2018 High Yield Milan Credit Conference Credit Suisse

Transcription

1 2018 High Yield Milan Credit Conference Credit Suisse 1 March 2018

2 Disclaimer This presentation has been prepared by Gamenet Group S.p.A. (the "Company" and, together with its subsidiary the Group ) and is being furnished for information purposes only in order to generally present the Group and its business. This presentation does not purport to be completed or exhaustive. This presentation does not constitute an offer or invitation to subscribe for or purchase, or a solicitation of any offer to purchase or subscribe for any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. This presentation is being communicated to and is directed only to (i) persons to whom it may be lawful to communicate such presentation; and (ii) persons to whom it may be required by law or regulation to disclose such information (all such persons being referred to as relevant persons). This presentation is only directed at relevant persons and must not be acted on or relied on by persons who are not relevant persons. 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Any forward-looking statements in this document are subject to a number of risks and uncertainties, many of which are beyond the Company s control, that could cause the Company s actual results and performance to differ materially from any expected future results or performance expressed or implied by any forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements as a prediction of actual results. To the extent applicable, the industry and market data contained in this document has come from official or third-party sources. Third-party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the fairness, quality, accuracy, relevance, completeness or sufficiency of such data. The Company has not independently verified the data contained therein. In addition, certain of the industry and market data contained in this document come from the Company s own internal research and estimates based on the knowledge and experience of the Company s management in the market in which the Company operates. Such research and estimates, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this document. Although Gamenet Group S.p.A. has obtained the information provided from sources that should be considered reliable, it cannot guarantee its accuracy or completeness. The information provided is purely of an indicative nature and is subject to change without notice at any time. 1

3 Team presenting today Guglielmo Angelozzi CEO Mario Bruno CFO Josef Mastragostino Investor relator Joined Gamenet Group in August 2014 Chairman of Acadi (1) -Confindustria association IGT (Senior Vice President Gaming Machines and Online) Bain & Company Accenture Degree in Engineering from Bologna University and MBA from SDA Bocconi Joined Gamenet Group in October 2012 Carlson Wagonlit (CFO Italy) Exxon Mobil (Europe Downstream Financial Reporting Manager) Degree in Business and Economics from LUISS University Joined Gamenet Group in November 2017 IGT (Director Investor Relations) TREVI Group (Investor Relations Manager) Lottomatica Investor Relations BBA from City University of New York, MS from LUISS University and MBA from Cornell University (1) Associazione Concessionari Apparecchi da Intrattenimento, with Confindustria Servizi Innovativi e Tecnologici. 2

4 Gamenet Group overview # 3 operator in Italy Distribution network 42,573 AWP (1) 12,299 4, ,292 VLT (1) Bet bn Revenue m EBITDA m 39 2, Betting PoS 65 Gaming Halls Bet CAGR % Revenue CAGR % EBITDA CAGR % 13,645 2, ,575 Street Ops (2) Multi-product integrated player 25 2,566 Retail & Street Operations 16% Betting & Online 18% Contribution margin breakdown 130m VLT 50% 16,629 1, ,417 AWP 16% Source: Company information as of 30 September Note: #3 operator based on 2016PF revenues. Net Gaming Revenues (NGR) share based on segments in which Gamenet operates. Contribution margin as of 2016PF. (1) Operating VLT and AWP for which Gamenet S.p.A. is the concessionaire. (2) AWP owned by Gamenet Group. 3

5 Gamenet Group what sets us apart 1 Italy is the largest gaming market in Europe, growing, highly regulated and fragmented 2 Leading operator in the most attractive segments 3 Multi-product integrated company with proven track record of growth 4 Growth strategy focused on capturing and increasing share of the value chain 4

6 1 The largest gaming market in Europe Gross Gaming Revenues (GGR) (1) 2016 by country Italian GGR breakdown (2016) ( bn) 18.8 (3) 18.4 Bingo 2% Lotteries 33% bn (3) AWP 40% 8.6 Online 3% Betting 7% VLT 15% Segments in which Gamenet Group operates worth c. 12bn of GGR and c. 6bn of Net Gaming Revenues (NGR) (2) Gamenet is the 3rd largest player in Italy with > 600m revenues 2016PF Source: H2 Gambling Capital (data publication as of 28-Sep-17), MAG Consulenti Associati srl 2017 Estimation on ADM and Market data. (1) Gross Gaming Revenues calculated as total bet minus payout as winnings. (2) Net Gaming Revenues calculated as total bet minus winnings minus taxes. (3) Based on H2 Gambling Capital excluding Interactive Offshore and Casinò Land ( 0.8bn). 5

7 1 Highly regulated market around the concessionaires Regulator Providers Street operation companies (AWP) Concessionaires Retail Online Bet - Payout = GGR - Taxes = NGR Players 6

8 1 Growing market and a key source of revenue for the State GGR and NGR growth outpaces Italian GDP and the trend is expected to continue Evolution of GGR in Italy ( bn) GGR CAGR CAGR % Italian 1.4% GDP 18.8 GGR expected trend in Italy ( bn) % 26% of Italian public deficit % NGR Tax 2017E 2018E 2019E 2020E 2021E 2022E State Shift needs the sector to prosper: tax and operator growth aligned towards professional management of gaming in the country Source: ADM, MAG Consulenti Associati srl 2017 Estimation on ADM and Market data, Company Information, Istat, H2 Gambling Capital (data publication as of 28-Sep-17). 7

9 1 Highly fragmented market AWP VLT Betting Online Concessionaires m m 185 (1) 92 Street operation companies 3,750 1,144m Retail (PoS) 85,025 4, m 9,660 (2) +5,340 rights to be auctioned in 2018 Gamenet key strategic priorities NGR breakdown across the value chain Opportunity of vertical and horizontal integration Source: ADM, MAG Consulenti Associati srl 2017 Estimation on ADM and Market data. (1) Sport betting concessionaires. (2) 5,470 Shops and 4,190 Corners. 8

10 1 with few large operators Revenues 2016 ( m) 1,550 (1) (2) Offers a unique combination: Low leverage High growth Attractive dividend Strong cash flow Proven and distinctive business model Gamenet is the 3 rd largest gaming operator in Italy Long tail of smaller operators Source: Public filings. Note: Financials reported under IFRS, except for HBG, Admiral, Cirsa and Eurobet which are reported under Italian GAAP. (1) Includes only Italy; converted at exchange rate of 0.88 USD/EUR. (2) 2016PF data including 12 months contribution of Intralot. Sisal Payment and Services business unit. 9

11 2 Gamenet: leading operator in the most attractive gaming segments Segment % on total GGR GGR CAGR GGR CAGR Multi-provider concession Concession expiration Gamenet market share Catalysts AWP 40% 6.5% 0.5% % (3) Reduction of AWP by 35% Introduction of remote AWP VLT 15% 5.6% 1.2% % (3) Acquisition of gaming halls Change of distribution mix in favour of dedicated venues Betting (2) 7% 8.3% 2.6% 2016 (1) 11% (4) Increase betting licenses Online games 3% 7.4% 1.6% 2021 (1) 1% (5) Leverage retail network to push online (offer gaming accounts activations / top-ups) Segments in which Gamenet Group operates Source: Company information, MAG Consulenti Associati srl 2017 Estimation on ADM and Market data, H2 Gambling Capital (data publication as of 28-Sep-17). (1) Retail betting concessions expired on 30 June 2016; however 2016 Stability Law and ADM recent regulatory acts allowed concessionaires to continue to operate their concessions. Certain online concessions have expired in June 2016, whereas others are due to expire in (2) Retail and Online Betting, including sports betting, horse betting and virtual betting. (3) Market share based on 2016PF bet. (4) Market share based on 2016PF bet. Refers to retail sports betting. (5) Market share based on 2016PF GGR. Refers to online sport betting. 10

12 3 Rapidly grown into an integrated multi-product player Contribution margin 2014 (1) Contribution margin 2016PF (1) AWP 22% Betting & Online 2% Retail & Street Operations 1% 89m Entry in Street Operations Entry in the medium and highend retail segment Retail & Street Operations 16% 130m VLT 50% VLT 75% 2015 Increased presence in betting through Intralot acquisition 2016 Betting & Online 18% AWP 16% Provider Concessionaire Street operation companies Retail Provider Concessionaire Street operation companies Retail Source: Company information. (1) Breakdown gross of unallocated items and eliminations. 2016PF includes Intralot for 12 months on IFRS basis. 11

13 4 Growth strategy A INCREASE PROFITABILITY (REDUCTION OF EXTERNAL DISTRIBUTION COSTS) AWP VLT DISTRIBUTION INSOURCING EXPLOIT AWP-R INCREASE THE NUMBER OF GAMING HALLS B INCREASE REVENUES BETTING & ONLINE INCREASE THE NUMBER OF BETTING LICENSES C EXTERNAL GROWTH M&A OPPORTUNITIES 12

14 Distribution costs ( 266m) Distribution costs 4 Growth strategy: impact on Gamenet s P&L A AWP A VLT B BETTING & ONLINE Revenues (1) 299mn Revenues (1) 212m Revenues (1) 70m Other Cost ( 12m) Other Cost ( 25 m) Other Cost ( 9m) Retail PoS Retail PoS ( 126m) Retail PoS ( 38m) Street operation companies Contrib. Margin ( 65m) Contrib. Margin ( 24m) Contrib.Margin ( 20m) INCREASE PROFITABILITY (REDUCTION OF EXTERNAL DISTRIBUTION COSTS) INCREASE PROFITABILITY (REDUCTION OF EXTERNAL DISTRIBUTION COSTS) INCREASE REVENUES DISTRIBUTION INSOURCING EXPLOIT AWP-R INCREASE THE NUMBER OF GAMING HALLS INCREASE THE NUMBER OF BETTING LICENSES Source: Company information (1) Net Gaming Revenues excludes "other revenues" (EUR 0.3mn for AWP, EUR 3.7mn for VLT, EUR 0.6 mn for Betting &Online). 13

15 4 Growth strategy: a proven track record Street Operations: from the infrastructure set-up to the distribution insourcing more to come Retail: a professional network built in the last three years Retail Betting: becoming a leading player leveraging on Intralot acquisition Licences on betting (#) Infrastructure set-up M&A 3,256 (1) AWP ,246 (1) AWP insourced 65 gaming halls 15 betting points M 2017 (2) 3,439 AWP insourced 1,033 AWP 1,360 VLT Dec Sep Pipeline >7,000 AWP Operating licences Gamenet Operating licences Intralot Non operating licences Note: Company data. (1) Completed by June (2) From January 1st to November 1st (included). 14

16 CONC STREET OPERATORS NEW MODEL POS OLD MODEL A 4 Increase profitability: AWP Current AWPs value chain breakdown REMUNERATION TO THE VALUE CHAIN: NGR = 2,790m 1,507m Distribution insourcing = EBITDA Recapture STREET OPERATOR Owns machines Has commercial relationship with PoS Provides field services (technical assistance and logistics) Gets REVENUES SHARING MECHANISM 41% of NGR DISTRIBUTION INSOURCING / AWP-R SERVICE COMPANY 1,144m Will own machines Will have commercial relationship with PoS + Will provide field services (technical assistance and logistics) 140m PoS manager fee AWP manager fee Will get a % EBITDA of NGR Will get a % of NGR Concessionaire Source: ADM, company estimates, MAG Consulenti Associati srl 2017 Estimation on ADM and Market data. (1) 2016 average payout for the market. (2) 17.5% PREU + 0.3% concession fee. 15

17 CONCESSIONAIRE POS A 4 Increase profitability: VLT Current VLTs value chain breakdown Acquiring gaming halls REMUNERATION TO THE VALUE CHAIN: NGR = 1,433M Current VLT market set-up Highly fragmented market composed of ca. 4,934 points of sale, mostly no professionals ("moms and pops") Fairly active market with various buying opportunities 860m Currently Gamenet holds 2.0% of market share in the retail segment with 65 owned gaming halls Value recovery opportunity 60% of VLT value chain share to be captured through acquisition of further gaming halls (out of 8,570 licenses Gamenet VLTs, only 16% are installed into proprietary halls) Increase machine productivity moving them into proprietary halls (Gamenet has 20% higher productivity in its gaming halls) 573m Strategic Opportunity Strengthening the concessionaire's role in the VLT value chain through a creation of owned professional network Source: ADM, company estimates, MAG Consulenti Associati srl 2017 Estimation on ADM and Market data. (1) 2016 average payout for the market. (2) 5.5% PREU + 0.3% concession fee. 16

18 B 4 Increase revenues: Betting & Online # 750 BETTING LICENSES OWNED of which 480 Shops 270 Corners # 700 ACTIVE (1) (~93%) New Tender expected end of 2018 Goal to be achieved Acquisition of further betting licenses in order to increase efficiency of the current structure Increase market share Rights offered c. 15,000 rights to be auctioned vs the overall 9,660 currently in the market without relevant new entrants Very low renewal risk Envisaged Capex Cost of betting licenses equal to 32K for betting shops and 18K for betting corners Base cost to renew current licenses amounts to c. 20m (excl. new licenses and tender premium) Source: Company information. (1) As of 30 June

19 C 4 External growth The market is currently very INEFFICIENT and highly FRAGMENTED ROOM FOR CONSOLIDATION TO ACT AS CONSOLIDATOR Target Segment Gaming machines Betting & online Increase the market share Opportunity Synergies extraction potential in line with Intralot track record (EUR 11.8mn of synergies vs EUR 10.4mn of Intralot Italia EBITDA as of FY 16) Source: Company information. (1) As of 30 June

20 Key financial highlights Revenues (1) Contribution margin (2) EBITDA ( m) ( m) ( m) Margin (%) (3) Margin (%) (3) % 19% 22% 22% 12% 13% 12% 13% A 2015A 2016PF 9M A 2015A 2016PF 9M A 2015A 2016PF 9M 2017 AWP VLT Betting & online Retail & street operation Consistent revenues and EBITDA growth leading to a strong cash-flow generation Dividend policy: i) 18m dividend paid in 2018; ii) in 2019 and 2020 approximately 30% of the previous year consolidated net profit of the group, gross of the consolidated amortization of tangible and intangible fixed assets Source: Company information. Note: 2016PF data include 12m contribution of Intralot and debt refinancing. (1) Including infra-segment revenues and excluding unallocated. Total revenues net of unallocated / consolidation effect equal to 502m in 2014A, 473m in 2015A, 607m in 2016PF and 454m in 9M (2) Contribution margin including unallocated / eliminations equal to 89m in 2014A, 91m in 2015A, 130m in 2016PF and 100m in 9M (3) Calculated on net revenues. 19

21 Levered cash flow, capex and net debt Levered cash flow (1) Capex (2) Net debt ( m) ( m) ( m) Net debt / EBITDA (x) 2.8x 2.4x 2.3x 2.0x (3) A 2015A 2016PF 9M A 2015A 2016PF 9M 2017 Maintenance Expansionary - Other Expansionary - Vertical Integration 2014A 2015A 2016PF 9M 2017 Levered free cash flow provides flexibility to sustain growth / expansion and remunerate shareholders Source: Company information. Note: 2016PF data include 12m contribution of Intralot and debt refinancing. (1) Calculated as EBITDA maintenance capex net cash financial charges cash taxes tax adjustment (lower D&A). (2) Excluding cash at closing related to acquisitions. (3) Based on LTM EBITDA at September 2017 equal to c. 77m. 20

22 Gamenet Group what sets us apart 1 Italy is the largest gaming market in Europe, growing, highly regulated and fragmented 2 Leading operator in the most attractive segments 3 Multi-product integrated company with proven track record of growth 4 Growth strategy focused on capturing and increasing share of the value chain 21

23 Q&A 22

24 Contacts Gamenet Group S.p.A. Corso d Italia, Rome Italy Investor Relations Josef Mastragostino ir@gamenetgroup.it