GGRAsia – IGT to meet post-merger cost aims: Union Gaming

IGT to meet post-merger cost aims: Union Gaming

Dec 09, 2015 Newsdesk Latest News, Top of the deck, World

Revenue growth for gaming equipment supplier IGT Plc in international markets – i.e. outside Italy and North America – is likely to show nearly 11 percent expansion in calendar year 2015, said a note on Tuesday from Union Gaming Research LLC.

The comparison is made on a pro forma basis, as IGT only came into being on April 7 via the US$6.4-billion merger of Italy-based lottery technology and services specialist GTech SpA and Nevada-based slot machine maker International Game Technology.

Nonetheless, Union Gaming estimates IGT’s revenue from international markets to be US$932.4 million in 2015.

IGT announced a year-on-year growth of 30 percent in consolidated group revenue for the third quarter of 2015, to US$1.22 billion.

In its second quarter earnings statement in August, covering the three months to June 30, IGT reaffirmed its target of US$230 million in “cost synergies” by April 2018. At that time it said it expected to achieve two-thirds of the targeted cost reductions by April 2016.

Union Gaming issued its latest note on IGT after meetings last week with its management.

Analysts Christopher Jones and John DeCree stated: “Management noted a ‘high-degree’ of confidence in achieving… [a] US$280-million synergy target, of which US$230 million are costs related. By the end of 2016, more than two-thirds of these synergies will be implemented, with the full amount expected to be reflected in the profit and loss statement by 2018, though potentially as early as 2017.”

IGT probably needs two years to turn around the fortunes of its slot machines business, said a note in July from Telsey Advisory Group LLC, citing “a shrinking installed base and declining yield”.

Union Gaming said in its Tuesday note: “With a new head of international operations, IGT is taking a more aggressive stance in international markets. Specifically, management called out Australia as an opportunity as prior IGT legacy management de-emphasised the market.”

“We believe that while Australia is a mature market, it does represent an important Asian Pacific gaming market and a stepping stone toward a better presence in the Asian gaming market overall,” said Mr Jones and Mr DeCree.

Union Gaming noted that DoubleDown Casino, IGT’s interactive gaming business for digital media platforms, is “still undeveloped”. DoubleDown Casino was purchased by the International Game Technology entity in early 2012 for US$500 million.

“To date, growth has come largely from porting game titles onto the social media platform. IGT is looking to start marketing formally, expanding internationally and launching a rewards programme. Mobile also represents a considerable opportunity for DoubleDown,” said Union Gaming.