GGRAsia – IGT gaming operations likely pressured in 2Q: Telsey

IGT gaming operations likely pressured in 2Q: Telsey

Aug 10, 2015 Newsdesk Industry Talk, Latest News, Top of the deck

The recently formed IGT Plc is likely to show quarterly revenue from gaming operations down year-on-year “on a lower installed base and pressured yields”, said a note from David Katz and Brian Davis of Telsey Advisory Group.

IGT was created by the US$6.4-billion merger in April of Nevada-based slot machine maker International Game Technology and Italy-based lottery specialist GTech SpA. The new entity – now listed as IGT on the New York Stock Exchange – reports its second quarter numbers on Tuesday.

Mr Katz and Mr Davis said that strict year-on-year comparisons for the second quarter were difficult because of the merger and because of factors including a move by the merged entity to report in U.S. dollars and use U.S. generally accepted accounting principles, rather than euros; as GTech used to do. But they noted: “Although the format of the business on a consolidated basis will change from prior reports, the underlying fundamentals of the businesses, both the legacy lottery business and the gaming and interactive businesses, should be fairly clear.”

They added: “We forecast revenue of US$1.333 billion and EBITDA [earnings before interest, taxation, depreciation and amortisation] of US$327.5 million. More importantly, we forecast IGT shipped 5,100 units in the quarter, which is lower by 27.1 percent year-on-year compared to IGT’s standalone business. We expect gaming operations revenue to decline by 19.1 percent year-on-year on a lower installed base and pressured yields.”

The analysts stated however that the company had been “positioning personnel and strategies positively for a turnaround”.

In a presentation to investors in March just before the formal closure of the merger, executives from the GTech entity had mentioned it was likely to take two years to improve the fortunes of the IGT-branded slot machine business.

GTech reaffirmed at that time a target of US$280 million in “synergies” for the merged operation – consisting of US$230 million in cost reductions and US$50 million in revenue improvements.