IGT ‘prudent on recovery’ as company absorbs H1 losses of $291m

International Game Technology (IGT) cited the ‘intense impact’ of casino and gaming hall closures on its business, as the New York-listed gambling technology group recorded H1 2020 operating losses of $291 million.

Absorbing Q2 double-digit declines across its core business segments of lotteries, International, North America and Italy, IGT recorded a 48% decline in revenues, falling from $1.23 billion in Q2 2019 to $637 million in Q2 2020.

Compounded revenue impacts saw the firm’s adjusted EBITDA take a 63% hit, dropping to $168 million compared to $454 million in the prior-year period.

IGT reported that global gaming revenue declined by 72%, driven by the closure of casinos and gaming halls, fewer unit shipments, and lower systems and software sales compared to the prior year.

“Our second quarter results reflect the intense impact of global lockdowns caused by the pandemic,” said Marco Sala, CEO of IGT.

“That said, thanks to strong North America Lottery performance and our swift adoption of cost-saving and avoidance measures, we delivered better cash flow than we expected back in May.

“Our resilience is a direct consequence of the diversity of our global portfolio of products and solutions. The improving trends we are currently seeing are encouraging, but we remain prudent with our planning. Our new organisational structure enhances our readiness to adapt to changes in market conditions.”

The overall decline was compounded by an operating loss of $94 million, down from income of $224 million in the prior year which IGT stated was due to lower profit contribution from reduced business volumes, a $43 million restructuring expense and accelerating benefit from actions taken to reduce costs.

Despite the dire outlook, IGT reported an improvement in its digital division, with a 35% increase in revenues for the segment. According to the company, the ‘progressive easing of restrictions during the quarter and cost-saving initiatives helped mitigate impact’.

IGT has since shifted its focus towards cash generation and liquidity to ensure that it has the necessary resources to navigate the impact of COVID-19.

As of 30 June 2020, IGT noted that liquidity totalled $2.3 billion, comprised of $1.3 billion in unrestricted cash and $1.0 billion available under revolving credit facilities.

In an effort to accelerate the company’s response to market conditions, IGT also stated that ‘over $200 million has been identified in structural cost savings compared to pre-pandemic levels’.

Underlined as a core corporate 2020 objective, IGT governance reveals that it aims to deliver $500m in group savings delivered through structural and discretionary cost reductions by end of year trading.

The savings, which are ‘mostly expected in 2021, will include the ‘issuance of $750 million 5.25% notes due 2029, as previously announced, $500 million of net proceeds used to fund a partial tender of 6.25% notes due 2022, optimising the supply chain for maximum cost efficiency and eliminating duplicative functions’.

“Cash generation and liquidity remain our top financial priority,” added Max Chiara, CFO of IGT. “The proactive efficiency initiatives and focused capital markets activity we executed in the quarter have us tracking ahead of plan on all key measures and we expect to deliver positive free cash flow this fiscal year.

“We have the resources we need to navigate the impact COVID-19 is having on our business and we are making important, strategic decisions to enhance our operational flexibility. This includes over $200 million in structural and discretionary cost savings compared to pre-pandemic levels.”

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