logo

Allwyn Ag

Q42020

4/1/2021

speaker
Gail
Conference Call Operator

Ladies and gentlemen, thank you for standing by. I am Gail, your course call operator. Welcome and thank you for joining the OPAP-SA conference call and live webcast to present and discuss the full year 2020 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Jan Karas, CEO of OPAP-SA. Mr. Karas, you may now proceed.

speaker
Jan Karas
CEO, OPAP-SA

Thank you very much, operator, and good afternoon and good morning to everybody. Welcome to the OPAP 2020 Investors Conference call. As you may remember, in our last communication back in November, we were indicating that the COVID-19 red emergence felt like a deja vu, and although that's exactly what happened in the course of the following month, OPAP's performance is once again proving that the company has what it takes in order to emerge strong from this turbulence. In a year where our shops were fully closed for more than four months, we managed to generate lower but still significant profitability, maintain a strong balance sheet and boost our online content and performance. Without further ado, our CFO, Pavel Mucha, will now provide you with an overview of our financials, and I will then update you on our business progress, but more importantly, on our fast-forward long-term strategy, which will shape our future for the years to come. We will then answer any questions you might have. Pavel, over to you.

speaker
Pavel Mucha
CFO, OPAP-SA

Thank you, Jan, and good afternoon to everybody. Following a relatively normal Q3, The Q4 quickly brought in a revival of the pandemic, which led initially to local closures and later to a national lockdown as of November 7. As a result, it was no surprise that all major macro KPIs dropped further in Q4. According to ELSTAT provisional data, the GDP contracted by 5.9% in Q4, fully reflecting the restrictive measures applied since November's, While 2020 GDP came in better versus expectations but still dropped heavily by 8.2%. Total consumption declined by 3.7% in Q4 driven by a private consumption drop of minus 6.9% year on year. Finally, leading indicators demonstrated mixed signs with economic sentiment growing albeit still from low levels, while consumer confidence retreated, reflecting the escalation of the restrictive measures. Going forward, the visibility remains limited. MinFin official estimate calls for a 4.8% GDP growth and a 3% private consumption increase in 2021. However, as the lockdown period gets extended, uncertainty is growing. Independent estimates come with a wide range of GDP growth between 1 and 5%, and it will be obviously determined by vaccination rates, the economy's opening pace and the government support package, which has been already revised upwards to 13 billion euro. Going now to OPAP, the constant shift between closures and openings is distorting any potential comparison with macro data. That said, it's no secret that on the one hand, being a predominantly retail business, the imposed lockdowns have taken a heavy toll on performance, but on the other hand, it's also fair to say that when being opened, our performance has been encouraging. All in all, full year 20 GGR declined by 30.3%, with Q4 down by 48.3%, with a mixed regional picture as different measures and restrictions were applied across different areas. In that sense, on slide eight, we are depicting how lockdowns affected our business and subsequently our revenue throughout the year, and this is excluding any contribution from Kaizen. We defined three individual periods. The first one pertains to the 283 days of 2020, whereby our shops were fully opened, despite the fact that more than half of those days they carried some sort of restrictions. Our performance on a year-on-year basis stood at a satisfying plus 1%. When it comes to partial lockdowns, this period includes 48 days in which our VLT estate was closed and 20 days of local lockdowns. Our performance for this period stood at minus 20.6%, whereas the full lockdown, which accounted for roughly one-third of the year, led to a minus 92.3% year-on-year drop, with online being the only revenue stream. When addressing our key segment's performance on slide 9, we would like to note that it's the first time that OPAP is incorporating reporting-wise the online casino segment, which brought in €19 million in Q4. With this addition, we believe that we are now offering one of the most complete portfolios in the industry, with a well-balanced mix between lottery, VLTs and betting, this all in retail and online, while our reporting is also following a more precise segmentation. The casino figure on its own is a blended outcome of both OPAP, online casino, and Kaizen Gaming, Greece-Cyprus, since we managed to consolidate the latter's figures since December. Kaizen Gaming consolidation is also the main reason behind the fact that betting outperformed versus the remaining segments. In detail, betting in Q4 dropped by minus 27%, whereas the rest of our segments dropped between minus 59% to minus 67%. Because of the lockdown impact, we will not as usually analyze each segment's performance on an individual level, but Jan will make sure in his part of the presentation to refer to the key developments per segment. Going further down the profitability line, set aside the revenue drop, Our GGR contribution line has been disproportionately burdened by the prudent decision to record Hellenic Lottery's increased GGR contribution so as to meet the contractual threshold of €50 million. That said, taking into account that the closure of the related network and the subdued operational activity was beyond Hellenic Lottery's control, we have submitted a request of arbitration to the International Court of Arbitration, asking that GGR tax is calculated based on our actual performance. With that in mind, EBITDA for the quarter dropped by reaching €52.7 million versus €107.6 million in Q4 2019, as the revenue-related drop was partially counterbalanced by the incorporation of €42.5 million from the recognition of income relating to the new GGR contribution regime as provisioned by the Concession Extension Contract, which was commenced in October 2020 and will last till 2030. On full-year level and on a like-for-like basis, Excluding one of items, full-year 2020 EBITDA dropped by 32.4% year-on-year, which we believe is a substantial achievement given that our network was closed for more than four months. Note that Kaizen Gaming contributed €28.1 million on our EBITDA line, with more to come this year due to its full consolidation from December 2020 onwards. Finally, net profit in Q4 2020 reached €132.1 million versus €61.8 million in Q4 2019 due to a one-off gain of €142.7 million from the re-measurement of Kaizen Gaming's previously held equity stake. We believe that the re-measurement vindicates our acquisition decision and comes naturally as a result of the company's impressive performance in the last few years. After excluding one-offs, Q4 2020 like-for-like net profit dropped by 74.3%, whereas for the full year like-for-like net profit dropped by 51.4% year-on-year. As regards to cost efficiencies, our reported OPEX line came higher year on year, but this is entirely due to the full consolidation of Kaizen in Q4. As seen at slide 11, when excluding Kaizen, then our cost efficiencies have been well on track as we were able to realize OPEC savings in each and every quarter post-COVID emergence with the overall figure shaping at minus 4.1%. while on a like-for-like basis after excluding one of items, the drop stood at minus 12.7%. Cashflow wise and moving to slide 13, despite the lockdown and other restrictions, we managed to generate an operating cashflow of 186 million Euro for the year, thus providing with a tangible evidence that despite our retail operation, OPAP is able to generate cash even in the harshest of times. On the investment side, we spent €79 million, mostly due to the acquisition of the additional stake in Kaizen, which together with dividend distribution and debt repayments shaped our cash position to €507 million and our net debt to EBITDA ratio a bit higher, but still very comfortable, two times. It is this financial strength that enables us to propose a full year 2020 dividend per share of 45 euro cents in the upcoming annual general meeting, which we believe, given the circumstances, is a rewarding return to our shareholders. Sending to slide 14, OPAP Online has taken the pole position for the year. As evident, our strategy to enrich our portfolio very early in the initial lockdown has led to a material increase of our online activity. Our customers are at all-time highs, and that is despite the fact that the lack of retail activity is on its own taking an impact on Joker jackpots. In a nutshell, our average weekly online GGR during the second lockdown has well exceeded €1.5 million, while as seen on slide 15, every segment's online contribution has increased by a multiple. Reporting-wise, on slide 16, organic growth together with Stichemann full consolidation has led to online GGR to reach 24.4% of our total revenues in Q4 2020 from just 0.7% in full year 2019, while the portfolio mix is well diversified between betting, casino and lottery. Since Q1 2021 was another quarter that our retail estate remained closed for most of the days, our online and that is both OPAP branded and Kaizen Gaming remained the biggest contributor to our performance. Having said that and concluding my part on slide 18, for every full lockdown month, the GGR impact stands at between 130 to 140 million euro, while EBITDA impact at 45 to 50 million euro. With that, I'm passing you back to Jan.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-

Investor presentation