PRESS RELEASE THE BOARD OF DIRECTORS APPROVES THE RESULTS AS OF JUNE 30, 2018

Transcription

1 PRESS RELEASE THE BOARD OF DIRECTORS APPROVES THE RESULTS AS OF JUNE 30, % EBITDA GROWTH IN THE FIRST HALF OF 2018 (EURO 43.6 MILLION) VS FIRST HALF OF 2017, LAST TWELVE MONTHS (LTM) EBITDA AT EURO 89.3 MILLION NET FINANCIAL DEBT/EBITDA AT 1.8x, IMPROVING VS 31 DECEMBER 2017 Bet of Euro 3.5 billion, growing with respect to 1H2017 (+ 1.0%) Consolidated revenues of Euro million, growing by 3.5% before PREU increase, compared to Euro million in 1H2017 (-2.3%) EBITDA of Euro 43.6 million, % compared to Euro 36.3 million in 1H2017, LTM at Euro 89.3 million Net result equal to Euro -5.6 million compared to Euro -1.3 million for 1H2017. The Net Result of 1H2018 would have been positive and equal to Euro 4.9 million, excluding the extraordinary items, mainly related to a tax audit settlement in the first quarter and the costs incurred for the refinancing of the bond, for a total of Euro 10.5 million Leverage at 1.8x improving compared to 31 December 2017 and in line with 1H2017. The net financial position is equal to Euro million compared to Euro million at 31 December 2017 and to Euro million at 1H2017, notwithstanding ca. Euro 18.0 million paid for the dividend in 2Q2018, costs for the bond refinancing, and extraordinary costs related to the tax audit settlement Following the end of the first half, Gamenet Group announced the agreement to acquire 100% of GoldBet. With reference to the transaction, Gamenet was assisted by Unicredit, Nomura and Intermonte as financial advisor Rome, August 1, 2018 The Board of Directors of Gamenet Group S.p.A. (MTA; Bloomberg ticker: GAME: IM), a company listed on the STAR segment of the Mercato Telematico Azionario organized and managed by Borsa Italiana S.p.A., met today and approved the Consolidated Interim Financial Report as of June 30, The main economic and financial data of the Consolidated Interim Financial Report are shown below. Main financial and economic indicators ( million) For the semester ended June 30, Change (Euro) % Revenues (7.1) -2.3% EBITDA % EBIT % Profit before tax (2.8) 2.2 (5.0) <100% Net profit (loss) for the period (*) (5.6) (1.3) (4.3) >100% Net Financial Position (161.7) (139.6) (22.1) 15.8% (*) Net of extraordinary items, mainly attributable to the costs for the refinancing of the bond and the tax audit settlement which took place during the first quarter, totaling Euro million, the Net result is equal to Euro 4.9 million for the semester ended June 30,

2 EBITDA is defined as net profit (or loss) for the year adjusted for: (i) income tax expense, (ii) finance expenses, (iii) finance income, (iv) impairment of financial assets, (v) amortization, depreciation and impairment of tangible and intangible assets; (vi) reclassification to profit or loss of multiannual prepayments; (vii) acquisition related transaction costs; (viii) corporate restructuring costs and early retirement incentives; (ix) income and expenses that, by their nature, are not reasonably expected to recur in future periods. EBITDA and EBIT are alternative performance measures. As such, they are not recognised IFRS measures and may, therefore, not take into account IFRS requirements in terms of recognition, measurement and presentation. We believe that EBITDA and EBIT, both commonly used by gaming industry analysts and investors, help explain changes in operating performance and provide useful information regarding the Company s debt management capacity. The positive trend of betting and online continues. We are reaping the benefits of our distribution insourcing and vertical integration strategy in retail, which has contributed greatly to the increase in profitability. Furthermore, gaming machines show a positive trend, with a significant improvement in unit profitability, commented Guglielmo Angelozzi, CEO of Gamenet Group. Overall the results of the first semester show a clear trajectory for the whole year. Finally, we are very satisfied with the recent agreement to acquire 100% of GoldBet which further strengthens our leadership in Italy and transforms us into an operator of relevance on a European scale. Key developments and events of Gamenet s Group business during the first half of 2018: Bet at Euro 3.5 billion, with particularly positive contributions from online, AWPs and VLTs; Positive completion of the second and final phase of the mandatory AWP reduction (Bet +2.4% vs H1 17; +2.6% in Q1 18 vs Q1 17; +2.3% in Q2 18 vs Q2 17); Acceleration of the distribution insourcing strategy from 6,225 directly owned AWPs as of June 30, 2017 to 9,942 AWPs as of June 30, 2018 and of the downstream integration of the Retail segment (69 gaming halls directly managed); Optimization of the betting network with an increase of 1.3% in the number of operating rights and further improvement of the offering with the introduction of new and unique betting formats ( Record Bet and Special Bet ); further enlarged the online casino games offering. Consolidated Results as of June 30, 2018 Consolidated Revenues, before the PREU increase, grew 3.5%. The Group s total reported revenues (including PREU) amounted to Euro million compared to Euro million at 30 June 2017 (- 2.3%). The Betting and Online segment grew (+ 28.3%). The following table shows the breakdown of revenues by operating segment as of June 30, 2018 and June 30, For the semester ended June 30, Change ( thousand) 2018 % of revenues 2017 % dei ricavi (Euro) % AWP 139, % 152, % (12,748) -8.3% VLT 102, % 105, % (3,041) -2.9% Betting and Online 45, % 35, % 10, % Retail and Street Operation 8, % 10, % (1,437) -14.2% Retail and Street Operation (16) 0.0% (62) 0.0% % Totale 297, % 304, % (7,055) -2.3% Group EBITDA as of June 30, 2018 increased to Euro 43.6 million from Euro 36.3 million in 2017, an increase of 20.0%. The increase in EBITDA was due to the positive results recorded by sports betting, as well as by the excellent continuation of the distribution insourcing strategy. Group EBIT as of June 30, 2018 was Euro 14.7 million growing if compared to Euro 10.1 million of the same period of the previous year. Net financial expenses as of June 30, 2018 amounted to Euro 17.5 million and show an increase of Euro 9.6 million compared to the amount of Euro 7.9 million in the same period of the previous year. The increase was due to the refinancing of the high yield bond in April (for a total principal of Euro 225 million, with maturity in 2023 and interest set at the three-month Euribor - with a 0% floor - plus 2

3 3.750% per annum), which resulted in both costs relating to the early reimbursement of the bonds issued in 2016 (for about Euro 6.0 million) that were due to mature in 2021 as well as the write-off of the residual amortized cost of such bonds (for about Euro 4.1 million). Profit before taxes amounted to Euro -2.8 million compared to Euro 2.2 million in the previous year. The Net result for the first half of 2018 was Euro -5.6 million, compared to Euro -1.3 million for the same period of the previous year. The Net result would have been Euro 4.9 million excluding the extraordinary components for the period, mainly related to the tax audit settlement relating to the years which took place during the first quarter and to the costs incurred for the refinancing of the bond, for a total of Euro 10.5 million euro. The Net financial position at 30 June 2018 was Euro million compared to Euro million at 31 December 2017 and Euro million at 30 June The consolidated net leverage ratio (Net Financial Position/LTM EBITDA) was 1.8x, a slight improvement with respect to December 2017 and in line with the first half of 2017 notwithstanding the dividend payment of 2Q 18, the costs relating to the bond refinancing and the tax audit settlement. Operating segments: KPI, Revenues and Contribution Margin AWP For the semester ended June 30, ( in millions, except non-financial information and percentages) Revenues Contribution Margin Number of AWPs in operation as of the period end 29,505 41,675 Average number of AWPs in operation for the period 35,760 40,891 AWP Bet (1) 1, ,300.5 Average AWP PREU (as percentage of bet) 19.0% 18.0% (1) The figure does not include the bets generated by gaming halls connected to other concessionaires, amounting to Euro million, which are included in the Retail & Street Operations segment. As of June 30, 2018, the average number of operating machines was 35,760, down 29.2% compared to the same period of the previous year following the completion on April 30, 2018 of the 35% market reduction in the number of operating permits. Such reduction did not, however, impact bet which increased by 2.4%, amounting to Euro 1,332.2 million for the six months ended June 30, 2018 from Euro 1,300.5 million of the same period last year. Average productivity per machine also increased by 17.1% (+25.2 average productivity in Q2 18). Revenues at 30 June 2018 amounted to Euro million, compared to Euro million at 30 June 2017 (-8.3%), mainly due to the impact of the increase in the PREU from 17.5% at 19.0%, starting from 24 April 2017 (for Euro 12.5 million). The positive impact of the increased bet was offset by a temporary increase in payout that will be reversed by the end of the year; (it is recalled in this regard that AWP devices must guarantee winnings - payout of 70%, in an unpredictable way over a cycle of a maximum of 140,000 games and therefore small, temporary differences are possible). Following the sharp reduction in distribution costs, which decreased from Euro million to Euro million (-11.3%), the segment's contribution margin increased by 23.3% from Euro 11.5 million to Euro 14.2 million, representing approximately 4.8% of consolidated revenues and 17.9% of the Group s total Contribution Margin. It should be noted that the reduction in distribution costs is mainly attributable to the distribution insourcing strategy. 3

4 VLT For the semester ended June 30, ( in millions, except non-financial information and percentages) Revenues Contribution Margin Number of VLT licenses 8,570 8,570 Average number of VLTs in operation for the period 8,337 8,266 Number of VLTs in operation as of the period end 8,327 8,384 VLT in operation as percentage of VLT rights 97.2% 97.8% VLT Bet (1) 1, ,591.6 Average VLT PREU (as percentage of bet) 6.0% 5.7% (1) The figure does not include the bet generated by gaming halls connected to other concessionaires amounting to Euro 98.2 million, which are included in the Retail & Street Operations segment. As of June 30, 2018, the Group s VLT segment held 8,570 licenses. The average number of operating machines in the first half-year was 8,337, an increase of 0.9% compared to 8,266 in the same period of the previous year. The VLT bet increased slightly compared to the same period of the previous year from Euro 1,591.6 million to Euro 1,620.0 million (+ 1.8%; +3.5% in Q2 18). Segment revenues amounted to Euro million for the six months ended June 30, 2018, compared to Euro million for the period ended at June 30, 2017 (-2.9%). Such decrease was mainly due to the impact of the increase in the PREU from 5.5% to 6.0% from 24 April 2017 (Euro 5.1 million), partially offset by the slight reduction in payout (a positive impact of Euro 0.2 million) and positive impact (Euro 1.9 million) of the higher bet. The Contribution Margin in the six months ended June 30, 2018 was Euro 32.7 million, approximately 11.0% of total consolidated revenues and 41.3% of the Group s total contribution margin, an increase of 6.0% (Euro 1.8 million) with respect to the same period in the previous year. Such increase was mainly due to the positive impact of the reduction in platform costs following recognition of a VAT credit amounting to Euro 2.4 million, reflecting the decision of the court of first instance to accept Gamenet S.p.A. s VAT reimbursement claim in respect of the years Betting and Online For the semester ended June 30, ( in millions, except non-financial information and percentages) Revenues Contribution Margin Number of licenses/concessions (1) Number of active points of sale (shops and corner) Average number of points of sale in operations (shops and corner) Total retail bet Average bet per point of sale for the period Total online bet (1) 742 rights do not include the 54 licenses related to horse racing (58 in 2017) Bet increased by 1.1% compared to the same period in the previous year (from Euro million in the first half of 2017 to Euro million in the first half of 2018). The increase was mainly due to growth in the online Betting segment, where bet increased from Euro million in the six months ended June 30, 2017 to Euro million in the six months ended June 30, 2018, an increase of 4.6%. The network of operating points of sale as of June 30, 2018 comprised 400 betting shops and 288 betting corners. Total revenues in the Betting and Online segment amounted to Euro 46.0 million for the period ended June 30, 2018, % compared to Euro 35.8 million for the period ended June 30, The segment benefited in particular from the positive performance of the payout of retail sports bets, which was equal to 80.3% in the six months ended June 30, 2018 (compared to a payout of 85.7% in the same period of 2017). The Contribution Margin also benefited from the favorable impact of the payout, amounting to Euro 19.7 million, approximately 6.6% of consolidated revenues and 24.8% of the Group s total Contribution Margin, a sharp increase compared to the previous year. 4

5 Retail and Street Operations For the semester ended June 30, ( in millions, except non-financial information and percentages) Revenues included "Intragroup revenues and other revenues" Revenues Contribution Margin Number of gaming halls Eop Bet VLT Average number of VLT 1,465 1,288 Average bet VLT per machine (in Euro thousand) Bet AWP Average number of AWP 4,963 4,182 Average bet AWP per machine (in Euro thousand) As of June 30, 2018, the Group's Retail operations included 69 directly managed gaming halls, 3 under the Billions brand, 20 under the Enjoy the Game brand, 1 under the Easy Play brand, 44 under the Gamenet Entertainment brand. Street Operation activities included 3,933 owned AWPs. Bet in the Retail and Street Operations segment decreased from Euro million in the six months ended June 30, 2017 to Euro million in the six months ended June 30, 2018, a decrease of 11.9%, mainly due to the transition, during the first quarter of 2018, of a high performing owned gaming hall (whose bet, therefore, is accounted for mainly in the VLT segment as well as in the AWP segment) under the Gamenet S.p.A. concessionaire. Following the reclassification of the bet on proprietary gaming halls connected to Gamenet Concessionaire, the Retail and Street Operations segment generated bets of Euro million in the six months ended June 30, 2018, an increase of 18.3% compared to Euro million in the same period of the previous year, mainly due to the effect deriving from the acquisitions completed after June 2017 as part of the distribution insourcing strategy. Revenues (which include only third-party revenues) in the Retail and Street Operations segment amounted to Euro 8.7 million for the period ended June 30, 2018, -14.2% compared to Euro 10.1 million recorded as of June 30, This decrease was mainly due to the impact of the increase in the PREU. The Contribution Margin as of June 30, 2018 amounted to Euro 14.6 million, approximately 4.9% of consolidated revenues and 18.4% of the Group s total Contribution Margin. The increase compared to the previous year was mainly due to the acquisitions finalized in the period, as well as to organic growth and general improvement in the performance of the gaming halls. Key consolidated results for the quarter ended June 30, 2018 The following table shows movements in key economic and financial indicators between the second quarters of 2018 and Main financial and For the quarter ended June 30, Change economic indicators ( million) (Euro) % Revenues 148,4 148,8 (0,4) (0,0) EBITDA 20,6 18,9 5,5 0,1 EBIT 2,1 3,6 6,1 (0,4) Profit before tax (11,2) (0,5) 5,8 >100% Net profit (*) (7,2) (1,6) 1,3 >100% Total Group Revenues remained broadly in line with the second quarter of the previous year, going from Euro million in the second quarter of 2017 to million in the second quarter of 2018 (- 0.3%). Before the PREU increase, revenues grew 2.2% compared to the prior year period. EBITDA in the second quarter of 2018 was Euro 20.6 million, an improvement compared to Euro 18.9 million in the second quarter of 2017, also as a result of the changes in payout commented on above. 5

6 EBIT was Euro 2.1 million, compared to Euro 3.6 million in the second quarter of EBIT would have been Euro 6.6 million, net of extraordinary items, including an accounting reclassification of part of the charges deriving from the tax audit settlement which in the first quarter had been classified as taxes. The Net result is equal to Euro -7.2 million compared to Euro million in the second quarter of Net of the items described above, the net result would have been equal to Euro -0.2 million. Recent developments On July 24, 2018, Gamenet Group S.p.A. announced that Gamenet S.p.A., a wholly-owned subsidiary of the Issuer, has signed today a binding contract for the acquisition of 100% of the share capital of GoldBet S.r.l. ( GoldBet ), an authorized gaming and betting company in Italy (the Acquisition ). GoldBet ended 2017 with EBITDA 1 of Euro 40 million, EBIT Euro 34 million a Net Income of Euro 23 million and estimates an EBITDA 2 for the period of 12 months ended June 30, 2018 of approximately Euro 50 million. The value of the Acquisition is Euro 265 million (enterprise value), to be adjusted with the value of the net financial position, as defined in the contract, as of June 30, 2018 (the "Price"). Of this amount, Euro 240 million, adjusted with the value of the net financial position referred to above, will be paid in cash on the date of completion of the Acquisition ("Closing"), expected by the end of the third and beginning of the fourth quarter of 2018, while Euro 25 million will be paid subsequently, as deferred price components over a medium-term period, subject to the occurrence of certain conditions provided for in the acquisition contract. From the integration of GoldBet, significant cost synergies are envisaged, which are expected to reach, on an annual base, approximately Euro million in the period months after the closing date, as well as significant synergies in terms of revenues, particularly virtual betting 3. The Acquisition of GoldBet will be financed through recourse to debt for the portion of the price due at Closing. To this end, the Company has obtained the commitment of UniCredit and Nomura for the organization and underwriting of a committed bridge aimed at paying the price. The commitment of the credit institutions is subject to the usual conditions precedent for this type of transaction, including specifically the conditions precedent to the completion of the acquisition indicated below. The bridge loan may also be refinanced through a transaction in the debt capital markets, depending on market conditions. The Closing is subject to the occurrence of the usual conditions precedent for this type of transactions, including the approval of the Competition Authority and the authorization of the Customs and Monopolies Agency. 1 Determined from the financial statements of GoldBet for the financial year ended December 31, 2017, prepared in compliance with the Civil Code regulations that govern its preparation as interpreted by the accounting standards issued by the Italian Accounting Body ("ITAGAAP"). 2 This is a preliminary data estimated by GoldBet, calculated on the basis of ITAGAAP; therefore, deviations between final values and estimated values could be significant. In addition, the EBITDA estimated by GoldBet may not be comparable with the data of Gamenet Group since these are prepared in accordance with the international accounting standards adopted by the European Union ("EU-IFRS") and the relative method of calculation could be different, as not regulated by accounting principles. 3 The estimate of synergies has been elaborated on the basis of the information held by Gamenet Group as of today. The assessments made to estimate synergies are by their nature uncertain and also depend on numerous factors not under the control of Gamenet Group; therefore, the synergies estimated here could also differ significantly, in terms of realization and in amounts, from those that can actually be realized. Furthermore, the realization of some of the estimated synergies will result in the incurrence of non-recurring costs and investments. 6

7 For further details, see the press release issued on July 24, 2018 ( SIGNED THE AGREEMENT FOR THE ACQUISITION OF 100% OF GOLDBET ). Outlook The positive effects of the Acquisition of GoldBet on Gamenet Group s 2018 EBITDA guidance cannot yet be estimated, as they depend on the Closing date, namely the date of first consolidation of GoldBet. Conference Call The results as of June 30, 2018 will be presented to the financial community during a conference call to be held today at 3 pm, which will subsequently be available, as a recording, on the Group's website: Details to connect to the call are available on the company's website in the Investor Relations / Reports and Results / Call Instructions section. You can take part to the conference call by calling one of the following numbers: ITALY: , UK: , USA: Before the conference call begins, a slides presentation will made available on the website in the section Investor Relations / Reports and Results / Presentations. The documentation used during the presentation will also be available on the storage mechanism This document may contain forward-looking statements relating to future events and operating, economic and financial results of Gamenet Group. These forecasts have by their nature a component of risk and uncertainty, as they depend on the occurrence of future events and developments. Actual results may differ significantly from those announced, due to a multiplicity of factors. The forward-looking statements are however only referable to the date of this document. No obligation to update or modify any of these statements is assumed, either as a result of new information or future events or for any other reason. This document does not constitute an offer, solicitation or invitation to purchase or subscribe financial instruments issued by the Gamenet Group. This document and its distribution must not form the basis or be taken into consideration in relation to any contract or commitment of any kind, nor should it be construed as a recommendation regarding the financial instruments issued by the Gamenet Group. The data relating to EBITDA are not to be considered as an alternative to revenues or any other data deriving from the financial statements prepared according to the EU-IFRS or ITAGAAP standards in determining the results. The manager responsible for preparing the Company s financial reports pursuant to Article 154-bis of the Consolidated Law on Finance (TUF), Mr. Mario Bruno, confirms that the information contained int his press release is consistent with the entries in the accounting books and records. *** Gamenet Group, listed on the STAR segment of the Italian Stock Exchange, is one of the leading operators in the gaming industry in terms of revenues, which equaled Euro million for the six months ended June 30, 2018 as a result of its wide and diversified offer of gaming products operated under a multi-license regime in four different business sectors: (i) amusement with prize machines (AWPs); (ii) video lottery terminals (VLTs); (iii) betting and online gambling (Betting & Online); and (iv) management of gaming rooms and owned AWPs (Retail & Street Operations). 7

8 As of June 30, 2018, the Group s portfolio of granted concessions comprised 30,060 AWPs and 8,570 VLT licenses, along with a network of 742 betting licenses and 69 proprietary gaming halls distributed across Italy. *** For further information: Josef Mastragostino Investor Relations j.mastragostino@gamenetgroup.it Gennaro Schettino Press Office g.schettino@gamenetgroup.it Image Building Media Relations gamenet@imagebuilding.it 8

9 The consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the statement of changes in consolidated shareholders' equity, consolidated net financial debt, consolidated EBITDA and the Group's economic performance by business segment are shown below. Gamenet Group S.p.A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the three months ended June 30, (in thousands of Euro) Revenues 148, ,830 Other income 891 1,108 Total revenues and income 149, ,938 Cost of services (121,756) (124,061) Personnel expenses (7,627) (8,222) Other operating costs (5,089) (3,875) Depreciation, amortization and impairments (11,904) (9,984) Accruals and impairments (682) (140) Finance income 33 (75) Finance expenses (13,388) (3,993) Share of profit/(loss) of equity accounted investments - - Impairment of financial assets - - Profit before tax (11,198) (412) Income tax expense 4,037 (1,113) Net profit (loss) for the period (7,161) (1,525) Net profit (loss) for the period attributable to minority interests Net profit (loss) for the period attributable to the owners of the parent (7,488) (1,754) 9

10 Gamenet Group S.p.A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended June 30, (in thousands of Euro) Revenues 297, ,319 Other income 1,728 2,404 Total revenues and income 298, ,723 Cost of services (237,708) (256,269) Personnel expenses (15,171) (15,746) Other operating costs (7,097) (4,948) Depreciation, amortization and impairments (22,832) (19,094) Accruals and impairments (1,461) (529) Finance income Finance expenses (17,588) (7,998) Share of profit/(loss) of equity accounted investments - (15) Impairment of financial assets - - Profit before tax (2,790) 2,242 Income tax expense (2,796) (3,492) Net profit (loss) for the period (5,586) (1,250) Net profit (loss) for the period attributable to minority interests 473 (297) Net profit (loss) for the period attributable to the owners of the parent (6,059) (953) Basic EPS (0.20) (0.03) For the six months ended June 30, Income tax expense (5,586) (3,492) Actuarial gains and losses on employee benefit liabilities Fiscal effect (7) (51) Other items that will not be classified to profit or loss Total comprehensive income (5,562) (933) Total comprehensive income attributable to minority interests 473 (297) Total comprehensive income attributable to the owners of the parent (6,035) (636) 10

11 Gamenet Group S.p.A. CONSOLDIATED STATEMENT OF FINANCIAL POSITION For the six months ended June 30, (in thousands of Euro) Intangible assets 92,624 97,484 Goodwill 75,800 71,493 Property, plant and equipment 54,649 53,088 Investment property Non-current financial assets 3,797 4,634 Equity accounted investments - - Non-current trade receivables 8,771 14,232 Deferred tax assets 13,678 10,673 Other non-current assets 7,364 8,175 Total non-current assets 257, ,386 Inventories Current trade receivables 44,283 61,203 Current financial assets Tax receivables 10,418 13,518 Other current assets 33,226 43,901 Cash and cash equivalents 67,387 52,379 Total current assets 155, ,371 Total assets 412, ,757 Share capital 30,000 30,000 Other reserves 43,990 62,387 Retained earnings (37,976) (26,552) Total shareholders' equity attributable to the owners of the parent 36,014 65,835 Equity attributable to minority interests 3,454 2,906 Total shareholders' equity 39,468 68,741 Employee benefit liabilities 7,751 7,293 Non-current financial liabilities 227, ,453 Non - current trade payables Provisions for risks and charges 2,366 2,581 Other non-current liabilities 12,637 19,811 Total non-current liabilities 250, ,754 Current financial liabilities 10,180 13,277 Current trade payables 32,464 34,765 Other current liabilities 79,893 82,221 Total current liabilities 122, ,263 Total equity and liabilities 412, ,757 11

12 Gamenet Group S.p.A. CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended June 30, (in thousands of Euro) Profit before tax (2,790) 2,242 Reconciliation of profit before tax with cash flow from operating activities: Depreciation, Amortization and Impairment of intangible assets and property, plant and equipment 22,832 19,094 Accruals and write-downs for impairment losses 1, Other accruals Net financial expenses 17,512 7,711 Gains/losses on asset disposals - - "Prepaymet" amortization 2,845 2,663 Other adjustments for non-cash items (137) (874) Cash flow from operating activities before changes in net working capital 42,495 32,081 Changees in net working capital Decrease/(increase) in inventories 10 (10) Decrease/(increase) in trade receivables 12,676 4,661 Decrease/(increase) in trade payables (1,632) 606 Other changes in net working capital , Cash flow from changes in net working capital 11,870 15,278 Income taxes paid (887) - Accruals to employee benefits and provisions for risks and charges (324) (1,259) - - Cash flow from operating activities 53,154 46,100 Cash flow from investing activities Investments: (17,543) (17,241) - intangible assets (8,166) (5,987) - property, plant and equipment (9,377) (11,254) Disposals of assets - - Deferred purchase consideration for acquisition of subsidiaries/business units (3,465) (7,546) Disposal of business units - - Acquisition net of cash and cash equivalents (5,105) (2,565) Cash flow from investing activities (26,113) (27,352) Cash flow from financing activities Change in other financial liabilities (812) (74) Shareholder loans - - Increase in credit facility - 5,000 Repayment of credit facility - (5,000) Increase in revolving credit facility 12,000 - Decrease in revolving credit facility (5,000) (5,088) Repayment bank overdraft - - Repayment of bond (206,000) - Proceeds from bond issuance 218,000 - Net financial expenses on raising of bond (2,250) - Changes in current and non current financial assets (71) 66 Net financial expenses (9,578) (7,612) Dividends paid (18,040) - Acquisition of treasury shares (397) - Incorporation of Gamenet Group - - Shareholders transactions - - Other movements Cash flow from financing activities (12,033) (11,753) Net Cash flow 15,008 6,995 Cash and cash equivalents at the beginning of the period 52,379 49,767 Cash and cash equivalents at the end of the period 67,387 56,762 12

13 Gamenet Group S.p.A. CONSOLIDATED STATEMENT OF CHANGE IN EQUITY (in thousands of Euro) Share capital Legal Reserve Share Premium Reserve Other Reserves Total Other Reserves Retained Earnings/ (Losses) Total Sharehold ers' Equity Attributab le to Owners of the Parent Equity Attributab le to Minority Interests Total Sharehold ers' Equity As of December 31, ,000 6, ,520 (221,133) 62,387 (26,552) 65,835 2,906 68,741 Net profit/(loss) for the period (6,059) (6,059) 473 (5,586) Actuarial gains and losses on employee benefit liabilities Total comprehensive income (6,035) (6,035) 473 (5,562) Dividend distributions - - (18,000) - (18,000) - (18,000) (40) (18,040) Acquisition of treasury shares (397) (397) - (397) - (397) Other movements Acquistions As of June 30, ,000 6, ,520 (221,530) 43,990 (37,976) 36,014 3,454 39,468 13

14 Gamenet Group S.p.A. CONSOLIDATED FINANCIAL POSITION NET FINANCIAL DEBT For the six months ended June 30, Cash at banks 67,387 56,762 Financial assets (*) 8,957 13,450 76,344 70,212 Senior Secured Notes - - Due to bondholders - capital (220,606) (195,442) Due to bondholders - interest (1,504) (4,500) (222,111) (199,942) - - Bank overdrafts (1,240) (1,143) Other financial liabilities (14,716) (8,760) Total debt (238,067) (209,845) - - Net financial debt (**) (161,723) (139,633) (*) The determination criterion applied by the Group may not be homogeneous with that adopted by other groups and, therefore, the balance obtained by the Group may not be comparable with that determined by the latter. 14

15 Gamenet Group S.p.A. CONSOLIDATED EBITDA For the quarter ended June 30, ( in thousands) Net profit (loss) for the period (7,161) (1,524) Income tax expense (4,037) 1,113 Finance income (33) 75 Finance expenses 13,388 3,993 Share of (profit)/loss of equity accounted investments - - Depreciation, amortization and impairment 11,904 9,984 Pre 2013 non-cashed VLT tickets paid to ADM - 1,130 Reclassification to profit or loss of multiannual prepayments 1,695 1,738 Accessory expenses for the purchase of participations 821 1,539 Severance costs Non recurring employes benefits Non recurring income/expenses 3,972 - EBITDA 20,631 18,907 For the quarter ended June 30, ( in thousands) Net profit (loss) for the period (5,586) (1,250) Income tax expense 2,796 3,492 Finance income (75) (118) Finance expenses 17,588 7,998 Share of (profit)/loss of equity accounted investments - 15 Depreciation, amortization and impairment 22,832 19,094 Extraordinary accruals to doubtfull receivable reserves - - Pre 2013 non-cashed VLT tickets paid to ADM - 1,130 Non-monetary costs (reclassification to profit or loss of multiannual prepayments) 3,030 2,900 Severance costs Non recurring employes benefits 1, Accessory expenses for the purchase of participations 1,361 1,724 Net profit (loss) for the period 43,611 36,347 15

16 Gamenet Group S.p.A. GROUP ECONOMIC PERFORMANCE - EVOLUTION BY BUSINESS SEGMENT (in thousands, except for percentages) AWP VLT Betting and Online Retail and Street Operations Unallocated/Elimin ation Total 2Q '18 2Q '17 2Q '18 2Q '17 2Q '18 2Q '17 2Q '18 2Q '17 2Q '18 2Q '17 2Q '18 2Q '17 BET 660, , , , , ,550 96, ,751 1,761,897 1,731,620 of wich Retail and Street operation 48,122 35, ,982 75,342 Bet 660, , , ,503 1,468,623 1,426,319 Payout (463,999) (452,052) (709,399) (685,287) (1,173,397) (1,137,339) GGR 196, ,763 98,619 95, , ,980 Tax (PREU, IU, ecc.) (125,513) (120,037) (48,481) (45,788) (173,994) (165,826) NGR 71,094 73,726 50,138 49, , ,154 Non-bet based revenues Revenues toward third parties 71,176 74,010 50,839 50,051 22,139 20,101 4,170 4,682 0 (14) 148, ,830 Other income toward third parties (64) ,108 Intragoup Revenues and Other income ,580 3,830 (5,668) (3,848) (0) 0 Total Revenues and Income 71,215 74,159 51,340 50,076 22,315 20,215 10,077 8,748 (5,731) (3,261) 149, ,938 Third parties distribution costs (61,379) (65,418) (30,248) (29,420) (10,331) (10,051) (212) (231) 4,428 3,257 (97,743) (101,863) Tax- concession fees - other (1,982) (1,937) (2,424) (2,340) (849) (1,084) - - (28) - (5,283) (5,362) Other distribution & platform costs - - (3,086) (2,847) (721) (450) - - (12) (35) (3,819) (3,332) Other direct costs (859) (993) (879) (1,188) (1,102) (1,028) (2,383) (2,332) 4 (103) (5,219) (5,644) Contribution margin 6,995 5,811 14,703 14, ,312 7,602 7,482 6,185 (1,339) (142) 37,152 33,736 Contribution Margin/bet 1.1% 0.9% 1.8% 1.8% 4.7% 4.1% 7.7% 5.2% n.a. n.a. 2.1% 1.9% Contribution Margin/Total Revenues and Income 9.8% 7.8% 28.6% 28.5% 41.7% 37.6% 74.2% 70.7% 23.4% 4.4% 24.9% 22.5% Indirect costs (23,092) (20,094) Finance income (11,904) (9,984) Finance expenses 33 (75) Share of profit/(loss) of equity accounted investments (13,388) (3,993) Impairment of financial assets - - Share of profit/(loss) of equity accounted investments - - Profit before tax (11,198) (410) Income tax expense 4,037 (1,113) Net profit (loss) for the period (7,161) (1,523) GGR refers to gross gaming revenues, defined as total bet minus payout. NGR refers to net gaming revenues, defined as total bet minus winnings minus taxes. Contribution margin is calculated as the sum of: i) revenues; ii) other income; iii) distribution and platform costs; iv) concession fees; v) other distribution and platform costs; and vi) other direct costs. 16

17 In the following table, bet generated by company owned gaming halls connected to Gamenet Group s concessionaires is reclassified from the AWP/VLT segment into the Retail and Street Operations segment (AWP / VLT segments that in this version represent the "pure" business of the Concessionaire). It should be noted that distribution insourcing transactions finalised by the Group get reported within the AWP segment (with the exception of those finalized by the Group subsidiaries carrying out Street Operations, which are reported in their respective segment). (in thousands) Bet 2Q '18 2Q '17 AWP 612, ,672 VLT 684, ,161 Betting and Online 196, ,550 Retail and Street Operations 268, ,237 Total 1,761,897 1,731,620 17

18 Gamenet Group S.p.A. GROUP ECONOMIC PERFORMANCE - EVOLUTION BY BUSINESS SEGMENT (in thousands, except for percentages) AWP VLT Betting and Online Retail and Street Operations Unallocated/Eli mination Total 1H '18 1H '17 1H '18 1H '17 1H '18 1H '17 1H '18 1H '17 1H '18 1H '17 1H '18 1H '17 BET 1,332,173 1,300,490 1,619,973 1,591, , , , ,915 3,546,436 3,509,724 of wich Retail and Street operation 91,133 66, , ,498 Bet 1,332,173 1,300,490 1,619,973 1,591,551 2,952,145 2,892,042 Payout (939,339) (913,504) (1,422,082) (1,397,367) (2,361,421) (2,310,871) GGR 392, , , , , ,170 Tax (PREU, IU, ecc.) (253,113) (234,605) (97,198) (90,396) (350,311) (325,001) NGR 139, , , , , ,169 Non-bet based revenues ,967 1,912 2,219 2,252 Revenues toward third parties 139, , , ,700 45,965 35,840 8,683 10,120 (16) (62) 297, ,319 Other income toward third parties ,135 1,729 2,404 Intragoup Revenues and Other income ,516 7,588 (10,605) (7,618) (0) 0 Total Revenues and Income 140, , , ,049 46,277 36,045 19,790 18,145 (10,452) (6,545) 298, ,722 Third parties distribution costs (120,517) (135,917) (60,660) (62,727) (21,131) (20,355) (396) (489) 8,628 6,346 (194,077) (213,142) Tax- concession fees - other (3,997) (3,901) (4,860) (4,774) (2,757) (2,734) (11,614) (11,409) Other distribution & platform costs - - (3,666) (6,067) (1,502) (1,192) (5,168) (7,259) Other direct costs (1,417) (1,690) (1,357) (1,626) (1,225) (1,647) (4,837) (4,575) (83) (315) (8,919) (9,853) Contribution margin(*) 14,210 11,520 32,695 30,854 19,663 10,116 14,557 13,081 (1,906) (513) 79,218 65,058 Contribution Margin/bet 1.1% 0.9% 2.0% 1.9% 5.1% 2.6% 7.0% 5.5% n.a. n.a. 2.2% 1.9% Contribution Margin/Total Revenues and Income 10.1% 7.5% 31.7% 29.1% 42.5% 28.1% >100% 72.1% >100% 7.8% 26.5% 21.2% Indirect costs (41,661) (35,827) Finance income (22,832) (19,094) Finance expenses Share of profit/(loss) of equity accounted investments (17,588) (7,998) Impairment of financial assets - (15) Share of profit/(loss) of equity accounted investments - - Profit before tax (2,790) 2,244 Income tax expense (2,796) (3,492) Net profit (loss) for the period (5,586) (1,248) GGR refers to gross gaming revenues, defined as total bet minus payout. NGR refers to net gaming revenues, defined as total bet minus winnings minus taxes. Contribution margin is calculated as the sum of: i) revenues; ii) other income; iii) distribution and platform costs; iv) concession fees; v) other distribution and platform costs; and vi) other direct costs. (*) Net of the one-off positive impact of the VAT reimbursement linked to VLT platform costs, the Contribution Margin amounted to Euro 76.8 million. 18

19 In the following table, bet generated by company owned gaming halls connected to Gamenet Group s concessionaires is reclassified from the AWP/VLT segment into the Retail and Street Operations segment (AWP / VLT segments that in this version represent the "pure" business of the Concessionaire). It should be noted that distribution insourcing transactions finalised by the Group get reported within the AWP segment (with the exception of those finalized by the Group subsidiaries carrying out Street Operations, which are reported in their respective segment). (in thousands) Bet H H AWP 1,241,040 1,233,659 VLT 1,389,102 1,446,053 Betting and Online 386, ,768 Retail and Street Operations 530, ,245 Total 3,546,436 3,509,724 19