Intralot Integrated Lottery Systems and Services SA
ATHEX:INLOT
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Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your Chorus Call operator. Welcome, and thank you for joining the INTRALOT conference call to present and discuss the first quarter 2019 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Andreas Chrysos, Group CFO. Mr. Chrysos, you may now proceed.
Good afternoon, ladies and gentlemen, and welcome to this conference call for INTRALOT's Q1 2019 financial results. Mr. Sfatos and Mr. Nikolakopoulos, Group Deputy CEOs; Mr. Tsagalakis, Head of Capital Markets; as well as the technical teams responsible for the preparation of the financial statements material are next to me on this call.
Regarding the agenda, we will briefly review the financial results of the year, the statement of our CEO will follow, and after that, the INTRALOT team will be at your disposal for the Q&A session.
As always, we would like to remind you that this is only a summary of our results, so please refer to the IFRS report as well as to the management and discussion analysis available in our website for further details if needed.
So starting with our presentation, Q1 2019 performance was in accordance with our expectations communicated already in our previous call. Compared to last year respective period, EBITDA overall was impacted by the continuation of the low remuneration of the OPAP contracts due to smallest co-pay primarily and to a lesser extent from the discontinuation of our Russian business and of our businesses with SGLN in Morocco as well as from the FX headwinds in Argentina and Turkey. Positive variance counterbalancing partly [ but tough managing ] to recover all loss of the OPAP contract have been primarily the introduction of the Illinois contract as well as the better performance of our Chilean operations.
Focusing on the Illinois contract, it is already performing as planned, expected to hit an annualized EBITDA in the order of EUR 20 million, recovering fully the negative impact of the new OPAP contract versus the old one. Although Q1 2019 performance was worse than a year ago, it is already evident that the things we have in our pipeline have started already contributing positive results, and this quarter was much better compared to Q4 2018, although, the quarter's rationalization actions have not started yielding substantial results yet. Having said that, the initiatives we have identified and are already being implemented are expected to have at least EUR 10 million of annualized savings starting to have the first good signs of the strategy after H1 of this year.
In terms of cash balance, as the shareholders of the parent view, again we are in line with the guidance that we gave in our previous call. According to this and although there will be some swings, our target is to maintain this balance in the order of EUR 75 million to EUR 80 million throughout the year. So although this cash balance at the end of Q1 was EUR 56 million, currently it is already in the order of EUR 80 million again after the collection of dividends from our partnerships. Last, but not least, our CapEx guidance for a level of EUR 55 million to EUR 60 million still remains, and we are also on this -- on track on this also.
In Q1 2019 specifics, so with regards to page number 9 and starting from the revenues line, we have a deficit of around EUR 18 million in Q1 2019 versus 1 year ago, primarily coming from the markets of Bulgaria, Greece, Argentina and Turkey. The Bulgaria deficit has been the result of a revised payout strategy in Virtual games. In Greece, the deficit refers to the new OPAP contract terms. And in the last 2 countries, it has been primarily an effect of the macroenvironment and the FX headwinds. The quantification of this effects is in the shortfall of EUR 23.5 million, will be counterbalanced however by better performance in the U.S. by nearly EUR 5 million mainly as a result of the Illinois contracts term.
Same trend for the GGR with the U.S. performance managing to counterbalance the adverse effects of the macroenvironment in Argentina and Turkey and the discontinuation effect in Russia and the SGLN contract in Morocco, not balancing however, the lower OPAP contract.
Gross profit margin lower by 1.5%, primarily due to the partly reallocation of resources from the OPAP contract towards other projects yielding finally a lower EBITDA by 15% year-over-year. Comparing however with the last quarter of previous year, EBITDA has improved by more than 60% with the main driver being the absence of many negative items affecting the course of Q4 2018 such as the performance reconciliation mechanism in Morocco and the OPAP termination expenses and to a lesser extent by better top line performance.
Moving on to the next page, on the bottom left of the slide, we see that the operating cash flow has been reduced versus last year by EUR 16 million. Excluding the impact of the discontinued operations in Azerbaijan and Poland, the variance is lower by nearly EUR 12 million with the main variance being the lower EBITDA by EUR 5.5 million as well as the adverse working capital movement by circa EUR 10 million, primarily due to the bad timing of delayed receipts in Morocco, but also in Illinois, invoices were first collected in entry but also some inventories purchases support the new projects as well as the payments for suppliers coming from Q4 of last year.
On the other hand, lower tax payments by EUR 3.5 million partly counterbalance the above negative working capital movements. It is worth mentioning here, however, that both negative effects that affected the working capital have already or will be partly restored within this year since receivables in Morocco and Illinois have already been collected and the inventories will be utilized in signed contracts such as the Netherlands.
Compared to the last quarter 2018, operating cash flow is lower by EUR 8 million, primarily attributed however to the negative trends in the working capital in current quarter versus the positive ones in last quarter of 2018. On the other hand, net CapEx has returned to normal levels after the excess spending in Q4 2018 directed to the U.S. market primarily.
All in all, net debt movement presented in the next slide increased by around EUR 32 million versus 2018 closing, half of which, however, is attributed to the IFRS 16 adoption as well as due to some leftovers in our U.S. growth CapEx and the working capital items referred already. It is also worth mentioning as shown in slide number 12, second graph that the U.S. business, along with the Turkish and Bulgarian one account for more than 75% of our EBITDA performance, while the introduction of the Illinois contract in Q1 2019 has already started to increase the U.S. business contribution in our EBITDA since it was 25% in full year 2018. It is already 28%, expected to be increased even more moving forward.
And with this final statement, I would like to pass over to Mr. Chris Sfatos for our CEO statement.
Hello, ladies and gentlemen. I will read the statement from our Chairman and CEO, Mr. Sokrates Kokkalis, in commenting the first quarter results:
"The first quarter results reflect a big improvement compared to the last quarter of 2018 with quarter-on-quarter increase of EBITDA by more than 62% compared with the last quarter 2018, although, they still compare unfavorably with first quarter results of last year. The impact due mainly to the partial loss of the OPAP contract last year will be offset progressively by successful launch of the Illinois lottery landmark project on February 18, 2019.
Earlier this year, we launched a series of initiatives to implement the strategy of cost-containment, organic growth and operational efficiencies. On the organic growth front, we have been very successful by signing a new flagship contract in Canada with British Columbia lottery cooperation for a gaming engine, terminal software and hardware as well as services for 5 years that can be extended for up to further 6 years.
After an international competition, we also signed this week the renewal of our Sports Betting contract in Morocco for 8 plus 2 years, which includes a full product portfolio mix.
On the cost containment front, we have already taken measures of OpEx and CapEx reductions that will lead in savings in excess of EUR 10 million on a recurring annualized basis, while collection of dividends in the second quarter boosts our immediately available liquidity. Continuing positive news from advances in the sports betting legislative environment in the U.S. in the District of Columbia and Montana create immediate prospects for new revenue generation in the promising U.S. Sports Betting market.
We are also very optimistic about Gamenet, our asset in Italy, which announced very strong growth in the first quarter of 2019. We have recently reorganized our technology division by creating 2 new dedicated end-to-end Sports Betting and lottery divisions, focusing on the design and evolution of our next generation platforms and portfolio offering and a customer-focused solution delivery division to boost our operational efficiencies and strengthen our digital operations capabilities.
Finally, in the U.S., we have announced a new Board of Directors of our subsidiary, INTRALOT Inc., with 3 new nonexecutive members that will strengthen our corporate governance structure with former ambassador, Tom Miller, as Nonexecutive Chairman of Board; financier Daniel Rappaport as Vice Chairman and business consultant Nikolaos Nikolakopoulos as member."
And now we can start the Q&A session.
[Operator Instructions] The first question comes from the line of Felix, Wolfgang with Sarria.
Just following up from what we were discussing on the last call about your liquidity forecast effectively through the year. Would that be largely unchanged from where you are right now, given we're now a quarter further?
Yes. This is, I guess, we are in line with what we said. So let me remind you that what we have said back then was that our target is to maintain the immediately available cash in the area of EUR 80 million. So this amount, there will be, of course, some swings normally. So this amount at the end of March, it was EUR 56 million. You can refer in the MD&A in order to see this number. But currently this is again back on track. It's close to EUR 80 million because this EUR 56 million was not including the dividends that we received during April and May from our partnerships. So returning this amount again on the level that we have been announced and is our target for this year. So yes, the answer is yes, we are on track.
Would that be -- where in particular where those dividends have come from now?
So we have collected dividends from our partnerships in INTELTEK Turkey, from Gamenet. We had a capital retirement dividend from South Korea, Peru as well, plus the collection of the sale in Poland, the Totolotek. Plus the AzerInteltek the sale -- our portion from the AzerInteltek sale that we received through our dividend, through our company in INTELTEK. So I think that is all.
Okay. And you are also referring at the time to plans that would result in significant cost savings from the second half of the year onwards without...
What is the question?
Because the line was...
The next question will come from the line of [ Atandre, Nicola ] with Barclays.
Just quick question. We've noticed your press release this morning about the appointment in your U.S. business and I just wanted to ask if this is kind of preparation for development in your U.S. corporate structure or if there are any plans to modify your U.S. presence or bringing new resources to chase, let's say, the U.S. market opportunity, which is, of course, very large?
As we have been saying for quite some time, the U.S. asset is a strategic asset for us and we are taking a series of measures to strengthen the capabilities to address new market opportunities there. And the move of changing, I mean, this initiative to invite very senior people as nonexecutive members is, as we said, a very serious move in the direction of strengthening corporate governance and inspiring more confidence to the markets about the quality of our assets. And this is coupled with other initiatives like strengthening the technical division there and hiring new talent and streamlining the operations and even finding savings there. So it's a plan to strengthen our operational capabilities and the entire quality of the company there.
The next question comes from the line of Kandalam, Jayanth with Lucror.
Actually, I had few of them. Firstly, just to carry on from your statement on the U.S. operations, just trying to understand. The business is a strategic asset as you clearly mentioned and you'd like to grow in that area, and I believe that you're also competing for a few projects out there. But to be truthful, I mean, if you look at your own balance sheet, i.e., unless there is some kind of an external support for the U.S. business or U.S. business being put in a separate shell or something, how exactly is INTRALOT going to fund? I mean given the current state of your finances, how are you exactly going to fund any expansion in the U.S.? I mean even U.S. for the matter at this point in time is not cash generating now or maybe I'm mistaken, but I just need -- trying to understand this U.S. angle, please?
Well, first of all, as we mentioned, we just completed a very important investment last year at Illinois, which is bringing very, very significant returns right now. And we also just signed a new contract with BCLC, which is a contract for our U.S. subsidiary, so it will be executed through over U.S. subsidiary. And we are clearly in a position to finance regular CapEx of the order of EUR 50 million group-wide, as we have said before. So we don't see actually a contradiction in our statements there.
BCLC project is CapEx-free and there may be other such opportunities. Especially, in projects in the online business and Sports Betting, they are not expected to be as CapEx-heavy as the traditional retail deployments. So it's not an extraordinary need of CapEx that we anticipate in the U.S. going forward, plus there is focus for significant cash flow generation in the U.S. And we have revolving credit facility there with the Bank of America and that's our plan. We don't foresee an investment of EUR 100 million coming for example, if that's what you're asking?
Yes, partly that. But if you can just give us a little bit of more idea in terms of how cash flow generation is in U.S. Because clearly U.S. and, I mean, clearly U.S. plus I believe, Greece and Morocco to a degree have a substantial EBITDA contribution. So if you just looking at the U.S. business, how much actually is it cash positive? And if you're talking about not needing too much of CapEx, then just for the U.S. business, out of this EUR 50 million, how much is actually going to be U.S. CapEx?
The U.S. CapEx, you said?
Yes.
Okay. The U.S. CapEx, first of all, let me remind you something that we have said also in our previous calls. Currently, we do not have any serious and CapEx-intensive renewals. So we have renewed our Ohio contract recently, which is a big one. We have renewed our Arkansas contract recently. We have a clear time horizon for all our existing contracts of around 7.5 years, so we do not anticipate to have, let's say, substantial requirements for our CapEx moving forward.
Having said that, the maintenance CapEx that our U.S. business requires in a normal course of business, let's say, will not exceed the EUR 10 million, which obviously will be -- could be financed directly from our U.S. operation. I'm not talking about new things. I am talking about the maintenance CapEx for our existing contracts. So we think that there is plenty of room with the cash flow that the company is already producing as we speak to be able to finance both the maintenance CapEx and maybe something more should an opportunity arise in the future.
Okay. That's helpful. What about working capital requirements like in the past -- in the last 1.5 years, you had significant working capital tied up with regard to the Illinois contract, and only now it's -- you're kind of unwinding that. So is there something that's being a risk going forward, is there any contract which is going to take working capital quite significantly?
No, it isn't.
Okay. And just one last question before I move back into the queue. You did mention income from your partnerships, but what exactly is the minority dividends you are expecting to pay in 2019 please for the sake of our model?
More or less in the order of EUR 40 million as it is the case every year.
The next question comes from the line of Ossowicz, Piotr with Ironshield Capital.
Just a couple, if I may. First, can you please give us an update on the discussions with your banks regarding the RCF?
Well, as we have said in the previous call, we are not interested in raising extra debt. We do have the ongoing discussions. We don't have something to announce other than the renewal of our Bank of America facility. But we have several opportunities to raise debt, secured or unsecured, and we have declined such offers because we don't want to increase our gross debt. And it will be important to find the savings instead of raising additional money. We feel that currently our liquidity will be sufficient without raising additional debt.
Okay. This is helpful to know. Just moving on to the performance in the U.S., if I get it right in your presentation on Page 12, you show EUR 9 million EBITDA for the U.S. But if Illinois contributes EUR 20 million per year, has been contributing for the Q1, that should be about EUR 5 million -- EUR 4 million to EUR 5 million, say, from Illinois. That would suggest that non-Illinois part of the U.S. contributed around, say, EUR 5 million to EUR 6 million of EBITDA. And this is obviously materially less than EUR 7 million we saw in Q1 '18 and what we have seen throughout 2018. So is it that Illinois has not been contributing for the full quarter or the other businesses contributed less?
Exactly. This has been the case. So let me remind you that Illinois started in 18 of February, so it's -- however, the costs we are running for the whole quarter. So it is half quarter regarding the top line, but the full quarter regarding the cost and actually costs were quite increased because we have also some leftovers from last year. So this is not a good quarter to measure the Illinois contract. Having said that, we remain consistent with what we have communicated already, that with the Illinois contract in full, we will have an EBITDA in the order of $50 million, as we said already.
So $15 million or $20 million?
$50 million for the overall business. $20 million is the...
Overall.
Yes, yes.
Okay, so EUR 50 million for the overall U.S. Okay.
Dollars.
$50 million for INTRALOT Inc.?
Correct.
Okay. Okay. Perfect. Once you're talking about the U.S., can you just give us a little bit more color on how integrated those U.S. operations are into the overall INTRALOT operations? So in terms of -- I mean, is this basically mostly focused on the contract and sales? Or there's some dedicated that's offsetting and the clearance mechanism for the U.S. or this is all done from Greece?
The U.S. business is in terms of operations more or less autonomous. There are 460 people -- close to 460 people there. There is -- there are dedicated teams in every project, and there is also management team in Atlanta where are the headquarters. Obviously, there are synergies with -- and know-how transfer from the headquarters here in Athens. But in general, we do operate with dedicated teams in every project there.
Right, but if this is autonomous then I understand INTRALOT Inc. pays about $10 million to INTRALOT Operations Limited. So if it's autonomous, then why does this payment need to happen?
Can you please repeat the question because I'm not...
I also understand that there is a fee or at least there is a payable from INTRALOT Inc. to INTRALOT Operations Limited that is disclosed in INTRALOT Inc. stand-alone financial. It's about $10 million at least for 2016, 2017. We haven't seen 2018 yet, I think. So I'm just trying to assess if the U.S. operations INTRALOT Inc. is autonomous, then why is there a payment of nearly 1/3 of their EBITDA to INTRALOT?
Yes, yes, I understand. Because there are some royalties and some leasing fees on the terminals, but this is not an operational thing.
Okay. Okay. Got it. All right. And maybe lastly, on the U.S. Can you just remind us what is the calendar for the -- for your larger licenses to expire? So I appreciate your saying that there is no CapEx disclosure this year, but should we -- when should we expect higher CapEx in -- CapEx in the years 2020, '21, '22 or later?
As we have said especially for 2021, we do not expect in our existing projects substantial CapEx requirements. However, if an opportunity arise either in other states or some new business activities in our existing contracts, we may have some slightly increased CapEx, but we do not expect, especially for the next 3 years, to have material outflows for CapEx.
If I may answer, Andreas, as I said before, up to 2027, most of our contracts will not require significant new CapEx. The issue is that BCLC which is a contract that we have signed recently, practically, there is no CapEx outflow because it's a straight sale in the beginning, and then services, royalties and various fees that -- so this contract does not incorporate any CapEx at all. There are some opportunities, especially in Sports Betting that we are after. You have probably heard about or read about D.C. in Montana. There, we will see, depending on the outcome, the required CapEx. But again, it's not something significant like the previous years like Illinois or Ohio.
Okay. And this is clearly switching to Morocco. This new contract you have -- well, congratulations on this by the way. What are the economics relatively speaking in terms of CapEx, if any, and the economics compared to what we are seeing historically?
There isn't a commitment for investment in Morocco. As an incumbent, we have some our economies of scale. We have some CapEx-related items already in place now at warehouses, I mean. So the outflow that we are projecting for the next couple of years is going to be in the magnitude of EUR 10 million. I cannot give more details due to confidentiality, but more or less we do expect to remain EBITDA-wise at the same levels.
So you mean at the same level with respect to this particular contract because there was another contract in the Morocco which I understand expired.
Yes, with the current one. I'm talking about the current one.
Okay. Perfect. All right.
This one more or less was, if I'm not mistaken, 75% or 78% of the overall business of Morocco, so the other local businesses is a small portion.
The next question comes from the line of Cope, Jeffrey with Stifel.
Just a question in regards to the Ohio license. I believe a portion of this expires this month or next month in regards to the incident. I was wondering if you could just give us an idea of what the EBITDA impact of that will be.
Let me make sure that I understand the question. What are the license that you say that expired in Morocco or in -- sorry, in Ohio. We do have a contract until 2027, that is renewed every 2 years. I think this month was the end of the last period of 2 years and it has been renewed.
I think but with the renewed contracts, did you not lose the warehousing portion of the...
You're talking about the CSP, sorry. We are practically on legal dispute there, has not yet come to an outcome. But comparing to our overall business in Ohio, I would say that this is insignificant and to be more precise close to EUR 0.5 billion EBITDA. We are still running it but as I said, we are in a legal dispute.
Okay. And then just kind of staying on the U.S., I did see that you guys published the 2018 filings for INTRALOT Inc. On the last call, you mentioned that EBITDA for the full year for the U.S. group was EUR 29 million. It's kind of hard to kind of connect that with the INTRALOT Inc. filing EBITDA kind of from the filings looks like it's closer to kind of $19 million. I was wondering if you kind of tell us -- kind of bridge that gap between those 2 numbers, is that all Philippines or is there kind of add-backs we're not seeing in the INTRALOT Inc. filings?
It's intragroup transactions that on a group level they are eliminated. So in the INTRALOT Inc. U.S. files, you see the stand-alone EBITDA and in the group results, you see them having out the intragroup transaction. So this is the variant there.
Okay. So the INTRALOT Inc. group just the 12 U.S. kind of lottery contracts that will do $50 million EBITDA, that's not including Philippines so that's a 100% U.S. business. It's still -- that's a $50 million EBITDA business?
This is the annualized group contribution EBITDA of the U.S. with the full impact of the Illinois contract. We are not going to see this, this year because the Illinois contract had a delay at the beginning of this year. So the $50 million will be, let's say, the EBITDA of the U.S. next year -- the lottery EBITDA, okay, excluding any additions that we might have related to maybe to sports betting contract revenue start. So this is the pure lottery EBITDA on an annualized basis with our existing contracts.
Okay. So run rate $50 million essentially?
That's correct.
Okay. And then finally on the last call, you also mentioned that there was some Ohio terminal sales that were going to be done this year. Were those made in Q1? Or do we know -- you have any kind of idea when those will be?
So we are expecting those on Q3.
Okay. And that is excluded from your $50 million?
Yes, absolutely, net of terminals. The $50 million is net of terminals.
The next question comes from the line of Hassan, Jahanzeb with Citadel.
Just had a couple of questions in different parts of business. The first one is, I just wanted to see what is the latest update on this side of your Bilyoner operation?
We have renewed the license until end of August. And after the Turkish -- the Istanbul elections at the end of the month, we'll have [ next ] by Spor Toto to have way things in order to see how we're going to proceed practical negotiations for the next years. This is not only for Bilyoner, but all the agents in Turkish. So practically after the elections and most probably within July, we will conclude what would be the terms, conditions and the duration of the new license.
So you expect that to be concluded in July?
Definitely, we are going to start the discussions within July, early July, and hopefully, we're going to conclude July now. It is a state. I don't know it is going to take part of August, but I presume within July, we will finish all the discussion and move forward with this.
Got it. And then, you mentioned that there's a number of cash inflows in the second quarter that's helping to keep the cash at the parent -- above that EUR 75 million target. Could you just help bridge that gap? I mean you mentioned a few sources: INTELTEK, the Gamenet dividend, et cetera. If you could just put some numbers around that, that would be helpful.
Okay. The collection of INTELTEK, it was included in course of the Azeri. It was in the order of EUR 15 million. The dividend from Gamenet was in the order of EUR 4 million. The capital repair and dividend distribution from South Korea, it was EUR 3 million. The dividend from Peru, it was EUR 1.5 million. The Totolotek proceeds from the sale of Totolotek were in the order of EUR 6 million, and I think this brings us more or less to the EUR 30 million -- EUR 25 million, sorry, from the EUR 55 million that were at the end of March of EUR 80 million that we said is our current balance.
Understood. And just to be clear, then the only other kind of, if I can call them, one-off inflows we should expect during the course of the year will be the distribution from INTELTEK when that is wound down sometime in Q3?
Last dividend that we have on a recurring basis is from Bulgaria. Hellenic Lotteries, not received yet, and that's it. Last Argentina -- sorry, last Argentina.
Right. And then can you just confirm that the remaining EUR 7.5 million of the, I think, the Nomura term loan that has been repaid.
Yes, we received it. So Nomura is fully repaid, all of it, EUR 15 million.
The next question comes from the line of O Sullivan, Brian with NatWest Markets.
Quite a few have been answered already, but can you just maybe give me the split between your OpEx and the CapEx. You see, you've said you have identified circa EUR 10 million run rate savings. What is the split, please?
The split between OpEx and CapEx in this...
Yes.
It's more or less half and half.
Okay. So based on that and what you guided already in terms of your full year profitability for the U.S. and other jurisdictions, now the time has moved on. What are you expecting in terms of proportionate EBITDA for the year ahead for 2019?
Okay, give us a second. Maybe there is another question. We will get back in 3 minutes on this. Is there any other questions from the...
The next question comes from -- we have a follow-up question from the line of Ossowicz, Piotr with Ironshield Capital.
Regarding Bilyoner in Turkey and whether this lines expire and do you expect a renewal? And also on Turkey, you have previously announced investment in the R&D center in the country. So if you can give us any update on this as well?
The first thing is that -- the first part of the question, Turkey, yes, we do expect to renew the license. We're just waiting to see the terms and conditions because you know there is an increase in payout. So most probably this will be counterbalanced by the fees.
The second thing about the development of Turkey, for the time being, we have no plans for that because you can understand that this was announced when we were bidding for Spor Toto, Iddaa, the sports betting business, which we didn't win. So in that sense, it makes no sense to have this developments [ in there. ] So we have frozen those discussions in this investment.
Okay. And when do you expect to see anything in Bilyoner?
Most probably in July.
The next question comes from the line of with O Sullivan, Brian with NatWest Markets.
Sorry. Yes, I was cut off in the middle of my questions there. Sorry, just to confirm, you're going to come back before the end of the call with your full year EBITDA guidance. Is that right?
It will be in the order of EUR 85 million to EUR 90 million.
Of proportionate EBITDA?
Proportionate EBITDA, correct, for this year. It is going to be a full effect of the lower of our contract, but with introduction of Illinois more or less, it's going to be in the area of EUR 85 million to EUR 90 million. And it does not incorporate any upside we may have in the U.S. from the terminals that Mr. Nikolakopoulos mentioned previously. So this is net of terminals again. So if there is saving of the terminals, it's going to be better.
Okay. So look, I mean, I appreciate the variable here is -- now the Morocco has been renewed, which is great. The variable obviously is Bilyoner. But given -- what would you see? So if your full year is in the order of EUR 85 million to EUR 90 million of proportionate EBITDA, what is your run rate looking forward? So Bilyoner obviously is the variable. Everything else, you should have reasonable visibility. I appreciate the U.S. didn't start until like, whatever, 18th of February you said, and then there's couple of other moving parts to the year. But on a run-rate basis, are you closer to EUR 100 million or higher? Or lower?
I would say, EUR 95 million to EUR 100 million, yes.
Okay. So in that context and you basically are going to be free cash flow negative, let's face it. I mean even if you had revised down your CapEx expectation, but you take into account some elements of tax, even a benign working capital and then obviously a hefty interest bill, your cap structure is looking reassembly unsustainable. So have you plans -- you mentioned you have no plans to incur any debt this year, but ultimately you will have to address your capital structure I suspect at some point in 2020. So can you give us a bit of a flavor of what you're thinking about? And along those lines as well, obviously, your bonds are trading at massive discounted levels, have you considered doing bond buybacks, as one of those options?
The question is about this year or going forward?
Both.
This year, we are fine. We can sustain the capital -- we can pay all our coupons. We have calculated everything, and we're fine. Going forward, we need to see how our plans for cost reductions and for business goals will work out. But I think, we will be ready for a more detailed discussion after we have a business plan, which we are working on and will be available for our next discussion.
But we anticipate significant business opportunities and growth in our business at lower cost. And let me remind you that the CapEx requirements moving forward will be much less, so even less than EUR 55 million to EUR 60 million. EUR 55 million to EUR 60 million is for this year, where we have some leftovers from last year. So the real CapEx requirements on a recurring basis, on a normal course of business, let's say, is going to be less than EUR 50 million. So we already have our plans regarding the expenses reduction, as Mr. Sfatos said. So this is going to be EUR 10 million, but it is an exercise that will be continued.
So if we wanted to make a quick calculation, assuming the CapEx of EUR 45 million to EUR 50 million plus the interest expenses in the order of EUR 45 million, more or less annually so this makes an outflow of EUR 90 million plus the taxes on our perimeter is close to EUR 5 million to 8 million, so this is around EUR 100 million requirements. With the expenses plus the continuous of this exercise, we expect to be in a position to cover all of these obligations moving forward. So this is more or less our target. We're not there yet, but we are already on track.
Okay. That is very helpful. And then kind of lastly then in terms of maybe to help you along that process, how many RFPs are you currently looking at or engaged in? What kind of visibility do you have over potential new opportunities in the short to medium term?
I don't have the exact number in front of me. But as I told you, we are focusing, first of all, on 2 significant opportunities in the U.S. that we have now. The [ ones that you see, ] which practically was announced in the midyear, also, but we have a contract for the renewal of our lottery business, introduction of iLottery and the Sports Betting, which is practically on the state council for approval. So we will know in the next 30, 45 days. We do have also the opportunity in Montana to introduce Sports Betting, where practically the lottery was given a monopoly there. And there is also Milli Piyango, which we are assessing the situation in Turkey. There are also few others, like the Atlantic Lottery, where there is terminal, self-service terminals, associated with software. And there are some other opportunities that we are looking. But those 3 that I told you has the most, let's say, imminent driving in terms that more or less, we will know in the next 2 months.
The next question comes from the line of Clarke, Ronan with Deutsche Bank.
Apologies if you've addressed this already. I joined the call a bit late. But it was wondering about the Gamenet investment and whether the opportunity to monetize that has progressed at all? And obviously, Trilantic did a sell-down, I guess, that's helped liquidity and also may be demonstrated that it's doable pretty quickly. So I was just wondering if you've accelerated plans for that, please.
Right now, we see great opportunity in the business itself. The current market prices do not reflect that opportunity and the valuation that we have in mind. So if the market conditions improve, that's one scenario. If they stay the same, we don't anticipate -- we don't plan to make any move at a discounted price compared to the real potential of the company. And you know what the numbers are. There has been already great performance this year and great prospects for a stellar year 2019.
The next question comes from the line of Sykes, John with Nomura.
I wanted to just ask you a few -- so let's take your comment about 2019. It sounds like you should meet all of the obligations. Just by my rough numbers, you will have some cash outflow around EUR 30 million, okay? But with the dividends coming onstream with some repatriation from INTELTEK, you should be able to balance that out. So in 2020, when CapEx normalizes and your cash burn presumably is lower, okay, what -- at that point, what would be, I guess, at that point, you're talking about potentially looking at the 2021's refinancing bag. And I guess the crux of my question is what at that point kind of what assets do you have available to raise funding if you need it, okay? And kind of what are your thinking in terms of the plan, generally, at that point?
We are still in the process of preparing for that discussion. So we would not like to comment about the initiatives that we will take in 2020. But I think all the -- like, series of actions, 9, 10 actions that we have planned in the last 2 months, we're executing. We are on track and things work out. Once we have the business plan, a detailed business plan, what investors would like to see and will appreciate, I think, it will be a much more fertile ground to have any discussion about the capital structure.
Okay. And just what about -- what's your thinking with respect to kind of value of noncore assets that you could tap into for cash?
You mean, about the asset disposals?
Yes, exactly.
Well, we have some actions already going on. I would not like to be more specific at this point because these are negotiations going on, but we will have some results there. So we said that our strategy has 3 components, organic growth, cost savings and asset disposals. We are still on that strategy, and we are on track.
Yes. Because when I -- assuming working capital is neutral by 2020, if you're on the EUR 95 million to EUR 100 million side of EBITDA, let's just say a lot of these things go well on the cash burn at that point it's not very significant, not assuming any significant improvement in D.C. So I guess, I'm -- of course, you would -- you do have the bond coming due -- a year on the bond. So I hear you it's not a today issue, but it's going to become more of an issue to obviously early next year.
Yes, not an issue. We are working to address the question with full armor.
Okay. Just one other thing on D.C. You probably saw the Post article that came out.
Yes. 2 days ago?
I guess... what, sorry?
You mean, 2 days ago?
Two days ago, exactly. Obviously, some political issues have been raised by one of the councilmen, I think. I know there is this contract -- sorry...
For this year, as I said before, we -- after discussions and negotiations with the state, we are now at a point where a contract have been submitted for hearing and waiting for approval in the council. We have done that, and we're expecting the decision of the council, which is my point of view, as I said before, it's going to be between 30 and 45 days.
Right, right. Okay. Now this decision, isn't this more of a decision with respect to the terms of the contract, but not so much pulling the contract?
This is not the terms. The terms can migrate. It is important, but either it's going to be voted and passed or not, but there is no discussion there about the terms and conditions.
Can you comment just what is the profitability of that contract?
No, no, that point, we will not.
We have a follow-up question from the line of Ossowicz, Piotr with Ironshield Capital.
Just following up on the various questions regarding your cash flow generation. Historically, you have been receiving cash interest income. Is that going to continue, given the fact that now you probably have less cash in emerging markets that you characterize by higher interest on cash balances? Or we should expect that there would be a couple of million, say, EUR 2 million or EUR 4 million of cash interest coming in every year, historically?
So this cash primarily was coming from our Turkish contract in INTELTEK. So our goal, it was being consolidated in our group results. This was not a cash item that was coming to the [ edge of the ] perimeter. So having said that, if we don't know what will happen with the INTELTEK contract finally because it's in an ongoing process, but even if this contract is not with us after August, nothing will change in our cash position because these were amounts that were not in our perimeter, anyway.
Well, they were reported, though, historically and...
Yes, they were reported absolutely in the group consolidated, but here we have tried several times to isolate or to differentiate the group numbers with the numbers that are -- the shareholders of the parent view have fully attributable the numbers and this was not thought to be attributable numbers anyway. All of it was consolidated, correct.
The next question comes from the line of Julien Martin with Aberdeen Asset Management.
Quick question on the U.S. contracts. Can you say there are any clauses in your various contracts that are linked to your solvency, any potential restriction in proceedings happening in Greece or any rating agencies' notations that could force a termination if any of those events were going to happen?
No, we don't have any. We don't see any stress. Actually, the good news that we can share is that at this point we have renewed all our surety bonds, which means that we have been vested by the insurance companies, and we have renewed all the surety bonds, so we feel comfortable moving forward.
Okay. And in terms of your Bank of America credit facility, I'm sorry, I missed that, but what is that for? Can you say the size and which business is lending that to?
It is a rewarding facility catering for any requirements, meaning, working capital requirements, any requirements that does not have a specific record. So it's a general effect, it was one. So it is designed to use -- to finance any working capital needs. Or last year, it was utilized in full in order to pay the requirements of -- paying our contracts. Now of course, it's been reducing since this investment is over. So it is repaid gradually. But no, there is no specific purpose, for general purposes.
Okay, and is that the INTRALOT S.A. level?
No, it's in INTRALOT Inc.
Inc., right, yes. And how much was outstanding at the end of the first quarter?
It was EUR 15 million, if I am not mistaken. It was EUR 16 million but is gradually reducing.
Okay. And lastly, on the 21, I guess, refinancing exercise, aware you're working on that right now. But I mean, would you say the solutions you're looking for that would only look to address the 21 on its own? Or are you looking potentially to bring in the 24 bonds within a wide holistic refinancing exercise?
It is premature to have this discussion. As we have mentioned many times, our focus is on the business right now to create the efficiencies, to stop the cash burn, to reverse the cash burn problem. And with the new business plan at hand, very detailed, we will be in a position to evaluate all the options in a couple of months' time.
The next question comes from the line of [ Dean, Sakreet ] with BNP Paribas.
Could you tell us events for Hellenic Lotteries? Is that asset that you plan to dispose of, given limited scope there? Or is that something that's on the table?
It's one of the options we have been exploring.
And if you were to put a number on it, how much do you think you could sell that asset for?
I do not want to enter this discussion, but for sure, as you know, we also have technology contracts there, which will be ongoing.
[Operator Instructions]
The next question comes from the line of [ Theodore, Javier ] with [ Hudson. ]
My question is, if there is any plan that you have to restore confidence from the Capital Markets ahead of the disclosing of the business plan, whether it's repurchasing bonds or using some cash, given that the bonds are trading at EUR 0.50 and this can affect the perception of the business as a solvent business at this point?
At this point, we will not -- we don't have such a plan. I mean we don't have a plan to repurchase our bonds at this point. We have other plans to restore the confidence in the markets, which, I think, is happening. I mean from our one-on-one discussions with our investors, we have reassuring messages.
[Operator Instructions] The next question comes from the line of Breen, Brendan with JPMorgan.
Just one question from me. What would be your dividends to minorities post INTELTEK, say, like the full year run rates from 2020 onwards?
It's going to be -- post INTELTEK, it's going to be in the order of EUR 25 million to EUR 28 million.
[Operator Instructions]
Ladies and gentlemen, there are no further questions at this time. I'll now turn the conference over to management for any closing comments. Thank you.
Thank you very much. We look forward to the next call.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for holding, and have a pleasant evening.