, compared to €11.6 million in the same period last year.

GTECH Lottery

Total GTECH lottery revenues for the fourth quarter of 2011 grew 15.2% over the same period last year to €249.2 million. GTECH same store revenue in the fourth quarter was up approximately 4% year over year. GTECH benefited from higher jackpot activity and the continued growth of instant-ticket sales, particularly in California where sales increased 46% and Illinois where sales grew 25%. International Lottery same store service revenues also benefited from jackpot activity and grew 2% compared to the fourth quarter of last year.

SPIELO International

Fourth-quarter revenues for the SPIELO International segment were €58.7 million, compared to €60.7 million the same period last year.

GTECH G2

Fourth-quarter revenue contributions from GTECH G2 were €22.1 million, versus €20.7 million in the fourth quarter of 2010.

Call of Annual Shareholders’ Meeting – New share buy-back plan – Executive Management Compensation Policy with New Stock Based Incentive Plans

The Board of Directors has also approved – for submission to the Annual Shareholders’ meeting to be called on May 9 and 10, 2012, respectively on first and second call – a new share buy back plan and the Group compensation policy for Directors, Executives with strategic responsibilities and Statutory Auditors with two new stock-based incentive plans for selected Group employees.

The above-mentioned share buy-back plan, if approved by the Annual Shareholders’ meeting, would renew the authorization to the Board of Directors for the acquisition and disposal of ordinary shares of the Company that had expired in October 2011. The authorization would be renewed to purchase, in bulk or in several stages, on a revolving basis, the maximum number of ordinary shares permitted by the law, i.e. an interest not exceeding 20 percent of the Company’s share capital. The treasury shares would be purchased to stabilize the share price and the trading performances, to serve extraordinary transactions, if any, and stock based incentive plans, as well as to offer shareholders an additional way to monetize their investment. The authorization to purchase treasury shares is proposed for the maximum period of time permitted by the law, i.e. 18 months from the date of the Shareholders’ Meeting, while disposal of treasury shares would be permitted with no time limit. The purchase price to be determined for each single transaction shall not be higher nor 30 percent lower than the reference price of the preceding trading session. Similarly, the sale price may not be lower by more than 20 percent of the reference price from the trading session preceding each disposal. Exceptions to the above thresholds are provided by the plan in the event of stock based incentive plans and extraordinary transactions. As at the date hereof neither the company nor its subsidiaries hold treasury shares nor does the Board of Directors currently intend to give the plan immediate execution in light of, among the others, yearly set by the existing financing agreement, trading trend of Company’s stock, and Company’s primary focus on debt reduction.

The Board shall also propose to the Annual Shareholders’ meeting two new stock-based incentive plans reserved for Lottomatica and/or its subsidiaries’ employees, pursuant to article 114-bis of the Consolidated Financial Act, namely the 2012-2018 stock option plan and 2012-2016 stock granting plan. The main reasons for proposing their approval to the Shareholders’ meeting are to focus the commitment of the beneficiaries on targets of strategic importance, such as consolidated EBITDA, and link the compensation of Executive Management and of the Executives with Strategic Responsibilities to the upgraded value gained by the shareholders, while encouraging loyalty and retaining executive management within the Group. Among the beneficiaries there are Marco Sala and Jaymin Patel, as current Board members, Renato Ascoli, as General Manager, Alberto Fornaro, CFO of Lottomatica, and Walter Bugno, President and CEO, SPIELO International and GTECH G2, as Executives with Strategic Responsibilities. Pursuant to Italian Stock Exchange recommendations, with a view to promote value creation in the mediumto- long term, vesting of the plans shall be subjected to achievement of 3-years consolidated EBITDA targets; the above mentioned beneficiaries shall retain for further 3 years at least 20% of stock delivered/arising from the exercise of options.

The documentation required by the relevant provisions in connection with the agenda items will be made available to the public, in a timely manner, at the Company’s registered office and at the offices of Borsa Italiana S.p.A. The documents will also be accessible on Lottomatica’s website,www.lottomaticagroup.com, under the section Governance – Documents and reports – Shareholders’ Meeting, May 9 and 10, 2012.

Related press releases: February 14, 2012; February 7, 2011

Declaration

The manager responsible for preparing Lottomatica Group’s financial reports, Alberto Fornaro, 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.

Lottomatica Group is a market leader in the Italian gaming industry and one of the largest Lottery operators in the world based on total wagers and, through its subsidiary GTECH Corporation, is a leading provider of lottery and gaming technology solutions worldwide. Together, the companies are the only vertically integrated full service lottery group. Lottomatica Group is majority owned by De Agostini, which belongs to a century-old publishing and media services group. Lottomatica is listed on the Stock Exchange of Milan under the trading symbol “LTO”. In 2011, Lottomatica Group had €3.0 billion in revenues and 8,000 employees in over 60 countries.