International Game Technology PLC (IGT) 2013 Q4 法說會逐字稿

Good day and welcome to the GTECH 2013 Full Year Results Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Marco Sala, CEO. Please go ahead, sir.

Good evening and welcome to GTECH's Fourth Quarter and Year End Earnings Conference Call. Joining me today is our CFO, Alberto Fornaro

Let me start by giving you my perspective on the Performance of the business and the organizational developments that defined 2013 for GTECH.

When I spoke with you 12 months ago, we were embarking on a major reorganization of the Company to redefine how we approach the market. Our intent was to become one company offering a comprehensive portfolio of services and products to the gaming market. Convergence is evident in all the markets we serve. To be even more relevant to our customers and to address new growth opportunities, we needed to become a single, customer-facing company and begin to harness the potential that was envisioned when Lottomatica acquired GTECH.

In addition, one year ago, we had just completed a very successful 2012 and were well on our way to delivering on our 3-year plan. So, we were looking forward from a position of financial strength. Of course, the new organizational structure we were implementing entitled some level of risk. Execution would be key.

One year later, I am pleased to report that we have successfully completed the reorganization. Our regional leaders are working with our centralized products and services organization and we are realizing some significant synergies as a result. And, even more importantly, our portfolio of offerings is more clearly focused and better aligned with market expectations.

The reorganization process was an ambitious undertaking, but a necessary one. As a result, we are firmly of the belief that GTECH is now in a strong position to support and drive our continued growth beyond what we could have achieved under our former organizational structure.

As to our 2013 performance, it was another good year in which we were able to accommodate unexpected developments and still meet or exceed our key performance objectives. We sustained our momentum with strong same-store revenue growth in the Americas. We maximized the benefits available from the Canadian replacement cycle for VLTs and systems by achieving over 40% market share. Internationally, we extended contracts in several key jurisdictions and strengthened our leadership in the commercial casino space. And, we maintained and grew our overall market position in Italy.

From a strategic perspective, we have made significant gains in addressing the WLA interactive markets. During 2013, we launched an on-line gaming system for the Georgia Lottery, one of the most comprehensive in the United States. And, we expanded and improved the on-line offerings in Illinois with a first-ever-mobile application.

We launched our new interactive platform for Norsk Tipping, where we are providing integrated casino, bingo, and iLottery products with mobile interconnectivity. We are preparing for the launch of our interactive solution for the Ontario Lottery. Finally, we were recently selected by OPAP to provide its sports betting and interactive solution. All in all, good progress has been made in the WLA interactive market, an area that we believe will be expanding rapidly over the next few years.

To advance our offerings in mobile, we have announced our acquisition of Probability, a leading provider of mobile services to the gaming industry. We expect that within the next 5 years, mobile will account for a significant portion of global gross gaming yield. And, the Probability acquisition propels us into a leadership position in the mobile gaming space.

In addition we will be making a significant commitment to increasing our presence in the commercial gaming markets which represent a significant opportunity for us, particularly in North America where significant machine replacements are expected. New content is one of the primary drivers of growth in this area and we will be focusing on increasing our offerings to gain market share.

During 2013, our Lottery management activities expanded with the launch of operations in New Jersey, Indiana and Costa Rica to complement our established operations in Illinois. Once the election cycle for Governors in the US is completed later this year, we are well positioned to take advantage of new Lottery management opportunities that are likely to be introduced.

Internationally, we look forward to a significant new operator opportunity in Turkey where offers are expected to be submitted in the coming months.

In regards to Italy, Lotteries performed well, driven by a positive performance in Lotto due primarily to the impact of late numbers and a good performance by 10 e Lotto. Results from scratch-&-win and machine gaming performed to our expectations and, we believe, are at sustainable levels going forward.

Turning now to other developments of importance, we enjoyed continued success in business development with the signing of extensions in 5 jurisdictions in the Americas, a new contract in Colorado, and additional VLT product sales in Oregon.

Internationally, we extended or expanded the contracts in Switzerland, Poland and Belgium. And, we are awaiting the launch of the VLT program in Greece. As I mentioned earlier we had good results in sales to the commercial casino market.

I'd like to conclude with a discussion of our guidance for 2014. Alberto will give you a more detailed perspective but I wanted to offer some comments. First and foremost, it is important to underscore that in 2014, we will continue to grow. We have developed a business plan that is ambitious, achievable and we will establish the foundation of our future growth, particularly in key segments like interactive, mobile, commercial gaming and lottery management agreements.

Further, we have put in place an organization that has the capability and resources to drive our success across our entire portfolio of products and services. And, finally, we expect that our continued disciplined approach to the investment of capital will allow us to sustain the progress we have made in strengthening our net financial position.

Now, I'd like to turn the call over to Alberto for his review of our fourth quarter and full year performance after which we will take questions.

Thank you, Marco.

Our performance in the fourth quarter underscores the strength of our operations as we were able to maintain EBITDA roughly stable at the consolidated level and in our three regions, even as revenues were down slightly.

Now let's turn to Slide 7, which shows consolidated results for the quarter. Consolidated Revenues were EUR773 million, down 5%, mostly due to the phasing out of the Canadian replacement cycle and to foreign exchange.

On a constant-currency basis, consolidated service revenues were up 2% in the quarter. EBITDA was stable at EUR245 million and was 1% higher on a constant currency basis.

In the second part of 2013, we started executing our synergies and rationalization plans, which I will discuss shortly. For now, let me point out that quarterly operating income of EUR104 million is impacted by certain restructuring costs that are part of this plan.

We announced in December a EUR28 million tax settlement in Italy. Net income attributable to the owners, when adjusted for this settlement, was EUR29 million, resulting in EPS of EUR0.17. NFP was in line with our guidance which will be discussed in more detail later.

On Slide 8 is a summary of the full-year 2013 results. You should note that we are also presenting these numbers net and gross of one-off events. Both EBITDA and operating income are shown before and after the EUR30 million machine gaming settlement in Italy. When taking this one-time event into account, EBITDA was at the higher end of our 2013 guidance.

Recurring operating income was EUR589 million, or 1% higher than in the previous year. Net income was EUR224 million when grossed-up for the one-time impacts of the gaming machine and the tax settlements.

Net financial position as of December 31st was also in the guidance range, and improved to EUR2.51 billion from EUR2.55 billion at the end of 2012.

Now let's look at the quarterly P&L. Reported figures reflect an average dollar-euro foreign exchange of 1.37, compared to 1.30 in the fourth quarter of 2012. For this reason, we also presented a P&L at constant currency.

While service revenues were stable, or up 2% at constant currency, product sales were mainly impacted by lower VLT sales in Canada in the quarter. In Q4 2013, Canadian sales were EUR5 million versus EUR35 million posted in the fourth quarter 2012.

Below EBITDA, depreciation and amortization is slightly higher due to capital investments that were made in 2012 and 2013, while operating income is also impacted by approximately EUR15 million of restructuring costs, out of a total of EUR21 million expensed in 2013. These one-time costs were mainly related to the streamlining of our interactive operations, optimization projects in the Lottery space, and costs associated with our overall management reorganization.

The increase in the quarterly tax rate is related entirely to the tax settlement in Italy mentioned earlier.

On slide 10 you will find details related to the Company's full-year 2013 P&L. EBITDA and operating income are shown both as reported and on a constant currency basis. Operating income reflects the slight increase in D&A and EUR21 million of restructuring costs.

Net income discounts the effect of the tax settlement in Italy. In 2014, we expect the book tax rate to go back to normal and be slightly north of 40%.

The Americas growth in the fourth quarter was driven by a 5.6% increase in same-store revenues. As indicated in the comparison of revenues and units shipped between Q4 2013 and Q4 2012, the Canadian product sales impacted in the amount of approximately EUR30 million and was partially compensated by EUR5 million in additional sales to customers in Argentina and elsewhere.

On a constant-currency basis, Americas revenue grew approximately 4% in the quarter, compared to the same period of 2012.

Despite lower product sales, EBITDA was only EUR3 million below last year due to the positive contribution of same-store revenues and action on costs.

Among the most recent developments in the interactive space, it is important to note the launch of a new mobile iLottery platform in Illinois.

Total revenues from international in the quarter were EUR85 million versus EUR103 million last year. You will recall that the prior year included a peak in product deliveries in France, Lithuania and other countries, which did not recur this year.

International Lottery same store revenues were impacted by lower Euro Millions jackpot activity. Notwithstanding the weaker jackpot-related sales in the fourth quarter, full-year same store revenues were stable.

International EBITDA benefited from cost reductions of approximately EUR7 million, of which approximately EUR2 million were structural in nature.

In Italy, total Lotto wagers were up 3% to EUR1.68 billion, compared to EUR1.63 billion, notwithstanding a lower contribution from late numbers, and supported by good 10 e Lotto performance.

Instant ticket wagers were in line with the same quarter of last year, at EUR2.41 billion.

EBITDA also benefited from the full impact of cost saving actions taken over the last several quarters. Last year in Italy we achieved EUR15 million in total savings, 90% of which are recurring. As a reminder, of this EUR15 million, approximately EUR5 million represented the carry-over impact from actions taken in 2012.

Most of the EUR19 million decline in machine gaming revenues was related to the tax increase that took effect in 2013, the impact on player behavior following the payout adjustments, and a more competitive environment due to the higher number of machines in the market compared to 2012. The average number of installed VLTs in the quarter for GTECH was comparable to fourth quarter of last year.

Net financial position at the end of December was EUR2.51 billion. Cash from operations was EUR696 million.

As you know, our working capital is somewhat volatile by nature, particularly in Italy where we manage the receivables and payables on instant tickets and commercial services. For this reason, we entered into an ongoing program for the sales, on a non-recourse basis, of certain trade receivables in Italy.

At December 31st, we had sold approximately EUR80 million of receivables under the program. While working capital peaks and troughs can be anticipated, at the beginning of last year we did not foresee the impact of the AWP and tax settlements as well as the full scope of our cash restructuring costs.

Maintenance CapEx was lower than anticipated, due to delays in investments initially forecast for 2013, of approximately EUR35 million and the remaining due to CapEx optimization. Let me point out that levered free cash flow totaled EUR326 million, up from EUR303 million last year.

During 2013, we invested in a number of growth initiatives, including lottery management contracts in Indiana and New Jersey, the Italian sports betting tender, and gaming machines expansion, as we had anticipated. We also joined the consortium that bought a 33% stake in OPAP, with a EUR20 million investment.

Before moving on to financial guidance for 2014, I want to provide a few details on our synergies and cost savings plan, stemming from the Company reorganization we introduced last year. We have identified three major areas of potential savings: the area of sourcing and supply chain; the area of technology, particularly in the integration of platforms and systems, including the implementation of the ERPs; and a rationalization of our footprint, both from an industrial point of view and through consolidation of data and call centers.

This third one amounts to around 50% of the total synergy, and the first two 25% each.

Through these initiatives, which we are now implementing, we expect to achieve approximately EUR50 million of recurring cost savings over the next two years.

Obviously, a number of the actions we identified required, and will require, one-time costs upfront. We estimated that we will incur approximately EUR35 million to EUR40 million of restructuring costs, EUR21 million of which were already expensed in 2013.

Finally, let me review the guidance for 2014. Revenues are expected to grow between 3% and 6%, driven by mid-single-digit growth in the Lottery business in the Americas, positive contribution from international and recovery in Italy, where we expect top-line growth in sports betting, benefiting notably from the soccer World Cup. Italian lotteries are expected to be stable.

Revenues from product sales will show a reduction due to the unfavorable comparison with 2013 that benefited from the Canadian replacement cycle.

We expect operating income to be up slightly in 2014. This is the result of several trends in different directions that I would like to summarize to you.

First of all, there is one thing that will not change; restructuring costs will be at about the same level as in 2013. And operating income will not be impacted by the AWP settlement.

This year, we have two major areas of improvement in profitability- cost savings and same-store revenues.

The expected synergies in 2014 will be around EUR40 million and will finance around EUR20 million in additional R&D and product marketing expenses. Same-store revenues are expected to drive additional profitability and will absorb the expected increase in D&A related to the 2013 and 2014 CapEx. The net impact will be another EUR15 million to EUR20 million.

So, all in all, despite the absence of the Canadian VLT replacement cycle this year, we expect to deliver a stable or slightly improvement in operating income in 2014.

The profile of 2013 product sales in Canada might impact the quarterly distribution of operating income. The year-over-year operating income improvement should therefore materialize in the second half of 2014.

EBITDA, when corrected for the one-off's, should improve year over year.

Maintenance CapEx is budgeted to be at the same level as in the 2013 guidance, taking into account the timing shift of EUR35 million related to last year.

Also for this year, growth CapEx is confirmed to be in the range of EUR115 million and EUR130 million, related to new projects in Greece, Colorado, the tail of New Jersey, and the betting tender in Italy, and the acquisition of Probability.

Today we also announced that we plan a buyback of a 12.5% indirect stake in Lotterie Nazionali, the company that owns the Italian scratch-&-win in concession, from UniCredit. The contract, signed in December 2010, gives us the option to buy back this stake and we believe that it is the right time to use the available liquidity to buy out minorities from an investment with an attractive yield.

Taking all into account, we expect net financial position to improve only marginally this year. Our current leverage ratio of approximately 2.3 to 2.4 times is sustainable, and we reiterate our commitment to maintain investment grade-type credit rating.

Now I'd like to open up the lines for Q&A after which we will hear closing statements from Marco.

Thank you. (Operator Instructions). Domenico Ghilotti, Equita.

Good afternoon to everybody. My first three questions; the first is related to a clarification on the guidance, in particular on the EBITDA guidance for 2014. I would like to check if you have included the EUR15 million, EUR20 million one-off costs at the EBITDA level and if you can give us an indication of what amount of the cost savings are already achievable in 2014. And also on the CapEx guidance, if the CapEx guidance includes the investment for the buyback of the scratch-&-win stake.

Second question is related to the current performance of your Italian business, so if you can provide some color on lotteries, sport betting and the game machines.

OK, so let me start with the guidance, OK? Regarding the guidance, we have included basically in our comments that this operating income is stable or slightly -- can enjoy slight improvement in 2014. We used as a base for 2013 the result as reported, plus the EUR15 million to EUR20 million you were mentioning of the one-off. So basically, the comment refers to that base, which basically coincides with the center of the guidance.

Embedded in this guidance there is the cost savings for the year of approximately EUR40 million in terms of synergy, in 2014. As I said, however, part of it will be utilized for additional investment in R&D, specifically in the gaming and the interactive sector as well as in product marketing, mostly in the same areas I have mentioned.

If I might interrupt on this topic; how can I reconcile the EUR40 million? Is it fully compatible with the EUR50 million on a two-year basis or that you are mentioning in the press release?

Correct. It's fully reconcilable and let me explain the reason. Some of the actions have been taken in 2013. For example, the rationalization of our footprint in interactive in Sweden announced in the second half of 2013, has been taken. The restructuring costs are part of 2013, and therefore will produce a full year of results in 2014.

And there's this initiative, there are others already taken that will produce the result in the current year.

In 2015, we will have mostly the carryover impact of the action taken in 2014, and that's why you have most of the results in terms of cost savings in the current year.

I will take the question regarding how is going the Italian business in the beginning of 2014. I'm pleased to say that things are progressing well in Italy, because we can report stability on lotteries, net of late numbers, as far as lottery is concerned, and the stability also on scratch-&-win. On sports betting we are growing. We have to report also a very good start of virtual betting that is delivering very well, at least in the first weeks. While in gaming machines, we continue to experience a decline in the VLT productivity, while keeping the performance in terms of revenues as far as AWPs are concerned.

So we are experiencing a situation similar to the trend that we experienced last year that is giving us the perspective of keeping our current profitability going forward.

I ask you just a clarification on sport betting; are you referring to growth in wagers or also you're satisfied with the payout -- so on net revenues?

(Inaudible) the payout is satisfactory. It is aligned with our expectation and is slightly more than last year. But it is by far below the historical average. So it's good.

OK. Well I had also just a clarification on the CapEx guidance in the previous question. So CapEx is already including the buyback of scratch-&-win, or we should add on top of the guidance?

No, it does not include it.

OK. Thank you.

Sorry. We have included it in the forecast for the NFP.

OK.

The NFP already includes the reimbursement of UniCredit.

OK. So it's not on the CapEx, but is on the net financial position. OK. Thank you.

Alvaro Mata of UBS.

Hey, Marco, Alberto. A couple of questions from me, please. The first one is on page 13 of your presentation. It seems that the EBITDA for the gaming machines during the quarter was down EUR13 million. So I wonder do you have the numbers of from where to where, so I can calculate that in percentage terms as well, please?

Just give me one second to -- regarding the absolute number. Okay, we usually don't provide this number, however, let me tell you that it's in the range. It's around EUR120 million, OK?

OK. EUR120 million is fourth quarter 2013 or 2012? So it's like EUR133 million to EUR120 million more or less?

No. It's the total for the year.

I see. But the EUR13 million; is that the decline in the fourth quarter or in the full year?

No, the EUR13 million is in the fourth quarter.

Decline in the fourth quarter, OK and then (multiple speakers)

And all the numbers in this table are for the fourth quarter.

And the EUR120 million you gave me is the amount of EBITDA you do every year?

Roughly, yes.

Roughly, OK. So you do -- am I right saying if I kind of pro rata that into the full year, you do about EUR30 million EBITDA per quarter and so EUR13 million down in a quarter is somewhere around 50%? Am I right saying that that's roughly the number?

No, because you are impacted by the one-off this year.

And how much was the one-off?

It's around EUR20 million.

EUR20 million on the full year? Is that a full year number?

It's the EUR20 million in the full-year number. But I think I provided more than we usually provide, so let's move to another question please.

OK. Have you heard anything or do you expect any kind of changes in gaming taxes in Italy in 2014?

If I could answer this question I would be very happy. I mean we managed last year without having any taxation increase. There is a not a debate regarding increase in taxation during the let me say, the start of the government actions. Very likely there will a law that will regulate more in details the gaming market, including also the review of all the aspects. But no one is, in this period, evaluating any increase in taxation.

Great, OK. And last question; why do think the AWP is performing better than VLT lately? Do you think there is a little bit of saturation in the VLT market probably?

No, the point is regarding AWPs, we are performing better because we have the chance to increase the number of machines. That is not the case when it comes to the VLTs and so we are keeping our revenues, because we are compensating a decline in productivity with an increase of machines.

As far as VLT; this concern we have already installed all our rights, for time being by the way, because during 2014, we will deploy additional rights, but for time being, we are keeping the same level of machines we were having last year and therefore we are suffering the decline in productivity.

I see. So on a like-for-like basis there is no really differential between the two machines. They're both performing similar? Is that right?

No, it's not what I said. But the VLTs are declining a little bit more than AWPs. But it is impacting us in a different way, because in one case we can offset the decline in productivity by the enlargement of our install base. On the other case, for the time being, we are unable to do that.

OK, OK. That's understood. Thank you very much.

Fabio Pavan, Mediobanca.

Yes, hello. Good evening and thank you for taking my three questions. The first one refers to the acquisition of Probability. Is it fair to assume that this deal will allow you to leverage and speed up your digital activities? Could you provide us some more color on this?

The second question refers to the US contracts. I was wondering if you could provide some more color on the start of the year in the Illinois and New Jersey activities.

And finally a question on the Italian market; I was wondering if you believe that for some sector, in particular I'm referring to the gaming machine one, sooner or later the time for consolidation in the industry could come? Thank you very much.

OK. I'll take the first question and the third question. Regarding Probability, of course we are very happy because we believe that -- we believe it's clear to all the industry that the mobile sector, the mobile sector is growing even faster than the overall interactive sector. And therefore, we can exploit the Probability capabilities in order to provide, to ourselves and Italy and to our customers across the globe, better and faster application of mobile.

And that's the reason why we did the acquisition and of course it will be part of our offering going forward in all our submissions. So we are very pleased for that acquisition.

Regarding consolidation; yes, I'm expecting some consolidation going forward. I cannot say if this year or later on is something possible in a market where there are many players, some of them not perfectly positioned in a declining market. So that could be, in principle, possible.

OK. Regarding the performance of the two [PMA], Indiana and New Jersey, we have started very well the two contracts and we are on target to achieve what are our plans for year end. So overall, it's a very encouraging start.

Thank you very much.

Andrea Randone, Intermonte.

Thank you and good evening to everybody. Just a couple of questions; the first one is about again your CapEx guidance. Please can you confirm that you are not including any amount of investment for Turkey, and if it pleases you to spend some words about these upcoming opportunities you mentioned during your presentation.

And second question is just about the dollar sensitivity. You provided a guidance with an exchange rate 1.3. I wonder if you can give us an idea of dollar sensitivity maybe translating the targets at 1.4 or just the sensitivity. Thank you.

Turkey; there are no CapEx in our guidance as far as Turkey is concerned. Now we are working quite extensively on our Turkey bid. We consider Turkey a quite attractive market for the lottery outsourcing, since we know the market rather well, being the supplier of Milli Piyango.

So we know that there is potential in that market and we are evaluating our submission that is due in April. This is what I can say on Turkey so far.

Thank you.

Regarding the sensitivity to foreign exchange and specifically to the dollars, the net financial position is impacted by EUR2 million for each EUR0.01 of change. Obviously we have a part of our debt is in dollar and therefore that's an impact.

In relation to the P&L, EUR0.01 change in the dollar-euro has an impact of EUR1 million.

Excuse, Alberto; EUR1 million on EBITDA you mentioned or EBIT?

On EBIDTA.

Thank you.

Richard Stuber of Nomura.

Hi, good evening. So just one further question from me, please. You haven't really mentioned too much about your balance sheet and potential for refinancing opportunities there. I was wondering if you could just shed some light on that please. Thank you.

Yes, as you know, we have maturities in terms of credit line in December 2015 and one important maturity in terms of bonds which is in 2016, a EUR750 million senior bond, and also we have the first call on the hybrid. Therefore we have some time to eventually refinance both the debt, then the bond. In anticipation of that, we have issued a bond in November 2012 for EUR500 million.

So we are looking at it. However, we are looking also at the refinancing in conjunction with the potential bid that we have to face, and particularly one in Turkey that could be especially large when we look at the up-front fee. And therefore, this will be an important part of our decision making to when and how to refinance the debt.

Could I just follow up what you said on Turkey just now? So you have a large up-front fee; would you also consider partnering with a financial player as well so they could help fund this fee and you could share the returns or at the moment in Turkey you're thinking of putting up the entire fee yourself?

Well, we have not decided yet. We are exploring all the options at the moment. There is still some time before the bid and the decision usually done in very last -- the very last few weeks before the bid. So no decision has been taken yet.

All right. Thank you very much.

[Ariana Bastianelli of Karoff]

Hi. Good afternoon to -- good evening to everybody. I have three remaining questions. The first one is related to the [Italian Lotto] in 2016. I wanted to know if there is an initial discussion with the regulator in terms of a potential structure of the renewal of the contracts, I mean if they're to go for an up-front or eventually decrease the fees or both?

The second is if you can quickly remind us, give a sense of the impacts in the reduction of minorities coming from the buyout of the stake of UniCredit in scratch-&-win.

And the third one again on Turkey. I mean from my previous understanding there was a capital allocation discipline to Turkey in your previous thoughts. I would like to know if there is something in the meantime that has changed or if you can give us a broad range of your maximum engagement that you could have there. Thanks.

OK. I'll take the first question and the last question. The first; in talking about Turkey, we have not discipline only in Turkey. We have discipline in all our business. So it is not the matter. Of course I cannot provide any figures. You can imagine, that is a competitive bid. And therefore I do not provide which are our thoughts for the maximum capital we would deploy.

I think we have demonstrated over the last couple of years that we are very carefully deploying our capital and the same approach will be adopted for approaching the Turkey bid. I repeat, it's important because we believe it has potential. On the other side, we will maintain our disciplined approach.

And that's it regarding Turkey.

Regarding the Italian Lotto; we didn't have any discussion with the regulator regarding our intents to approach the rebid. By the way, it's rather early and therefore it's quite normal that there is no discussion at this point in time. And therefore we need to have more clarity from the regulator regarding the process and intents to adopt for the bid.

Thank you.

Regarding the UniCredit stake and the second question, we have a two partners; Scientific Games at 20% and [Defita] 16% and in addition to that we have UniCredit with 12.5%. So we are going to buy back the 12.5%, bringing our percentage to 64% of the total. Expenditure will be EUR72 million and on top of that we're going to pay UniCredit EUR20 million -- additional EUR20 million for remuneration of dividends and repayment of capital related to 2013.

Thank you.

(Operator Instructions). Domenico Ghilotti, Equita.

I have a couple of questions. The first is related to the international same-store sales in Q4 that were flattish, basically. I was expecting some improvement thanks to the UK international lottery pricing. So I wonder if you have some color on the impact of this re-pricing and on the trend for Q4 in international lotteries.

And the second question is on a sustainable recurrent tax rate that we can assume in 2014.

Regarding UK, there was a -- let me say, a soft start, but there was an improvement but there was in UK a lower performance regarding Euro Millions. By the way, what I can anticipate is that the start of the year in UK is rather positive.

OK.

(Operator Instructions). Domenico Ghilotti, Equita.

Sorry I had also the question on tax rate assumption for 2014.

Sorry. Domenico, so basically the tax rate at 47% is 10 points higher than last year. It was 37%. I remind you that we said last year there were 2 to 3 points of one-offs. So when we normalize that, it was around 40%. And impact of the tax settlement for 2013 is around 7 points. So basically when you eliminate the one-offs, the two are comparable and consistent with the guidance I was giving for next year.

OK. Thank you.

Thank you. That will conclude today's question-and-answer session. I would now like to turn the call back to Mr. Salas for his closing remarks.

OK. Thank you very much. In many ways, 2013 was a pivotal year for GTECH. It tested our capacity to realign and reorganize ourselves to better address market trends and consumer expectations while executing an aggressive business plan.

I am pleased that we did so successfully. I would like to emphasize something I said earlier. It is my firm belief that GTECH, as an organization, is now in the best position it has ever been to take advantage of opportunities in the markets in which we operate.

We have established a greater level of focus and insight into our product strategies and deliveries and our regional organizations are better aligned to deliver our entire portfolio, all of which gives me confidence in our ability to deliver on our commitments and the guidance we have provided today. Thank you for listening.

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.