Thought's on Intralot's Q4 results

All,

A first look at the Intralot financial statements ( FY18 - December) reveal:

1) Earnings were as modelled.

2) Cash: The company shows £162m in cash (consolidated). That is some E35m more than our estimated E90m proportionate cash. The difference between the reported and our figure is down to: 

a) consolidation of JVs ~E+40m. The cash from the Azeri sale is still in Turkey and the 55% that don’t belong to Intralot are being fully consolidated (itself about ~E+10m), 

b) lower CapEx by ~E+10m than even our revised forecast (the company clearly applied the breaks), 

c) higher borrowing ~E+25m (we think mostly via the US $20m st. overdraft to fund part of the CapEx there). At December, the company only had E39m of short term financial leases and borrowing s aside from the two bonds.

3) Liquidity: Access to both RCF facilities D and E is suspended due to broken covenants. Liquidity should be restricted to the available portion of the proportionate cash of E85m as per year-end, or around E70m at the moment. Note that this includes some E27m of short term financing that will need to be addressed before the year is over. Whether or not the additional E10m of Capex will have to be spent remains to be seenThoughts:

- From a first look, all appears to be largely as expected - except that the company has found a way to borrow some money at subsidiary level and spent yet less CapEx. What has therefore  changed is the urge with which Kokkalis may have had to act. With E70m of likely current liquidity (for now - see point 3 above), we are not expecting him to stumble into any restructuring - as evidenced by the zero reply advancing advisors and hopeful hedge funds have received so far. He will be pondering his options, looking to sell the Gamenet and various other stakes in the right order and he’ll be tacking any cost savings that present themselves. 

- Ultimately, we do think Kokkalis will have to strike a deal with bondholders, but we now believe that would be Q319 at the earliest and we still don’t think it will be to give the 21s a preferred status in exchange for merely some more time. 

Wolfgang