Intralot again blames Argentina FX woes after H1 revenue dip

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Intralot has again laid the blame for stagnant performance on Argentina’s economic woes after reporting a decrease in revenue and earnings during the first half of 2024.

The lottery and gaming group saw a slight fall of 0.9% in revenue during the six months to 30 June 2024. While it attributed much of this to challenges created by the devaluation of the Argentinian peso, the group performed well in Turkey, whose own currency hit record lows earlier this year.

Intralot’s revenue of €173.6m ($192.0m/£146.2m) was down by €1.7m year-on-year, which included a €10.3m impact due to exchange rate movements in Argentina during December 2023. Revenue from B2C operations in the country declined by 33.6% year-on-year to €7.4m in H1.

The macro environment in the country was the key driver for its sales deficit, Intralot said. However in local currency, current year results are actually 131.4% ahead of the prior year.

Intralot’s technology and support services (B2B/ B2G) segment, which makes up 70% of its business, reported a 1.5% decline to €121.7m in revenue during the six-month period.

The fall was mainly due to the FX currency translation in Argentina (€-2.9m) and a marginal drop in Intralot’s US sales. This was down to unfavourable timings of jackpot draws, it said. However, the group said the revenue decrease was partially offset by an organic 3.5% uptick amount in revenue from Oceania. It did not publish the monetary value of the tech segment in Oceania.

Intralot’s strong management performance in Turkey The group saw its management (B2B/ B2G) contracts grow by 25.4% to €37.3m, which was driven by local market growth and market share gain in Turkey. This came despite the headwinds in Turkish lira, which fell by 19.5% compared to the Euro between June 2023 to June 2024.

Turkish performance along with better sales in its US sports betting contracts were in part counterbalanced by lower recorded revenue in Morocco as a result of the contract renewal, which has a smaller contract value due to its limited scope.

Looking at georgraphical regions, European revenue dropped by 40.2% to €30.4m, with Americas down 9.% to €104.0m. These declines were partially offset by 19.7% growth in its Other region – including Australia, New Zealand, South Africa, Turkey, Taiwan and Morocco – to €47.2m.

Gross gaming revenue (GGR) was up 1.1% to €165.3m, with its Turkish growth offsetting the challenges in Argentina. Improvements in Turkey also helped it to increase revenue by 3.1% in the second quarter.

Turkish expansion lifts expenditure Turning to outgoings, total operating expenses were up 18.0% year-on-year to €55.1m. This was mainly impacted by rising expenses in Bilyoner (Turkey) following the initiatives to strengthen its market position.

EBITDA amounted to €59.5m in the period, which was down by 5.3% year-on-year. The variance, Intralot said, was largely driven by pressures in Argentina and Morocco. On a yearly basis, EBITDA margin on sales posted a marginal decrease by 1.6pps, from 35.8% in 1H23 to 34.3% in the current period.

“Half year results confirm the company’s stable course and maintenance of key financial indicators at desired levels, in spite of FX headwinds and seasonality effects,” chairman Sokratis P. Kokkalis said. “Strengthened by the group’s improved financial position, the company continues to deploy and take live its new advanced lottery engine, Lotos X, and further developing the entire lottery technology ecosystem in developed markets such as Canada.

“At the same time, we are currently pursuing a large number of promising commercial opportunities in North America and Australia while renewing the trust and cooperation with existing important clients such as in The Netherlands and in Ireland.”

Intralot’s new CEO During the period, Intralot appointed Nikolaos Nikolakopoulos as its new chief executive in June. His arrival was announced with the group’s Q1 figures, which saw revenue fall 4.8%, but growth in net profit.

Intralot highlighted several reasons for the decline in revenue. Primarily, this was the result of lower revenue from licensed B2C operations in Argentina, led by the peso devaluation in late 2023. As such, revenue here was down €4.8m, or 43.2%.

Intralot also posted a 1.6% drop in revenue from technology and support services contracts across B2B and B2G. This, it says, is again mainly due to negative foreign currency translation in Argentina.

In contrast, in local currency, US activity remained at the same level year-on-year despite the unfavourable timing of jackpot occurrences, the impact of which was counterbalanced by strong growth in ilottery sales

There was, however, better news in terms of management contracts, with revenue rising by 8.8%. Intralot said this was driven by local market growth and market share gain in Turkey, despite the headwinds in Turkish lira.

During Q1, the group completed the refinancing of 2024 bonds through the issuance of a bond and a syndicated loan with five Greek banks.

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