Intralot - Arithmetic, Time and GHBV
All,
Please refer to our unchanged analysis here.
The trouble with a 5-year business plan is of course that it should survive at least the first three months. Since making ourselves unpopular on the last call, probing the company’s arithmetic underlying the forecast for the ROW business, we have not received the answers management promised it would procure - until now.
Answer:
- No, of course, it doesn’t add up. In the first three months, the EBITDA contribution of ROW amounted to a mere E10m - before an equally high HQ allocation without partnerships. To make budget EBITDA would have to jump to an average of E16m per quarter - if we generously add a chunky E10m to come from one-ffs on new contracts and assume none of that has already flown into Q1. All that is unlikely given NL are down and OZ seems off the pace (never mind the one-off gains in Q1 last year).
No call, no language, no GHBV RCF:
- The financials released include no more statement on how the company intends to restructure, the way they did in Q4.
- Presumably in preparation of the proposed JV split, the RCF at Global Holdings has been paid down.
- Also, there has been no call along with the presentation this time. Intralot is holding its AGM later this month and we don’t expect any further news to come out until that is dealt with.
Q1:
- The results should do little to alleviate the 24s concerns over the proposed deal. Intralot significantly exceeded Q120 comps, mostly in the US, where the lottery business has been going strong and where a significant Jack Pot added to the results.
- Along the divisions set out in the company’s proposal, the US subsidiary accounted for practically the entire E18m net EBITDA of the company, whereas the remaining businesses approximately balanced out the significant central costs in Greece and Cyprus.
- Thanks to the sale of Intralot's Peruvian business and a tax inflow, management was able to maintain liquidity despite coupon payments and paying down its Global Holdings revolver.
Positioning:
We remain exposed to the 24s with 4% of NAV and are expecting events to unfold over the summer. Overall the business is improving and consolidated Q1 results beat our expectations. But it's all about the deal now.
Happy to exchange views.
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003