IGT declares interim dividend despite 2Q net profit slide
International Game Technology Plc (IGT), a supplier of casino and lottery games and services, has posted a net profit of about US$4.9 million for the second quarter of this year. It was a 96.7-percent decline over the corresponding period ended June 30 last year, when IGT reported a net profit of US$161.5 million.
Nonetheless the group declared an interim cash dividend of US$0.20 per share on its ordinary shares. The dividend is payable on August 29, to holders of record as of the close of business on August 15.
In its results posted on Thursday, the company said it had revenues of US$1.23 billion in the second quarter, up 3 percent in year-on-year terms from the US$1.20 billion recorded last year. While the revenues from IGT’s lottery services division declined slightly year-on-year, sales of slot machines jumped. For example, IGT said global shipments of gaming units grew by 76 percent in the three-month period.
The international sales division – which includes the Asia-Pacific region – reported a 46-percent increase in revenue when currency exchange rates are excluded from the calculations. The international segment’s revenue grew to US$142 million, up from US$101 million in the second quarter last year.
IGT’s quarterly slump in group-wide profit was largely due to interest expenses and a loss incurred on currency movements. IGT operates in more than 100 jurisdictions worldwide.
“There are some items that impacted the year-to-year profit comparison,” said Alberto Fornaro, the group’s chief financial officer in a conference call with analysts.
“The decline in total service revenue was accentuated at the operating income level driven by interactive performance and non-wager-related items,” he added.
The group’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 3 percent year-on-year, US$454 million this year up from US$442 million last year.
Mr Fornaro said in prepared comments issued with the results that “EBITDA in the quarter was the highest we achieved in three years and translated into substantial free cash flow”.
EBITDA beat estimates
Deutsche Bank Securities Inc said IGT’s second-quarter adjusted EBITDA had beaten the institution’s estimate by US$46 million.
“Upside was primarily driven by stronger sales revenue, as international replacement units came in well above our forecast and domestic replacement sales also exceeded our estimate,” wrote analysts Carlo Santarelli and Steven Pizzella.
IGT shipped slightly more than 10,000 replacement machines globally in the three months to June 30, a 96.4 percent increase over the second quarter last year.
Quarterly machine shipments in the international segment rose 110 percent year-on-year, to 6,563.
IGT chief executive Marco Sala noted in the conference call with analysts: “International gaming machine units did very well, thanks to the contribution from Sweden video lottery terminals and increases across all main geographies. This significant growth recognises the quality of the games we are bringing to market.”
IGT breaks down its activities into three broad markets: international, “North America gaming and interactive” and Italy. Results in North America were boosted by strong product sales, up 22 percent to US$104 million in the second quarter, from US$85 million in the corresponding period a year earlier. The sale of replacement units in North America was up by 54 percent, the company said.
In Italy, IGT’s lottery services division drives revenues and this segment grew by about 4 percent year-on-year.
The group’s net debt stood at just under US$7.64 billion as of June 30, up 1 percent year-on-year.
CFO Mr Fornaro noted in Thursday’s earnings call that the group’s net debt leverage had “improved compared to year-end levels” as at December 31.
“In July, we proactively amended our revolving credit facility to extend the maturity date by three years to July, 2024, lower the size from about US$2 billion to around *US$1.7 billion and modify certain provision that increased flexibility,” said the CFO.
He added: “The reduction in the size of the facility reflects lower anticipated needs. This leaves us with the liquidity that is more than sufficient to cover debt maturities until 2022.”
In May, IGT said its first-quarter net profit was US$40.3 million, turning around a US$103.2-million loss in the corresponding period last year.
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