International Game Technology PLC (IGT) 2010 Q2 法說會逐字稿

Good day, and welcome to the Lottomatica Q2 2010 results conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Marco Sala, CEO and Managing Director, Lottomatica Group. Please go ahead, sir.

Thank you for joining us for Lottomatica Group's 2010 first half results presentation. With me today is Stefano Bortoli, the Chief Financial Officer of the Group who will provide you with a review of financial results for the quarter and half year. Also with us are Jaymin Patel, CEO of GTECH and Renato Ascoli, General Manager of Italian operations who will join us for the question and answers period at the end.

I would like to begin with an overview of our results. I will focus on the second quarter performance because it provides a useful insight into trends in our business. Overall, the Group had a solid second quarter.

Year-over-year, revenues for the first quarter were up 11%. EBITDA was up 5%. And net income attributable to the owner of the parent grew substantially, increasing by 58%. Earnings per share grew to EUR0.21 from EUR0.15, grew for a very healthy 40% increase over the quarterly performance last year.

Our results benefited from our focus on cost savings and the related actions we began at the end of 2009 and continued this year. In addition, our ability to react to market conditions, particularly in Italy, and manage our expenses, helped drive our performance.

We also experienced a positive impact from favorable foreign exchange rates. You will recall that because of our global footprint, we have a natural edge for fluctuations in FX. That along with some actions we have taken to reduce our exposure to various currencies, produced a benefit for us.

Taken against the first quarter results, we are encouraged by the second-quarter performance. Be sure, there is much to be accomplished in the second half of the year, but we have confidence in our ability to deliver our full-year plan.

The second quarter was also of particular note for the commercial success that the Group enjoyed. In Italy, where our Machine Gaming business continues to prosper, we recently opened the country's first VLTs venue. As we deployed VLTs to satisfy our over 10,700 licenses, we expect the development of that market to be a major contributor to our growth.

The VLT deployment is allowing us to benefit from synergies between our Spielo subsidiary and Lottomatica's Italian operation. Working together, the companies were first to market with VLTs, are entering into a supply agreement with Gamenet and are anticipating signing additional agreements to provide systems and gaming machines to other operators.

The VLT opportunity in Italy is a great demonstration of the value of the Group. When we created the Lottomatica group of companies, we envisioned a time when we would be able to integrate and leverage the core competencies of the combined organizations to address an opportunity. That is what is occurring in Italy with our Machine Gaming and Interactive businesses as Spielo and G2 help our Italian operations to differentiate themselves from their competitors.

GTECH had also had some important contract wins in Poland where our customers, Totalizator Sportowy, has expressed a desire to expand the relationship into commercial services and interactive wagering, and in Kentucky where we have been a long-term incumbent.

We also were successful in gaining a five-year extension of our contract with California Lottery, which extends that contract until 2019. In addition, the lottery is implementing changes in its prize payout that were recently authorized. It is expected that with the new flexibility, the California Lottery will grow to join the ranks of the top revenue-producing lottery in the world.

In Spain, we launched a new lottery in partnership with ONCE. You will recall that our arrangement with ONCE essentially makes us the manager of the new lottery network. We began selling throughout approximately 3,500 retailers which has growth to 5,800. And we expect the number of retailers to double over the next 18 months. We have had a successful start, and our expectation is that GTECH's operation in Spain will become a significant contributor in 2011 and beyond.

Cross-selling of Powerball and Mega Million games in US is beginning to have a positive impact on GTECH's customers gained. Many states are just getting their promotional activities into a full gear to support this concept, but we are seeing continued improvement.

Now, I would like to look at the operating results of our business lines. Lottomatica's Italian operation's revenue grew by more than 5%, driven primarily by Machine Gaming and Sports Betting. It's important to note that having successfully concluded the tender from -- for Scratch & Win, we can now focus primarily on recapturing some of the momentum that was lost during the tender process.

It is only natural that the potential of competitors entering the Scratch & Win market caused some disruptions. Retailers become uncertain about the future, and that impacted sales; that time has passed. The quarter revenues from Scratch & Win were comparable to the same period last year. And we have a number of new game launches planned for the rest of the year.

In the Italian Sports Betting market, we benefited from the World Cup competition. Fixed-odds sports betting wagers grew by more than 7% over last year, and the payout, which you may recall has been relatively high in the first quarter, were at the expected level for the quarter.

Machine Gaming revenues for the quarter grew 39% over a similar period last year. Lottomatica took actions to reinforce its leadership role in the Italian Machine Gaming market through the continued expansion of our direct management of gaming machines. As I already mentioned, the new VLT market offers great promise for the Group.

GTECH's second-quarter performance was good. Revenues grew more than 20% over the similar period last year, supported by a 12% growth in service revenues and a significant increase in product sales.

As we have previously noted, governments around the world are turning to their gaming programs to generate more revenues. There are numerous examples we can point to, including the new Interactive poker network sponsored by some provincial lotteries in Canada, an entirely new lottery retailer network in Spain, and Interactive channels opening up in the WLA market. Gaming expansions is underway in the US, particularly in the Machine Gaming market.

Lotteries are also exploring new business models, most notably in Illinois, where responses to their product management procurement are due tomorrow. As I had previously noted, the model adopted by Illinois Lottery will provide an opportunity for commercial operator to drive the success of the lottery and be compensated commercially-attractive rates.

The evaluation process is on track for a selection in the third quarter. Given the highly sensitive nature of where we are in the procurement process, we will not be in the offering much comment on it. However, we do expect to submit a very compelling offer.

In Gaming Solutions, Spielo has won new business to supply a central monitoring system and electronic gaming machines in Argentina. We also anticipate that the number of Canadian lotteries will soon be entering into replacement cycle for their gaming machines programs.

We recently took steps to reinforce the leadership of Gaming Solutions' organization. [Walter Bunion] an experienced gaming operations executive has taken over as President of Gaming Solutions. He is well -- he is a -- he is well-prepared to continue to grow our gaming solution business, particularly in the area of VLT expansion.

Finally, our G2 organization is working with Canadian lotteries who are about to go live with Pocket Network. This holds great promise, and strategically, is an important example of lotteries entering the Interactive space in North America. The G2 organization is going through the many changes caused by an evolving regulatory environment in Europe and preparing for the potential of the US market being opened for Interactive wagering.

We have been investing time and energy in developing the WLA market where we have had some initial success. At the same time, legislation is being actively considered to authorize Interactive wagering in the US. This is probably still some way off, but there has been promotional activity by key legislative leaders. We believe that G2 group is well-positioned to take advantage of opportunities as the regulatory environment begins to stabilize. In summary, we are --

Apologies for the interruption ladies and gentlemen, we are currently experiencing a technical difficulty, please stand by.

So I will try to summarizing that as I mentioned, we are successfully navigating through some very uncertain economic conditions. The Italian market is generally meeting our expectations and GTECH is becoming an even greater contributor to the Group's overall result. That is what we have anticipated it would be.

We have improved the results of the second quarter. We remain confident that we can achieve the key performance metrics of the guidance we have previously provided. And our commitment to maintaining an investment-grade credit rating is firmly in place.

Now, I would like to turn over the call to Stefano for a review of the financials, after which we will take your questions.

Thank you, Marco, and good evening everyone.

I'm happy to report that overall we delivered solid performance in the second quarter of 2010. Revenues for the second quarter were up 11% at approximately EUR575 million compared to approximately EUR516 million in the second quarter of 2009. At constant currency, revenues were EUR551 million.

EBITDA was up 5% to EUR200 million, compared to EUR191 million in the second quarter of last year. Second quarter 2010 EBITDA on a constant currency basis was EUR194 million. EBITDA margins were 34.8% compared to 37% in the second quarter of 2009.

Looking at Lottomatica's Italian operations, our Scratch & Win business generated gross wagers of approximately EUR2.3 billion, in line with wagers for the second quarter of last year. We are encouraged by Scratch & Win performance in June when compared to June of 2009. The number of Scratch & Win tickets sold in the quarter was also in line with the second quarter of last year, at EUR616 million.

To drive sales we introduced two new EUR3 tickets in the second quarter and we launched a EUR5 ticket in early July. We have three additional tickets planned for the reminder of this year.

Lotto wagers were approximately EUR1.2 billion compared to EUR1.4 billion in the same period last year, down 16%. Lotto wagers were primarily impacted by a low incidence of late numbers. Lottomatica's Finsoft's sports betting wagers grew 7% to approximately EUR229 million. Due to this continued strong performance of Finsoft's sports betting, total sports betting wagers for Lottomatica grew 4% to EUR251 million in the second quarter of 2010.

Machine Gaming wagers were up 10% compared to the same period last year, EUR1.1 billion. We continue to adjust our installed AWP base in Italy to improve our profitability to increase management of our machines. Interactive wagers were up 19% versus the second quarter of last year, at approximately EUR103 million, driven primarily by skill games wagers.

Lottery revenues were EUR160 million compared to EUR174 million in the second quarter of last year. Revenues from Sports Betting were up 29% to EUR42 million versus EUR33 million in the second quarter of 2009. Machine Gaming revenues were up 39% to EUR51 million. Revenues from Commercial Services were up 9% to EUR25 million due to an increase in bill payment services, electronic top-ups for prepaid mobile and ticketing services. Revenues from our Interactive business in Italy generated EUR13 million, up 39% versus the same period last year, primarily from skill games.

On slide nine we provide a break down of GTECH lottery service revenues for the second quarter of 2010 versus the second quarter of 2009. Note that this includes Gaming Solutions and GTECH G2.

US lottery same-store service revenues increased 1% versus the prior year. We continue to see some encouraging signs of recovery with solid performances in Texas, California, Illinois and Virginia. International lottery same-store service revenues decreased slightly versus the prior year. We experienced growth in the UK and certain Latin American countries, including Mexico, Trinidad and Jamaica. This was offset by softness in Eastern Europe and Ireland.

Revenues form Italian operations in the second quarter of 2010 were EUR291 million compared to EUR276 million in the same period last year, up 5%. This increase was primarily attributable to gains in Machine Gaming and Sports Betting, partially offset by Lotto performance.

Revenues for GTECH, Gaming Solutions and GTECH G2 were EUR284 million compared to EUR240 million in the second quarter of last year, up 18%. This increase was primarily due to higher product sales, a higher incidence of software service revenues and the weakening of the euro against the US dollar, partially offset by a change in GTECH's contract portfolio.

EBITDA from Italian operations was up 4% to EUR124 compared to EUR120 million in the same period last year. Increase was attributable to gains in Sports Betting and Machine Gaming, partially offset by Lotto performance. Investments we have made in our business segments over the last couple of years are producing results. For example, we are seeing higher contributions from our Machine Gaming business which is the fastest growing market in Italy.

EBITDA for GTECH Gaming Solutions and GTECH G2 was up 7% to EUR76 million compared to EUR71 million in the second quarter of 2009. EBITDA benefited from the weakening of the euro against the US dollar, again partially offset by changes in our contract portfolio.

As Marco mentioned earlier, we are realigning our organization to better serve our customers and generate savings in 2010 and beyond. This is the result of actions taken in the fourth quarter of 2009 and this year as well, where we are revisiting the cost structure in its functional area, identifying ways to drive cost, leadership in technology, software, product development and support. In the second quarter alone, we realized EUR8 million in cost savings, and the majority of the savings are sustainable in 2011 and beyond. We are confident in our ability to achieve the higher end of our expected savings for the full year or EUR30 million.

Looking at the P&L, operating income was up 4% in the quarter to EUR110 million versus EUR106 million in the second quarter of last year. Increase in interest expense was principally due to the higher weighted average interest rates resulting from a different mix of our debt, given the issuance of EUR750 million of guaranteed notes in December 2009.

In the second quarter of 2010, we recorded approximately EUR16 million of non-cash foreign exchange gains, principally resulting from hedging of a portion of our US-dollar debt. In 2009, we recorded non-cash foreign exchange losses of approximately EUR12 million resulting from foreign exchange rate fluctuations and inter-company loans and other debt.

Income before tax was up 44% to EUR83 million compared to EUR58 million last year. Group net income we EUR46 million versus EUR33 million in the same period last year, up 37%. Net income attributable to the owners of the parent was EUR35 million, bringing our earnings per share to EUR0.21, up from EUR0.15 last year.

Revenues for the first six months were up 2%, at approximately EUR1.12 billion compared to approximately EUR1.1 billion in the first half of 2009. At constant currency revenues were also EUR1.1 billion. EBITDA was EUR397 million, compared to EUR431 million in the first half of last year. First half 2010 EBITDA on a constant currency basis was EUR393 million. EBITDA was impacted by Lotto performance in Italy, contract portfolio changes for GTECH, which will not have an impact in the second half, and prize payouts for Sports Betting in Italy. This was partially offset by gains in Machine Gaming and cost savings initiatives. EBITDA margins were 35.5% compared to 39.2% in the first half of 2009.

Looking at the P&L, operating income was EUR228 million in the first six months versus EUR261 million in the same period last year. Income before tax was EUR160 million, compared to EUR182 million last year. Group net income was EUR87 million versus EUR119 million in the same period last year.

Net income attributable to the owners of the parent was EUR64 million, resulting in earnings per share of EUR0.38. We have healthy free cash flow generation of EUR406 million in the fist half of the year, providing the capacity to fund, amongst other things, CapEx interest and dividend payments. Our net financial position at June 30, 2010 was EUR2.96 billion, which is in line with 2009 before the impact of our planned investment for the new Scratch & Win license and foreign exchange.

At the end of the six-month period, we also had approximately EUR800 million of cash and committed and undrawn lines of credit to fund our capital expenditures going forward. Our CapEx is progressing in line with plans. EUR77 million of maintenance CapEx for GTECH G2 and Gaming was primarily related to investments in GTECH's contracts in New York and California. The EUR21 million in acquisitions represent the final payment for the acquisition of Boss Media.

The Lottomatica's Italian operation's maintenance CapEx was EUR527 million, primarily related to Scratch & Win license, while growth CapEx totaled EUR54 million to -- due to investments in VLTs and Sporting Betting in Italy.

Now I would like to open the lines up for Q&A, after which we will hear closing remarks from Marco. Operator, please.

(Operator Instructions) Our first question for today comes from Peter Testa from One Investments. Please go ahead.

Yes, thank you. I had a couple of questions, please. The first one is just to make sure I'm clear on the Machine revenue in Italy versus the wager. The performance of the revenue was substantially better than the wagers. I was wondering if you could give a sense as to what -- how you think about this relationship going forward. I will take them one at a time, if that's okay.

Well, because of the number of, let's say, increasing involvement of our Group in the, what we call the direct management of point of sales we think that for the remainder of the year we might benefit from a better relationship between revenues and wagers. In other words, we will somehow have a higher fees stemming from, let's say, a wider and deeper penetration down the value chain.

And so you think this will be a relationship that carries on through the second half and then follows the wager trend, going forward after that, say 2011, is that right?

Yes, I think that the market overall is experiencing an increase in wagers, which is very much related to the, let's say, introduction of new AWP2s regarding the last year AWP1; also showing some, let's say, incremental wager from the marketplace.

We still expect this trend to continue along the year. We estimate and, let's say, while in terms of share of, let's say, direct or indirect, we think we might land on 40% direct, let's say, wagering contribution and 60% coming from the indirect.

Okay. And then the next question, and I apologize for asking this, but it's been in the newspaper, so I'm compelled to ask. But you mentioned the desire or the interest in maintaining investment-grade rating, and there is some newspaper reports suggesting this not only necessary for covenants, but also for your US concession contracts that you maintain an investing-grade rating.

Firstly, is that point true? And secondly, in this era of paranoid rating agencies, can you give a sense on what you can do to maintain a buffer on -- to therefore maintain an investment-grade rating? So whether you might be seeking to partner the new Gratta e Vinci contract or whether you might be doing other things to build up a buffer on the investment-grade rating. Thank you.

Well, let me clarify that there is no contractual requirement whatsoever for us to be investment grade. It's a deliberate choice of our Group to maintain investment-grade rating, and there is a strong commitment from the management to maintain investment-grade rating as an asset of our Group going forward. Our financial strategy is designed and intended to be put in place in a way to maintain investment-grade rating.

Our relationship with the rating agencies is open, and we keep in touch with them on a regular basis. They appreciate our openness. And for the time being, I would say that we have confidence that executing our strategy and our plans, we will be able to maintain investment grade as we have repeatedly stated. And let me remind that we are, let's say, Baa3 rating by Moody's, stable outlook, and BBB minus by S&P, and again it's stable outlook.

(Technical difficulty) any other steps such as partnering the Gratta e Vinci or any other steps to try to build up a buffer there, you're happy just executing as you go. Is that a correct understanding?

I want to repeat the fact that our strategy is to maintaining investment grade. We have, at the point in time, no further need to execute any different strategy than what we have put in place so far. But we will consider such options that will enhance our capability and reinforce our capability to maintain investment grade. At this point in time we have nothing to report.

Okay, that's very clear. Thank you for your answer.

Our next question comes from Matthew Gerard from Credit Suisse. Please go ahead.

Hi, good evening. I've also got a few questions actually, firstly on -- if we take them one at a time, firstly on VLTs in Italy. Obviously, you're on the ground now. So it's already changed your previous guidance on what you expect to be, say, an average number of VLTs operational through the course of the year. I think you previously indicated about a 1,000 or so wouldn't be bad average to work with for this current year.

And secondly, I suppose, linked to that last question on partnering, you've obviously got a significant number of licenses, but not necessarily the distribution capability in Italy. Are you considering linking up with some operator that has got the distribution capability to kind of better leverage your license allocations? Thanks.

So I'll take the first one about the guidance. As we had indicted in previous calls, we have included in our guidance a contribution of 1,000 machines. We have just started launching the first venue two weeks ago. So we are confident that the numbers, the average numbers of machine that we are previously indicating is in line with our ability to deliver in the second half of 2010.

And I will turn to Renato to comment on the ability to distribute our products within the Italian territory.

Yes, thanks, Stefano.

Well, one thing I may say is that probably because of the fact that we've been first to deliver and to pass the [concession] phase which is dei Monopoli di Stato and the reputation that both Lottomatica and the parent company, Spielo, has built over the months.

Nowadays, we have a high, huge pipeline of opportunity. So we have far more opportunities in terms of distribution outlets rather than licenses. So we are in the process of cherry picking so far.

Sorry, just to clarify, you don't feel you need a large scale distribution partner for the VLTs in Italy?

No. No, whatsoever.

Okay. And my second question was can we get an update on where we are with the Texas lottery, RFP. I've lost track of the delays now in Texas. If you could update us on the timetable, that'd be great, thank you.

Yes, with respect to Texas, we have -- we are expecting a decision by the Texas Lottery Commission in the middle of November 2010. They decided to delay the decision by several weeks because of the delay in the initial submission to early July. So now we will have to wait until November.

Okay. I suppose just following on now on US lottery, you talked quite confidently about the uplift on the Powerball and Mega Millions cross selling. I mean, is there any way you can perhaps quantify what you are seeing on the ground and in the US, and perhaps put that in the context of next year and perhaps what you expect to see in terms of the uplift?

Yes, all I can tell you is, certainly the performance of Powerball and Mega Millions for those cross-sell jurisdictions that have both games because those numbers are public. So for the first half of the year which represents, I think, approximately 21 weeks or thereabouts of sales because sales were -- I think were launched in the fifth week of the year.

So those states that have launched cross-sells, sales are up by 16% as reported by Stefano or Marco, I can't quite remember who said that. So sales are up from roughly EUR1.5 billion for those jurisdictions, up to close to EUR1.8 billion in total.

And the trend is continuing well. I don't want to make a prediction for next year just yet, but the trends are certainly quite positive and helping to sustain the overall online growth rate in the US market.

Okay, thank you very much.

Thank you.

Our next question comes from Domenici Ghilotti from Equita. Please go ahead.

Good afternoon. I have -- first question is related to the California introduction of products with high payout, higher payout, so I would like to understand the timetable and so timing of these launches.

Second question is, your comment on the legislative process going on in the US to remove the ban on the Internet gaming. Any comment would be helpful.

And the last question is related to the VLTs in Italy, if you have any, let's say, indication, starting indication from the results of the recently launched initiative.

So let me start first of all with the California question. We expect the California Lottery to begin to market some higher prize payout games beginning in the next several days. In fact, they will probably launch some games of between $1 and $3 in the next few days, and the prize payouts are going to be slightly higher in the mid 50s, the high 50s compared to prior games.

The first $5 games, we expect to be launched in the September timeframe, this will have a payout in the mid 60s. So the plan the lottery has is to very much show consistent responsible growth over the next several years by launching games with a higher prize payout on a scheduled basis over the coming months. So I think that the expectations that we had certainly are very much in line with where -- which -- with where our customer is going, and we feel quite confident with the long-term outlook there.

Your second question for me was with respect to the various bills that are being tabled in United States with respect to Internet gaming.

Yes, yes.

There are two sets of bills that are being pursued. There is one bill that's being pursued at the federal level, which is a Frank Bill and the Frank Bill has currently passed one level in the Senate hearings, and it still has another several hearings to go to be presented to the full Senate and then the House.

And I would characterize it as having made the first step. I think there is still a long way to go, and -- yes, long way to go for the bill to be passed by the House, so I certainly would not place the high probability on passage in the near term at all.

Then the other perspective is that several US states like California, Florida and New Jersey are also pursuing state bills, and again I think that there is quite a way to go before we'll see any real action there. But we are of course following it very closely; we remain interested in the progress. And we'll keep you informed as matters progress.

Thank you.

Yes, so as far as the -- your question regarding VLTs is concerned, well, of course, it is very hard to make or adjust the expectation after 13 days experience. Nonetheless, what we can say from the performance of our first venue operating is that both the expectations in terms of timing of the rollout and productivity of the VLTs is confirmed.

May I have another question on Spain, in particular on -- with the development in the retail network? You mentioned some figures related to the point of sales. I would like to understand if you have also some colors on, let's on, on improvement in wagers or, let's say, successful launch of new products.

Yes, so to give you some further information on Spain, we currently have approximately 6,000 or so new terminals in Spain, and we expect to more than double that by the end of 2011. In fact we'll be probably north of 15,000 new lottery terminals for the ONCE products by the end of 2011.

So far so good. We've only had a few weeks of sales, but the total volume of sales for the new channel and the existing ONCE channel is right in line with where we would expect, and sales are certainly improving week to week. And so our perspective today is that the products that we have launched being a range of new instant games as well as a daily keno game is doing well and we expect the business to develop.

Thank you.

Our next question comes from Alessandro Bajbadino from Deutsche Bank. Please go ahead.

Yes, the first question is regarding the cross selling of Powerball and Mega Million in Florida and California, if you have any update on when the two states will join it. And the second part is regarding VLTs, besides Spielo contract with [Game Mate], are there any other contract which Spielo can pursue in Italy? Thank you.

Let me go first, with respect to your question on Mega Millions, Powerball. Our customers in Florida and California are considering the launch of Mega Millions and Powerball, but we do not have a fixed timeframe for the decisions at this time.

Regarding the Spielo activities with other operators when -- what I can tell you is that there are some discussions, and I see room to have agreements with other concessionaires. But of course for the time being I cannot disclose any further.

Can I add a further question? It's regarding -- recently there was an article regarding your interest in Greece. Could you confirm that? I don't know if you already spoke about it. Unfortunately, I couldn't hear the whole call so far.

So we didn't talk about that. What I can confirm you is that any development in Greece that allow a role of operators in VLTs or open a room for an Interactive opportunity there will be followed very carefully by the company, so the interest is there. We are waiting to follow the legislation to make our own business assessment on the country.

Thank you.

Our next question comes from Laura Pennino from Banca Leonardo. Please go ahead.

Hello. I had just a question regarding the Lotto. Can you please -- what -- previously you said that you expect a minus 5% decline in light of the minus 16% of the first half, can you give an indication of what you expect for the full year? And maybe going on if you expect also to be stable or continuous decline even at a smaller rate.

Hi, well, the performance is there, of course. But the good news that we see that the, let's say, in the last month of June and in the last weeks, the performance of Lotto has been stabilized. So we do not expect for the, let's say, worsening of the comparison year-over-year.

Of course, as Marco Sala stated before, the reason for the business plan is mainly related to a statistical issue, the fact that late numbers did not appear for a sufficient period of time. If you go back to 2008 or 2009 you will see that for having late numbers to positively contribute to wagers, you need to have them and keep them for at least 40 to 50 consequent drawings.

This specific part did not appear for the first half of year 2010, so we have expectation that things should change in the following part of the year. Besides, we of course have some, let's say, commercial and advertising programs located in the second half of the year. That will be taken in place in order to partially cover the current performance. And we'll update you, of course, in the following calls.

Sorry, just a follow up. When you say you do not expect a further decline, you mean that you do not expect it to go worse than 16%, or do you expect it to -- not worse, to stabilize?

As I said, it has already stabilized, and we expect that the decrease will be not as worse as the 16% we are currently seeing.

Okay. Thank you.

And another question is regarding the Gratta e Vinci. You said that you expect to energize, to put some -- to energize the -- after the -- the process after the renewal of the concession. Can you give an indication of what you are aiming to do?

Yes, of course, the -- as we said before, let's say in the last months before the May 30th, the number of point of sales was a bit positive and worry about the continuation of the concession, and there have been also some, let's say, fuss about who could be the potential competitors in the market.

Now, all these, as we said, is gone, and we are currently focusing the launch of three new tickets for the remaining part of the year. The testing of these tickets is good, and so we expect positive contribution coming out of that.

Okay. Thank you.

(Operator Instructions) Our next question comes from Mauro Baragiola from Citigroup. Please go ahead.

Sala, it's not actually a question on Lottomatica, but I wonder if you can share your thought on the PartyGaming Scratch & Win deal, and how this could change the landscape in the US, if I may.

Now, as far as US is concerned, I think Jaymin explained very clearly that our view is that not withstanding all this preliminary discussion, the visibility of this business is not so near. We do not see a business opportunity very near, not withstanding the discussion in the Senate and not withstanding the discussion in some jurisdictions. Of course, we will make our own assessment over time, but -- I mean, we are not -- we keep [goaled] on that. Of course, we are much interested, but we are not reacting with an excess of expectation because of that. I will say that PartyGaming merger is one of the move that was somehow an opportunity; an opportunity -- possibility within the market that is not changing very much our landscape.

Okay. Thanks.

Our next question comes from Fabio Pavan from Mediobanca. Please go ahead.

Yes, hello, good evening, just a very quick question first. I was wondering, since you were able to deliver a natural -- very short-term view of this first part of saving, I mean there is in your opinion a chance to achieve -- higher than expected balance savings because it was for -- for you the first time you suggest some saving. And maybe there is room to improve this level. Thank you very much.

In terms of cost savings, well, we have stated that in the Q2 we have reported cost savings of EUR8 million on an overall target, which is confirmed to be EUR30 million for 2010, in terms of EBITDA contribution. Of course, this is the result of a never-ending exercise we have started in the Q4 2009, taking some reduction in force outside of Italy.

And we have continued looking at any cost component, focusing in 2010 within Italy; Gaming Solutions and GTECH, and we are continuing that exercise which is expected to generate further contribution in the following years. We will be more specific in future calls once we have developed further plans of cost reduction actions.

Our next question comes from Patrick Hughes from Citigroup. Please go ahead.

Yes, good afternoon. I'm afraid I actually missed the throwaway comments on what your available liquidity was, please, if you could repeat them.

Of course, we can. In terms of cash and committed and drawn lines, we have in excess of EUR800 million available at the end of June.

Okay. Can you also maybe give us some preliminary thoughts on your refinancing coming up in 2012? You got reasonably chunky amounts outstanding in terms of loans and revolver. Have you looked at that in any great detail as yet, please?

As you have stated, refinancing, the major refinancing is expected in 2012. We have a strategy. But, I mean, it's too early to disclose this strategy in the market. I think we have proved our ability to deliver with innovative solution than the way of maintaining a package of financing with structured elements in our portfolio which are ensuring long tenure and a competitive cost of funding.

Just -- I appreciate that. With regard to the lending groups for the various services, would you constitute them as being co-lenders to Lottomatica and GTECH?

I would say it's too early to say that. And I think it's not the session to discuss this level of details. I would be happy to answer further questions on a different session.

Okay. I'll call you offline then. Thank you.

(Operator Instructions) It would appear that at this time we have no further questions.

Thank you, Operator.

Let me finish with some brief comments. As we look at the near term, we are greatly encouraged by the wide range of opportunities that exists across our business lines. The Italian market will continue to be a focal point of our activities, particularly in reenergizing the Scratch & Win market and developing our VLT and Sports Betting businesses.

GTECH is well on its way to getting its new operation in Spain fully deployed. Its California (inaudible) customer is beginning to institute important prize payout changes, and the cross-selling of Powerball and Mega Millions games in the US is driving sales. We are also planning to submit a compelling bid in Illinois.

Our Gaming Solution business, particularly our Spielo subsidiary is capitalizing on opportunity in Italy and preparing for the potential introduction of VLTs in Greece as we were well positioned and ready to respond as the Interactive space evolves into more well-defined regulatory environments.

While we see great opportunity, we are also very much aware of the need to manage our business so that we can also respond quickly to challenges to our plan. We have been diligent in managing the cost side of our business to ensure that we meet our commitments. There will be no letting up in that area, I can assure you.

Thank you for joining us today, and I hope you enjoy the rest of the summer month.

Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You many now disconnect.