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Ant. Kerastaris: INTRALOTs new strategy and roadmap for growth


Starting back in 1993 as a spin-off of INTRACOM with €2m revenue, the company reached a turnover of € 2bn, INTRALOT succeeded to rank among the top three suppliers of gaming products and services worldwide, an industry that will surpass € 500bn globally by 2019.

In the past two years INTRALOT is reshaping in terms of its operational structure, its product portfolio and its finance profile. The company has evolved from technology vendor to a comprehensive gaming solutions and services provider, covering the entire spectrum for the traditional B2B sector to the final consumer as operator (B2C). In this broad range it attempts a renewal of its product portfolio as well as its geographic presence and partnerships along with maturing investment opportunities.

The person leading this effort is Antonios Kerastaris, INTRALOT Group CEO. In his interview to “Kefalaio Newspaper” he evaluates the impact of the changes in this period, talks about the rapid changes in the global market of gaming, the new INTRALOT strategy in all verticals (betting, lottery, interactive), the challenges and the goals that have been set.


Mr. Kerastaris, INTRALOT started its transition to a new business model after extensive restructuring of its organizational structure. What was the main goal driving these strategic changes?

These strategic changes have taken place as response to the global gaming market changes. In our sector the market is in transition to redefine its mission by utilizing modern technologies and capturing market trends. This means a wider geographic spread and portfolio depth which means many more products and services gaining ground in the global market. Therefore, we as INTRALOT, after 22 years of activity in this market had to redefine both our business model and our product offering but also to the distribution channels we will use at global level.

Which channels do you specifically mean?

In the past couple of years the market has grown excessively towards the online distribution channel, whether we refer to mobile or home based internet. This is a big shift that offers through this channel much higher capabilities to offer more and easier games while at the same time getting to know our player.

The second change has to do with the regulatory environment around the globe. We head towards more responsible gaming models with emphasis on the social aspects of gaming. And third, many countries are in transition from a semi- or un-regulated market to a fully regulated one, requiring a tottally different approach, and this is where companies like INTRALOT can function. Hence the advancements in regulated markets is a great opportunity for us.

 What is the impact of these changes to date?

There has been great progress regarding new services and products we offer, in the distribution channels and in particular in the online channel where our presence has so far been discrete.

There has been great progress in these areas, the products are already available in the market and we continue to expand the geographic footprint of these products. I think that in the next two years we will see these product influencing the financial results of the Group. And that’s because the life-cycle of a product in our sector is very long.

 Do you change strategy according to each market where you are present?

The gaming industry may be global but at the same time it possesses extended local characteristics. This means that in very few places we have the same Lotto or Betting product. We are betting operators in 16 countries but no two countries are the same. Theoretically, betting is a global product but it is very local in the execution part. The same goes with numerical games.

At the same time the company has adopted a broader M&A strategy based on complementarity and synergies with strong local players. There have already been some moves. Which can the next ones?

This has been the second biggest field of changes, concerning the ways in which we invest the company resources. This is why we decided to divest from certain markets so that we can invest in others. The way you handle your resources, be it loans or equity capital, in order to grow is very critical in this market. You cannot be an investor in every market because you do not have the balance sheet. To support your approach you must strategically position in the various markets with the correct mix between the equity you allocate in a business opportunity and what it means for your principal activity, which is not investment house but service provider. Therefore, how much capital and resources we allocate in each market in comparison to the benefits from this market is very crucial. And this is why one of our first decisions was to redefine our investment strategy.

What are, then, the new markets on which the new INTRALOT focuses?

We seek opportunities wherever we can find them and they really exist. As far as I am concerned the biggest opportunity for INTRALOT today is in the US market.

In the past two years, our subsidiary there has more than doubled its profitability and has increased its market share and spectrum of portfolio offering. The US has the advantage of being a well-regulated and mature market while at the same time due to its mere size a success there can really transform your figures in a spectacular way.

What specifically shows the trends in the US market? Privatizations or online?

Unfortunately, the first privatization in the US at Illinois did not go well and this set a significant obstacle for similar thoughts in other States. Concerning INTRALOT, all of our growth is organic. And we think there is lots of room for improvement; while we have still not touched our strongest asset, sports betting.

As you know, the only State in the US where sports betting is legal is Nevada. Therefore, we cannot still exploit in the US our greatest comparative advantage as the largest sports betting retail supplier in the world. But a substantive debate on this subject is now ongoing in the US. Imagine the prospects of this market especially when the online lottery sector is very little developed. The prospect of this market is number one for INTRALOT.

Will Australia continue to be one of the markets where you will be present or do you plan to exit?

Australia is a market where we had two kind of business, Lottery and VLT monitoring. We left the Lottery sector two years ago because it was loss making. We remain in the second sector and have recently undertaken a new project, the redesign of the Lottery West network. We are in discussions for various possibilities.

Australia is the most developed market in the planet both in terms of products and distribution channels, much ahead of the second market. It has two very big local players, and therefore it has special characteristics.

 You have strong presence in Turkey for years. How do you evaluate the situation there, given the political and economic conditions?
In Turkey, besides the impact of the Turkish Lira devaluation, the heart of the problem lies at the trade deficit. In spite of market pressure tendencies, the domestic market remains strong and grows in Lira terms by 8% per year so the demand remains strong. But the Lira devaluation has an impact on our results. However we have several other factors that help us hedge to forex headwinds.

Recent Turkish government decision to exploit the State Lottery Milli Piyango and horseracing Jockey Club (TJK) through a sovereign wealth fund, and to offer a tender for their management creates a new landscape for our sector. For INTRALOT Turkey represents an opportunity rather than a threat.

 What is the 2017 outlook for INTRALOT?

We closed an excellent 2016. It was a good year in terms of completed initiatives (which will yield visible results in the current year) but also in terms of readiness to execute the plans we have announces to our investors. Absent any dramatic changes, I estimate that 2017 will be the best year for a long time for INTRALOT.

In parallel, there have been important moves in the restructuring of the Group’s finance profile. What has so far been the results of this effort?

We have successfully completed two refinancing session in the Group. The first took place in the beginning of 2014, because the company was in need of the financial resources to run the business and achieve everything we have been discussing here. The important thing at that point was that we made an extremely successful execution in order to catch the best available market window in three years. We succeeded to make the pricing within 6 weeks from the bond issuance announcement. This is a unique accomplishment in Europe, especially with a 65 coupon when the previous one, 9 months before was at 10%. The same company, with the same financial results and the same rating, succeeding to attract more funds, and with a book that was five times oversubscribed, was a spectacular achievement.

This provided us the fuel to implement the entire company restructuring plan. We went back to the markets to essentially refinance of older bond. We went to the bond holder without a growth story, but with a plan to set our house in order and increase profitability and we convinced them to agree to a lower interest rate. We succeeded to convince the markets that the fair pricing at that time was not 8.75% but 6.75%. And not only that, but since September when the bond was launched, it trades between 100 and 102.

We succeeded in substantially reducing the risk premium that investors require to approach us, our bonds trade lower that the sovereign bonds and all this for a Greek company that offers services. I believe that INTRALOT has earned the confidence of the markets and this distinguishes from companies with a short term horizon.

In essence we have solved our financing needs until 2021 while we save €15 m per year from interest, which is reflected on our bottom-line. This can be the dividend for our shareholder in Greece tomorrow.

Under fulfilled conditions, your target is to achieve debt levels below two times your EBITDA. How close are you to this target?

Currently we are 2.5 and I think 2 is feasible. But if we come across an investment opportunity, say € 50-60 m with good returns which is worth increasing this ration we will do it. In any case, such rations are low for our industry. Our target today is 2 but it is not a taboo.

Do such investment opportunities exist?

Yes they exist. Right now we are in discussions for projects in the US, Latin America and Asia, without overlooking Europe and Africa. We have a pipeline of projects which are signed for execution and other in various levels of maturity which we pursue. Some of them will mature within 2017. Overall there is a short list of 15 projects around the globe that we consider as key opportunities in which we are interested and remain active until the final selection stage.

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