Intralot said that reducing its net debt in 2023 would allow them to take advantage of “significant” opportunities all over the world. This is despite reporting a decline in revenues for the entire year.
The revenue for the twelve months ending 31 December 2023 was EUR364.0m ($390.5m/PS311.3m), a 7.3% decrease year on year. Intralot stated that this is primarily because of the suspension of their Malta license.
Intralot’s spending increased during the past year. The combination of lower revenues and this resulted in a decrease in net profit. However, EBITDA increased on an annual basis.
Sokratis Kokokalis, the chairman and CEO of the company, was generally positive when he reflected on this year. Kokkalis spoke of “steady” growth in the operating profit and also referred to the debt reduction – which fell 32.1%, or EUR333.2m.
Kokkalis said that Intralot’s debt will be lower, allowing it to explore new growth opportunities.
Kokkalis stated that “2023 saw a steady increase in the operating profit, with a strong cash flow. We also achieved our strategic goals for margin expansion, debt reduction and deleveraging.”
The company is now in a strong position to take advantage of global business opportunities, using its competitive and modern technology.
B2C decline hits Intralot
When analyzing revenue in 2023 by segment, the decline in B2C revenues was responsible for most of it. B2C revenues from licensed activities also fell 68.2%, to EUR28.4m. This represents 7.8% of total revenue.
Intralot stated that the primary reason for its B2C drop was due to the expiration date of their licence on Malta, which is early July 2022. This contributed to the decline in EUR43.9m.
This was down EUR17,0m. The group noted that B2C revenue in Argentina was down EUR17.0m.
B2B Growth fails to counterbalance B2C Decline
Intralot saw growth in its B2B segment, which includes management services and technology support. This growth was not sufficient to compensate for the B2C revenue decline.
B2C Management revenue increased by 43.2%, to EUR72.4m. This was largely due to growth in Turkey. Intralot cited the growth of online gaming in Turkey, along with the success on the local market for sports betting. Morocco and US revenues also increased year-on-year.
Intralot’s main segment, technology and support services grew by 4.1% in revenue to EUR 263.3m. Intralot attributed this to the local growth of Croatia’s market, as well as a slight increase in US.
The new contract, which was signed in the middle of 2023, with Taiwan’s Public Welfare Lottery triggered a 9.8% increase in revenue in other countries. Intralot noted a small drop in Australia revenues due to the negative movement of foreign currency.
Intralot’s focus remains on the Americas
Intralot has confirmed that the Americas are its main source of revenues. In 2023, the revenue for this region was EUR210.3m. This is 10.6% less than 2022.
Europe’s revenue also fell 6.0%, to EUR116.1m. The revenue from other markets, however, increased 30.7%, to EUR91.4m. This helped to offset the declines in some areas. Intralot discounted EUR53.7m of cross-segment revenue, which resulted in the EUR364.0m total.
Lotteries will account for 53.4% in total revenues by 2023. Video lottery terminals accounted for 11.8% and sports betting 20.5%. Another 14.3% was from IT-related products and services.
Net profit drops 7.6%
Operating expenses are expected to increase 14.3% by 2023, reaching EUR114.1m. The good news is that other costs were lower.
Depreciation, amortisation and interest expenses were down 2.9% to EUR35.7m.
Pre-tax profits amounted at EUR33.6m in the year under review, an increase of 12.8%. Intralot didn’t disclose how much it had paid in tax, but revealed that its net profit after taxes and minorities interest (NIATMI), which was EUR5,8m last year, was down 7.6%.
But it wasn’t all bad. EBITDA increased by 5.4% to EUR129.5m, and the earnings before interest and taxes increased by 19.3% to EUR61.6m.
Losses due to intralots in the fourth quarter
Intralot’s final quarter was not a good one. The revenue was down 7.7% at EUR84.0m mainly because of the changes in Argentina’s economy.
The operating costs increased by 27.2% to EUR37.6m while the depreciation and amortization expenditures increased by 18.8%, reaching EUR19.4m. However, there was a small decrease in interest and associated costs, which fell to EUR7.7m.
The pre-tax profits were EUR1.4m, 86.1% lower than the prior year. Intralot did not disclose tax details, but said that NIATMI was 125.9% less at EUR3.2m for the Q4 period.
EBITDA also fell 18.3% in the third quarter to EUR28.4m, and earnings before interest and taxes dropped by 50.7% to EUR9.1m.
Future prospects
In recent weeks, Intralot’s start to 2024 has been enhanced by the announcement of a number of contracts with its existing partners.
Magnum Corporation, a Malaysian gaming firm, has renewed its agreement with the company. This partnership will be extended beyond the 17 year mark. Other recent deals include an extension with Morocco’s La Marocaine des Jeux et des Sports.
The deals are in addition to those made during 2023. For example, a partnership was formed with BCLC for sports betting. Kokkalis’s remarks about pursuing “significant business opportunities” suggest that more deals are in the pipeline.
Intralot has also recently completed a merger with its 100% owned subsidiary, ‘Betting Company Singular Member S.A.
There are some questions regarding the way the group has reported its receivables. Receivables are a way to recognise revenue even before the business generates it.
Intralot reported an EUR18.5m rise in 2023 receivables, as compared with EUR6.8m the year before. The trade and short-term receivables also increased to EUR119.9m from EUR109.9m.
Intralot’s capital issues were addressed by the payment of senior notes at 5.250% due in September. The bond issuance of EUR130.0m and the EUR100.0m loan provided by a group of Greek banks enabled this.
Kokkalis bought 400,000 registered common shares on the day that bonds were traded, and another 420,000 the next day. The purchase of 400,000 common registered shares on the same day as the trading of bonds signals Kokkalis’ confidence in its future.
