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Allwyn Ag

Q12021

5/20/2021

speaker
Operator
Call Operator

Ladies and gentlemen, thank you for standing by. I am Jota Yokoro's call operator. Welcome and thank you for joining the OPAP SA conference call and live webcast to present and discuss the first quarter 2021 financial results. All participants will be in a 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 of OPAP SA

Thank you very much, operator, and good afternoon and good morning to everybody. Welcome to Opap's Q1 2021 Financial Results Conference Call. Having behind us a year full of turbulence, uncertainty, and severe restrictions on most economic activities, We feel both proud and safe by saying that OPAP was beyond any doubt able to face unprecedented challenges in the best possible way. Profitability was obviously affected by the fact that the bulk of our land-based network was closed for almost all the quarter, but our focus on online as part of our established dual strategy led to record high numbers and solid profits on that front. Going forward, we are cautiously optimistic as online remains strong and our back-to-the-game commercial plan, together with the substantial commitment of our partners, has led to a successful op-up stores reopening and encouraging initial footfall and GGR indications. Our CFO, Pavel Mucha, will now provide you with a more detailed review of our quarterly performance, while I will then inform you on the progress we have demonstrated on the operational front. We will then answer any questions you might have. Pavel, over to you.

speaker
Pavel Mucha
CFO of OPAP SA

Thank you, Jan, and good afternoon to everybody. It is true indeed that although the lockdown has led Q1 numbers towards lower levels year on year, we believe that Q1 performance comes with a clearly positive tone. Several individual KPIs improved materially, and we trust that those will shape the longer-term trend. Before getting there, though, and starting as always with macro-developments, I wouldn't say that much has changed since our last update when it comes to the hard data. That said, the fact that leading indicators such as consumer confidence and economic sentiment have now been growing is reflecting a positive tone, which we hope will be eventually echoed on GDP and private consumption. Broker estimates still come with a wide range, however it is fair to say that most of the projections hover around 3-4% for the year. All in all, the fact that the economy has gradually reopened together with the vaccination progress and the fiscal support, which is one of the highest in Europe, makes us optimistic for the future. Jumping to OPAPS figures and slide 5, Our total GGR came in at 174 million euro, which is lower by 47% year-on-year, but this number is rather skewed on the back of the retail lockdown. In more detail, the land-based segment recorded revenues that dropped by 84% year-on-year, as most of our Greek stores operation was suspended for almost all of the quarter, with only about 40% of the network opening only within February. As such, I don't believe that it would make much sense to refer to our retail performance in the few days that only a small part of our network was open, other than the drop was within our expected range. On the contrary, when it comes to online, a more detailed reference is definitely needed, as GGR reached €122 million versus €5 million one year ago, with €103 million coming from Stichemann as a result of the company's full consolidation as of December last year. Stichemann continues to be the country's market leader, with good growth coming in for both sports betting and casino. At the same time, OPAP's online brand also reached new highs with revenue quadrupling on a year-on-year basis, reaching €19 million up from €5 million in Q1 2020. This performance is a result of our decision last year to prioritize online launches, which effectively enabled us to quickly offer a full spectrum of online games, including betting, casino and lottery. On the expense line, Let me firstly note that our gross profit has again once more been hit by our prudent decision to record Hellenic Lottery's increased GGR contribution according to the annual contractual threshold of 50 million euro. As you know, we have already filed an arbitration request, but until this is decided, we have chosen to book the full amount in our numbers so as to stay as conservative as possible. Other than that, OPEX figures on a reported basis increased to 76 million, but these are obviously not like for like due to Stichemann full consolidation. When adjusting for Stichemann impact as well as one-offs items, OPEX dropped by 15% due to cost efficiencies that we pursued immediately after the initial lockdown. In a nutshell, payroll decreased by 8%, while like-for-like marketing came in lower by 15% after adjusting for Stichemann's impact. Going forward, it is obvious that marketing will move higher as the gradual restart of our land-based activities will require a marketing boost so as to enhance our customer reach. With those in mind, and turning to slide 8, EBITDA came in lower by 29%, At 61.3 million, comparing to Q1 2020 when it was 86.4 million, or this is minus 44% like for like after excluding one of income in Q1 2021, while further down the profitability line, earnings after taxes and minorities in Q1 2021 reached 10.3 million or minus 2 million like for like versus 36 million in Q1 2020, as a result of lower operating profitability due to lockdown. Cash flow-wise and slide 10, despite our positive operating profitability, operating cash flow was negative for the quarter due to adverse working capital movement. This took place on the back of our network closure, which in turn led to receivables related to our past prepayment of GGR contribution. This effect is obviously not going to continue as our op-up stores are now open. Overall, our cash position remained at an exceptional 486 million euro, shaping a comfortable net debt to EBITDA ratio of 2.4 times. With that in mind, and given the shop's reopening, we are increasing the proposed dividend per share to 55 euro cents versus 45 euro cents announced before. Given the circumstances, we believe that this constitutes a much rewarding return to our shareholders. Finally, we have also prepared a few slides pertaining to our post-reopening performance. Starting with slide 11, it becomes evident that OPAP's brand online penetration is picking up pace, with Joker now reaching 20% and Pame Stichema standing at 8% versus low single-digit percentages in the pre-COVID period. In addition, when turning to slide 12, our retail business has also been recovering at an encouraging pace. In comparison to the same weeks in 2019, performance following the reopening has been steadily picking up pace with the last week generating numbers very close to the numbers generated in 2019. Comparison is also favorable versus post-lockdown reopening in 2020, But so as to be fair, we must stress that the sports betting offering is now full of events versus quite a limited offering last year. With that, I am 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.

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