Intralot Integrated Lottery Systems and Services — Underlying progress in Q124

Intralot (ASE: INLOT)

Last close As at 19/07/2024

EUR1.27

0.01 (0.79%)

Market capitalisation

EUR768m

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Research: Consumer

Intralot Integrated Lottery Systems and Services — Underlying progress in Q124

Intralot reported good underlying revenue growth in Q124, offset by broad-based unfavourable foreign exchange translation effects and some phasing. Our estimates are unchanged following the results. The company also announced the appointment of Nikolaos Nikolakopoulos as CEO. Mr Nikolakopoulos, who remains as CEO of the US subsidiary, Intralot Inc, takes the role from the incumbent chairman, Sokratis Kokkalis. The US is a key market for the company’s future growth aspirations, with plenty of opportunities to gain share in the next few years.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Consumer

Intralot

Underlying progress in Q124

Q124 results

Travel and leisure

20 June 2024

Price

€1.09

Market cap

€658m

Net debt (€m) at 31 March 2024 (excluding IFRS 16 liabilities of €15.8m)

337.8

Shares in issue

604.1m

Free float

45.5%

Code

INLOT

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.1)

(6.0)

82.7

Rel (local)

(4.0)

(7.5)

62.5

52-week high/low

€1.25

€0.57

Business description

Intralot Integrated Lottery Systems and Services is a leading global supplier of integrated systems and services for the worldwide gaming, lottery, sports betting and digital gaming industries.

Next events

H124 results

August 2024

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

Intralot is a research client of Edison Investment Research Limited

Intralot reported good underlying revenue growth in Q124, offset by broad-based unfavourable foreign exchange translation effects and some phasing. Our estimates are unchanged following the results. The company also announced the appointment of Nikolaos Nikolakopoulos as CEO. Mr Nikolakopoulos, who remains as CEO of the US subsidiary, Intralot Inc, takes the role from the incumbent chairman, Sokratis Kokkalis. The US is a key market for the company’s future growth aspirations, with plenty of opportunities to gain share in the next few years.

Year end

GGR*
(€m)

EBITDA**
(€m)

PBT**
(€m)

EPS**
(€)

EV/EBITDA (x)

P/E
(x)

12/22

343.9

122.9

16.3

(0.01)

8.0

N/A

12/23

348.6

129.5

26.1

0.01

7.6

163.5

12/24e

354.0

138.1

47.7

0.02

7.1

59.0

12/25e

378.9

151.5

70.2

0.04

6.5

26.8

Note: *GGR, gross gaming revenue. **EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Underlying revenue growth, negative forex

Intralot’s year-on-year revenue decline of €4.3m (4.8%) to €85.1m in Q124 included an identified negative translation effect from the devaluation of the Argentine peso (ARS/€227 at end-Q123 to ARS/€928 at end-Q124) of €6.7m, equivalent to a 7.5% change at the group level. The depreciation of most currencies of countries where Intralot operates versus the euro in Q124 indicates there were other unquantified negative foreign exchange effects, and therefore implies mid-single-digit underlying revenue growth in the period. Specifically, management highlights strong (+132% yo-y local currency) growth in Argentina, market share gains in Turkey and flat revenue in the US despite unfavourable jackpots. The absolute year-on-year decline in EBITDA of €3.6m, to €30.1m, appears to be entirely due to the translation effects of the Argentine peso devaluation, further investment in Turkey to drive market share, and the smaller scope of a renewed contract in Morocco, which offset very strong (c +40%) growth in Europe. The absolute decline in profitability coupled with an unfavourable working capital investment, which should reverse later in the year, led to lower absolute and relative (to revenue) free cash generation. As a result, the net debt position (excluding leases) increased marginally to c €338m (c €317m at end-FY23). In Q124 and following the period end, the company has redeemed and refinanced all of its debt obligations that had an FY24 maturity.

No change to estimates

Following the Q124 results, we have made no changes to our estimates; for FY24 and FY25 we expect EBITDA growth of c 7% and c 9%, respectively.

Valuation: Attractive versus our DCF valuation

The share price remains at a c 32% discount to our DCF-based valuation of €1.60 per share. With respect to multiples, Intralot’s FY24 EV/EBITDA of 7.1x is at a modest discount to the average multiple for the gaming technology peers of 7.5x, but at a premium for the median multiple of 5.7x.

Exhibit 1: Financial summary

€m

2019

2020

2021

2022

2023

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

409.2

292.9

335.3

343.9

348.6

354.0

378.9

Costs

(314.6)

(226.7)

(224.9)

(221.1)

(219.1)

(215.9)

(227.3)

EBITDA

 

 

94.5

66.2

110.4

122.9

129.5

138.1

151.5

Operating profit (before amort. and excepts.)

 

11.9

(2.3)

39.4

52.8

61.6

76.2

91.2

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(6.8)

(6.8)

(17.2)

(1.2)

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

5.1

(9.1)

22.2

51.6

61.6

76.2

91.2

Net Interest

(48.0)

(48.4)

(13.6)

(36.7)

(35.7)

(28.5)

(21.0)

JVS and associates

(17.5)

(1.5)

0.2

0.3

0.2

0.0

0.0

Exceptionals

(10.2)

(35.1)

28.2

14.6

7.4

0.0

0.0

Profit Before Tax (norm)

 

 

(53.6)

(52.2)

26.0

16.3

26.1

47.7

70.2

Profit Before Tax (reported)

 

 

(70.6)

(94.1)

37.1

29.8

33.6

47.7

70.2

Reported tax

(19.2)

(7.2)

(4.4)

(10.8)

(19.7)

(21.2)

(27.7)

Profit After Tax (norm)

(68.2)

(56.2)

23.0

10.4

10.8

26.5

42.5

Profit After Tax (reported)

(89.8)

(101.3)

32.7

19.0

13.8

26.5

42.5

Minority interests

(22.1)

(3.1)

(6.0)

(12.6)

(8.0)

(15.3)

(17.9)

Discontinued operations

7.7

(1.8)

(9.2)

5.6

0.0

0.0

0.0

Net income (normalised)

(90.3)

(59.4)

16.9

(2.2)

2.8

11.2

24.6

Net income (reported)

(104.2)

(106.3)

17.5

11.9

5.8

11.2

24.6

Average Number of Shares Outstanding (m)

147.8

147.8

148.3

249.5

416.0

604.1

604.1

EPS - normalised (c)

 

 

(61.10)

(40.19)

11.42

(0.89)

0.67

1.85

4.07

EPS - normalised fully diluted (c)

 

 

(61.10)

(40.19)

11.42

(0.89)

0.67

1.85

4.07

EPS - basic reported (€)

 

 

(0.71)

(0.72)

0.12

0.05

0.01

0.02

0.04

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

459.0

371.7

376.5

381.0

332.5

319.6

313.3

Intangible Assets

242.9

202.0

204.3

208.6

182.3

170.2

159.1

Tangible Assets

168.7

134.3

123.2

113.8

91.6

90.8

95.6

Investments & other

47.4

35.4

49.0

58.6

58.6

58.6

58.6

Current Assets

 

 

338.5

277.1

231.1

236.1

256.2

271.7

287.7

Stocks

35.6

25.7

18.7

23.9

24.4

24.7

26.5

Debtors

131.7

151.4

105.0

109.8

119.9

121.8

130.3

Cash & cash equivalents

171.1

100.0

107.3

102.4

111.9

125.2

130.9

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(135.7)

(370.4)

(115.9)

(105.7)

(320.7)

(319.8)

(323.0)

Creditors

(91.8)

(89.5)

(89.2)

(78.3)

(61.5)

(60.6)

(63.8)

Tax and social security

(3.1)

(3.4)

(5.6)

(0.8)

(3.9)

(3.9)

(3.9)

Short term borrowings and leases

(37.9)

(274.9)

(16.5)

(22.5)

(251.9)

(251.9)

(251.9)

Other

(2.9)

(2.6)

(4.6)

(4.2)

(3.4)

(3.4)

(3.4)

Long Term Liabilities

 

 

(754.9)

(497.6)

(607.1)

(599.1)

(225.9)

(218.3)

(200.2)

Long term borrowings and leases

(727.4)

(476.2)

(588.0)

(570.4)

(193.2)

(175.0)

(148.6)

Other long-term liabilities

(27.6)

(21.5)

(19.2)

(28.8)

(32.7)

(43.3)

(51.6)

Net Assets

 

 

(93.2)

(219.1)

(115.5)

(87.7)

42.1

53.3

77.8

Minority interests

0.2

3.7

8.0

20.2

17.8

17.8

17.8

Shareholders' equity

 

 

(93.0)

(215.4)

(107.5)

(67.5)

59.9

71.1

95.7

CASH FLOW

Operating Cash Flow

19.8

(27.1)

100.4

105.4

101.5

109.6

130.5

Working capital

(12.1)

(8.1)

(12.3)

(16.7)

(11.2)

(3.1)

(7.1)

Exceptional & other

67.9

87.4

15.6

19.8

29.5

28.5

21.0

Tax

(14.3)

(14.5)

3.8

(12.2)

(7.2)

(10.6)

(19.4)

Net operating cash flow

 

 

61.3

37.7

107.6

96.3

112.5

124.3

125.0

Capex

(55.0)

(35.9)

(22.9)

(26.5)

(29.7)

(45.0)

(50.0)

Acquisitions/disposals

98.4

(3.5)

10.3

(125.1)

(2.2)

0.0

0.0

Net interest

(44.0)

(43.8)

(54.4)

(38.5)

(35.1)

(26.5)

(19.0)

Equity financing

(10.6)

0.0

0.1

128.9

130.1

0.0

0.0

Dividends

(41.7)

(8.5)

(6.5)

(3.7)

(4.5)

(15.3)

(17.9)

Other

(1.7)

(11.9)

(23.1)

(32.6)

(148.5)

(24.2)

(32.4)

Net Cash Flow

6.8

(65.8)

11.1

(1.3)

22.5

13.2

5.7

Opening net debt/(cash) including leases

 

615.3

594.1

651.1

497.2

490.5

333.2

301.7

FX

1.9

(5.3)

(3.8)

(3.7)

(12.9)

0.0

0.0

Other non-cash movements

(29.8)

128.1

(161.3)

(1.8)

(166.8)

(44.7)

(37.8)

Closing net debt/(cash)

 

 

594.1

651.1

497.2

490.5

333.2

301.7

269.6

Source: Intralot accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Intralot and prepared and issued by Edison, in consideration of a fee payable by Intralot. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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New Zealand

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United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Intralot and prepared and issued by Edison, in consideration of a fee payable by Intralot. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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