Greek Organisation of Football Prognostics SA

ATHEX:OPAP

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I am Jota, your Chorus Call operator. Welcome, and thank you for joining the OPAP conference call to present and discuss the OPAP S.A. Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Jan Karas, acting CEO for OPAP S.A. Mr. Karas, please go ahead.

[Jan Karas, executive]

Thank you very much, operator, and good afternoon and good morning to everybody. Welcome to the OPAP's third quarter 2020 investors conference call. Although it is true that in many ways, the once again alarming situation related to the COVID-19 pandemic feels like a déjà vu that has been causing turmoil to any business, our Q3 results tangibly demonstrate that our business is fortified in order to overcome challenges. This, together with our well-planned actions, let OPAP to be able to report profitability growth for the quarter, which will be now analyzed by our CFO, Pavel Mucha. I will then provide you with an update of our business progress and future developments. We will then answer any questions you might have.

Pavel, over to you.

[Pavel Mucha, executive]

Thank you, Jan, and good afternoon to everybody. Q3 was a period closer to normality in this pandemic hit year. During this period, our shops network was fully open although under strict precautionary measures, including mandatory masks and distancing measures.

At the same time, macro KPIs improved on a quarter-on-quarter basis, but still remain subdued on a year-on-year level. GDP and private consumption for the third quarter will be announced in early December, but projections call for a near to double-digit GDP drops, coupled with the low to mid-single-digit private consumption decline.

Tourism revenues have fallen by 91% between March and July 2020 and remained weak during the seasonally important Q3 period. Finally, leading indicators such as consumer confidence recovered partially in Q3 and declined towards 2 years lows in October.

Going forward, the outlook remains bleak. The recently imposed national lockdown in line with what has happened in most EU countries is expected to further push numbers down. The Ministry of Finance is now expecting a 10.5% GDP drop for the year versus 8.2% only a few weeks ago. And that is despite the government relief measures, which will partially support quite a few sectors and individuals.

When comparing macro with OPAP's performance, it is clear that despite being a predominantly retail business, we managed to outperform on most fronts.

As you can see on Slide 8, total GGR declined marginally, down by 0.7% year-on-year and would probably have shaped towards higher levels if it wasn't for Joker Jackpot's unfavorable rollovers. On top, the revenue picture was quite mixed on a regional level.

Several areas were positive, while it was the touristic areas, including the islands that were hit the most, as lower tourism related proceeds less to led -- led to less disposable income and subsequently to lower spending from the local society side.

In more detail, lottery dropped by 9.3% in Q3. As mentioned in our Q2 call, the drop is mostly due to KINO on the back of the game structure and the fact that its successive 5-minute draws usually require more active time within the shop. This trend persisted in October, taking into account that some regions in Greece entered into local lockdowns.

On the betting front, revenues increased double digit, aided by Pamestoixima performance, strong virtual numbers and contribution from our new Powerspin game. October's numbers follow broadly the same trend with growth among all games of the segment.

VLTs also recorded solid growth by 10% year-on-year, proving that the game continues to be well taken by both existing and new OPAP customers alike. October's performance remained positive, although local lockdowns led to lower numbers month-on-month and to a substantial deviation of different regions.

Finally, Hellenic Lotteries numbers remained weak in Q3, figures dropping by a significant 14% year-on-year. Reduced mobility was -- has had a game as a considerable portion of its revenues is taking place through third-party POS and street vendors. As it seems, this trend continues in Q4, and it wouldn't change in the short term.

Profitability-wise, and turning to Slide 9, EBITDA for the quarter increased to EUR 105 million versus EUR 104 million in Q3 2019, while the net profit came in at EUR 53 million, up by 8.3% year-on-year.

In order to get to this point and going to Slide 10, we managed to once again more efficiently manage our costs with total OpEx staying lower for a third consecutive quarter down in Q3 by 3.8% year-on-year. The continuation of the pandemic and lockdowns imposed in November, which led to our shops closure will mean that our cost efficiency exercise will, to the extent possible, continue for the remaining part of the year as well.

On top, Kaizen contribution reached EUR 7 million for the quarter shaping a 9-month overall figure at EUR 13.4 million as a result of the company's higher profitability and OPAP's increased stake at 69%. Furthermore, our participation has increased to 84.9% in November.

Cash flow wise and Slide 12, we managed to generate an operating cash flow of EUR 159 million for the 9-month period. On the investment side, we spent EUR 79 million due mostly to the acquisition of the additional stake in Kaizen, which together with the distribution of dividend per share of EUR 0.30 in August, shaped our cash position to EUR 543 million and our 9 months net debt-to-EBITDA ratio at a comfortable 1.7x.

Going to the COVID related update, on Slide #13, our network in Greece remains closed since November 7 with a lockdown list announced for December 1. Separate stores have also closed in regions covering 40% of OPAP Cyprus operations with the lockdown lift announced for the same date as the Greek one. That said, the impact on our business from the lockdown will not be vastly different versus the previous one.

As seen on Slide 14, should the lockdown get lifted as planned on December 1, the impact should be in the area of EUR 110 million to EUR 120 million in terms of GGR and EUR 45 million to EUR 50 million in terms of EBITDA.

On this front, I have, unfortunately, very fresh news, which was released earlier this afternoon. And that is that the government just announced that the lockdown, the national lockdown will continue by another week until the 7th of December.

Finally, as you know, our original concession pertaining to our legacy games expired as of October 12, 2020, and a new license extension ending in October 2030 came into effect. The new concession is, in many ways, similar to the old one as it covers all of our legacy games.

OPAP paid for the extension EUR 375 million already in 2011, out of which, EUR 300 million and according to the amendment of the contract addendum from 2013 corresponds to GGR contribution prepayment of EUR 1.83 billion. OPAP has implemented the new concession agreement as per the contractual terms. The first monthly payment based on this new framework took place already in November.

With that, I'm passing you over to Jan.

[Jan Karas, executive]

Thank you, Pavel. Following up on the financial part, I would like to start by thanking our 8,046 investors who participated in the bond issue for their support and vote of confidence, and reassure them that OPAP will continue to be worth of their trust.

Jumping to an operational review of the quarter, we believe that OPAP has demonstrated exceptional operational readiness, managing to implement a heavy road map of initiatives in order to enhance players' engagement and at the same time, ensuring that business is conducted smoothly.

Starting as always with our OPAP stores network in Slide 18. Lockdowns and restriction measures did not prevent us from keeping on an extensive shops upgrade program, bringing another 233 new and upgraded stores up to the end of September.

As mentioned in the past, new and upgraded stores provide significantly improved customer experience, leading to material better performance. And as such, we will continue with this direction in the future as well.

However, our shops remain currently closed. And as such, to help our loyal partners, we introduced similarly to first lockdown a process by which we temporarily postpone agent receivables from their last clearance before second lockdown. We have also prepared a set of guidelines to help them benefit from the various government stimulus measures, covering, in many cases, significant portion of their underlying fixed costs.

At the same time, we are carefully planning our shops opening, taking into account that safety comes first for both our agents and our players, .we are ready, and we will fully abide by any COVID-related mandates and restrictions.

Continuing with VLTs in Slide 19 and 20, spending in the third quarter remained solid, with GGR per VLT per day of the machines that have been operational for a year coming in at EUR 37. Active customers increase now standing close to the height achieved just before lockdown as a result of our focus on providing clean and safe environment to our players, supported by CRM campaign where one-to-one communication regarding the safety measures was accompanied with an offer incentives.

Summer in-store promo focus on new registrations and players visitation also positively contributed as players participation to the draw promo surpassed 70%. We also managed to launch certain new games, now reaching a total of 109, accompanied by 5 launch promos to enhance games trial and increase activity. At the same time, we changed the jackpot levels now leading to more frequent jackpots in an effort to increase the winning notion of the players.

Overall, in the last years, our jackpot related prices reached EUR 22.5 million and were distributed at almost 47,000 winners. Going forward, December is definitely a seasonally important period for all of our games and VLTs are no exception to that. As such, we are planning a set of actions to take the most out of the festive period, obviously, upon a potential retail network reopening.

Sports betting wise, on slides 21 and 22, higher activity also due to a higher than usual number of events occurring within summer along with our persistent focus on our sports book enhancement led to increased numbers mentioned by Pavel earlier.

SSBTs continued to be an important growth driver, constantly gaining weight in the mix, especially when it comes to live events. Our new game, Powerspin, aided by the 360 promo campaign attracted quickly players' interest and proved to be a significant addition to our portfolio.

Virtuals relaunch earlier this year is continuing to gain new and existing players' interest, having a lasting positive effect on our revenues. This is why we plan to see virtual sports as a whole new gaming category. And in line with that vision, we lately added high-definition virtual basketball to our mix, offering a whole new level of audiovisual gaming experience.

We also have enhanced our racing product portfolio with Greyhounds that are now together with the revamped Horse Races, offered as a part of the new live racing channel that provides continuous live betting content.

Finally, we launched an innovative personalized live score push notification service, where customers, by simple scanning of their betting slip, get live updates for all their events directly to their mobile phone. Thus, upgrading and further digitalizing the retail sports betting experience.

When it comes to online on slides 23 and 24, our well planned dual strategy is starting to pay off. Despite shops reopening, our online performance increased quarter-on-quarter with online Joker penetration remaining above 10% despite the lack of favorable jackpot rollovers.

Active customers are now close to all-time highs and we believe that we will hopefully exceed those levels in the coming weeks, while initial signs on the second lockdown performance are certainly demonstrating growing weekly numbers.

The enrichment of our portfolio, together with improved key customers' rewards and handling improved significantly our customers' experience. More steps in these directions are taken with the recent launch of the Salesforce platform that will enable us to further improve our CRM and customer support services.

On top, to improve the quality of service of our payment and deposit services, we just went live with an alternative payment provider, delivering additional level of security of our operations.

As evident on Slide 25, Kaizen posted another quarter of record growth and will definitely enjoy another record year. Greece and Cyprus reached 73% of total revenue, with the rest of the territories growing at an even faster rate. The company has been recently awarded with the prestigious Mobile Operator of the Year award at EGR Operator Awards on an international playing field, and this is obviously no coincidence.

We believe that the company's performance so far fully vindicates our decision to increase our stake and further think that we will be able to enjoy even more benefits next years.

Set aside our product and network enhancements, 2020 has been a year where both the society and our people needed the foremost of our attention. Starting with CSR, we donated medical equipment, hygiene materials, we delivered sports apparel to thousands of deprived children across Greece. We continue our Wishing Ornaments program and launched an online dedicated platform related to our Sports Academy program.

Additionally, we are actively participating in supporting, Thessaloniki, the city that is being tested by coronavirus the most these days by aiding the health system and local authorities.

Specifically, the company has donated supplies and equipment to the Ippokrateio - General Hospital of Thessaloniki, a COVID-19 reference hospital, the Municipality of Thessaloniki and The Cities Police directorate.

We also feel proud for our new responsible gaming campaign, both within our stores and across media channels, with the slogan of, because you are in charge of the game and OPAP teaches you how, OPAP has been actively training the players regarding the core principles of responsible gaming and highlighting the importance of personal responsibility.

Additionally, we are proud, as we have just recently received from the auditors the signed statement of alignment of OPAP's RG program with European Lotteries RG standards. This classifies OPAP among the top scoring gaming companies in Europe in responsible gaming.

As for our people, working remotely brought us 1 step closer to the new continuous learning initiatives. We upgraded and enhanced with the new e-courses or OPAP academy's e-learning hub, while we collected with Udemy to cover technical and other developmental needs.

We will stay on the same path further pursuing the development of our employees, which, along with our agents, have shown great professionalism and commitment that we are deeply thankful for.

Just before finishing my opening statement, I would like to highlight the fact that the second lockdown finds OPAP in a much better position versus the first one. As you can see on the Slide 26, sports betting calendar has been normalized with sports events now taking place despite the lockdown, which in turn will lead to higher online sports book revenue.

In the lottery segment, we acted promptly by adding a third Joker draw, and as such, we can now benefit from an equal -- from -- and all other things equal faster jackpot accumulation.

Online group's offering is stronger than ever due to our increased stake in Kaizen and a better starting base in OPAP's online, both in terms of available products and active customers.

Finally, our liquidity is even stronger with EUR 483 million as of 24th of November, and on top recent retail bond, which was a remarkable success. We managed to raise EUR 200 million at a 2.1% rate, which is the lowest interest rate amongst bonds that are traded in the local market, with the total valid demand from investors participating in the public offer reaching EUR 611.9 million.

With that, I am now concluding my opening statement. Thank you for your patience and attention, and I'm opening the floor for any questions you might have.

[Operator]

[Operator Instructions] The first question comes from the line of Kourtesis Iakovos with Piraeus Securities.

[Iakovos Kourtesis, analyst]

I would like to ask -- as you've said, on 16th of November, you paid the first installment of GGR tax for legacy games according to the new concession agreement. Could you confirm for us that this payment corresponds to the 5% GGR tax from your side? And was there any reaction from the Greek government, if any, or would you be open if there was any reaction from the Greek government to engage in discussions with them? That will be my first question.

Second question has to do with online launches, taking into account the new lockdown, if you plan any new launches of your legacy games to go online like KINO, Lotto? And did you have a time frame for this? That will be from my side.

[Pavel Mucha, executive]

Thank you for the question. Yes, indeed, on the 16th of November, we paid GGR contribution based on the rules for the extension of our legacy game concession. And indeed, we paid at the rate of 5%, but we have to take into account that already we prepaid very large amount back in 2011 and that must be also taken into the account.

[Iakovos Kourtesis, analyst]

Did you have any reaction from the side of the government on this payment?

[Pavel Mucha, executive]

No, no. This is a long time ago signed contract. So obviously, no reaction from the government.

[Iakovos Kourtesis, analyst]

So if I may ask, how should we think on this from now on? Should we model 5% GGR tax on your legacy games until 2030?

[Pavel Mucha, executive]

Our prescribed GGR contribution rate in the amendment of the addendum stands at 30%. So our GGR contribution rate for the next 10-year period stands at 30%.

[Iakovos Kourtesis, analyst]

30%, okay. And what about online launches?

[Jan Karas, executive]

So on your second question, regarding online launches, at this moment, we don't have any specific plans bringing additional games to online and extending the portfolio during the crisis and during the lockdown.

[Operator]

The next question comes from the line of Draziotis Stamatios with Eurobank Equities.

[Stamatios Draziotis, analyst]

A few issues I would like to ask, and if -- I guess it would probably be best if we took these one by one. So firstly, just on the tax issue, I was just wondering what the next steps are? Has there been any further communication on behalf of the state? And if not, I mean, would it be reasonable to expect a discussion process to kick off, especially as the new regime is poised to result in a sizable hole for the state budget?

[Kamil Ziegler, executive]

Kamil Ziegler. I will answer this -- your question. As we said a couple of times that we implemented this regime in the 13th of October, this is the regime framework which was long time anticipated since year 2013 and we currently are not in any negotiations because we are in the situation that we are implementing the contract which is there.

So we are in the position where we are paying this GGR contribution. OPAP prepaid already almost 10 years ago the money which had the value for this period of time, EUR 1.8 billion. So this is the situation. So we are doing our business as it is anticipated in this concession agreement.

[Stamatios Draziotis, analyst]

That's very clear. And if I can follow-up on this, assuming let's focus on 2021. So assuming a normal period, there will be obviously a profit, but most primarily cash flow boost from the lower duty payment. I was just wondering, what do you intend to do with this? Will this be treated as part of the normal cash flow generating capacity of the business, therefore, available for distribution to shareholders? Or will you treat it as temporary ahead of maybe discussion with the states of any kind?

[Pavel Mucha, executive]

Well, obviously, there will be some P&L and cash benefit. At this moment, it's very early really to say what we are going to do with cash in 2021. We have shops closed. We don't know what happens in Q1. But for sure, we are not planning to spend the cash or spend the cash for any future negotiations or anything like that.

[Stamatios Draziotis, analyst]

Okay. That's very clear. And just moving on to the lockdown issue. Just wondering, you mentioned before that the state -- the government announced today an extension of the lockdown for another week. Just wondering based on the indications that you have at the moment, do you think that OPAP's stores will be bundled with retail shops upon reopening? I mean -- or will they be included in the eating out cohort, which would mean an opening date further out in December?

[Jan Karas, executive]

We would wish to know, but this would be an entire speculation. We will see and follow the official communication of the government bodies on that subject. We are, as I said earlier, obviously, ready, and that includes different kind of measures to be applied in stores. So in terms of readiness, we are prepared for any scenario.

[Stamatios Draziotis, analyst]

Sure. Okay. That's fair. And lastly, on the cost base, now assuming there are further, let's say, rolling lockdowns in 2021 regional or partial or whatever. To what extent do you think that the cost base can be further rationalized in order to mitigate the effect from negative operating leverage?

[Pavel Mucha, executive]

Look, I think we demonstrated very good cost cautiousness already in 2020. For sure, as I said earlier, already for November, December, we are looking for further cost efficiencies. And of course, inevitably, when the network is shut down, we naturally save some costs because some of the costs are directly related to our day-to-day operations of the retail network.

So I don't want to now speculate what cost savings we can make in 2021. But for sure, we want to continue to be very careful on our cost base and really react very quickly, which we are able to react very quickly. Also due to the fact that many of our cost base is variable and related to our revenues and to our shops being open.

So definitely, if there would be further lockdowns or anything like that in 2021, we are ready again to react again immediately.

[Operator]

The next question comes from the line of Maskara Amit with Sephira Gem Equity.

[Amit Maskara, analyst]

Apologize my accent. So just to confirm, you mentioned as your profitability goes up with the new tax regime, which is obviously in line with your old agreement. So as an investor, we should just think of it as part of your -- there's no change in your payout ratio in the future. So that is -- whatever is the income, I should just assume similar payout ratio once we entered a normal environment post COVID.

[Pavel Mucha, executive]

This is really something which will be decided at a bit later stage. But for a long time, we have been declaring our standing dividend policy to distribute bulk of the free cash flow.

[Operator]

The next question comes from the line of Memisoglu Osman with Ambrosia Capital.

[Osman Memisoglu, analyst]

On the online bet now that you have increased your exposure to SMGC, are you able to give us a bit more color on the financials? Obviously, you gave us the revenue bit, but any more color on EBITDA or net profit given that you're investing and potentially loss-making, I guess, on the non-SMGC areas?

And then related to this, will you start consolidating it from the announcement date? Or will you wait for the approval for sole control? That's the online bit. I'll wait for the other question I have.

[Pavel Mucha, executive]

Okay. On EBITDA, I was just not sure -- I was just not sure where your question is heading, whether it's own OPAP online operations, your assumption that it's loss-making. Actually, it's not. It's...

[Osman Memisoglu, analyst]

Sorry. I skipped that part, I guess. I was talking strictly for Stoiximan or Kaizen. So within Stoiximan, so I was leaving OPAP online on its own basically. But within Stoiximan you give us a revenue, are you able to -- and we can figure out the net profit, obviously, for the total bit. Are you able to give us -- now that you will own 85% of the Greek and cities operations, are you able to give us an EBITDA figure for that bit?

[Pavel Mucha, executive]

Well, we do not report separately our companies within OPAP group. So at this stage, we would not like to disclose the Stoiximan results. They are obviously very profitable. And as I mentioned, we've consolidated in Q3, EUR 7 million contribution from Stoiximan and for the 9 months it's EUR 13 million.

Basically, your second question on consolidation, yes, we acquired additional 15% stake in Stoiximan during November. We are definitely looking at obtaining the sole control of the business. At the moment, it's subject to some regulatory approvals. And really, it's difficult to estimate from which point of time we will be able to consolidate Stoiximan.

[Osman Memisoglu, analyst]

Okay. And the other question I have is as a follow-up to the GGR little bit. Will you be able to give us a bit more color guidance on the accounting treatment of this change?

[Pavel Mucha, executive]

Well, the profitability really of OPAP will be enhanced by the difference in the GGR contribution rate from -- the effect of the new GGR contribution rate plus the already prepaid EUR 183 million for 2021, but the amount that may arise from potential corporate taxation.

[Osman Memisoglu, analyst]

Okay. And I guess just to follow-up on another figure. You mentioned 30%, but I guess that was the old figure, right?

[Pavel Mucha, executive]

No, the old was 35%. And for the next 10 years, the GGR contribution rate stands at 30%. And it's made up from -- yes, it's 30%.

[Osman Memisoglu, analyst]

Okay. So this 30% is your liability, but you will be paying 5% like you did in November?

[Pavel Mucha, executive]

Yes, yes. Because we prepaid most of the 30% already back in 2011.

[Operator]

The next question comes from the line of Mantzavras Paris with Pantelakis Securities.

[Paris Mantzavras, analyst]

Actually, the question refers to the effect of the new lockdown underway. Since -- as you described in Page 26, you are much better positioned now compared to the first lockdown. The question is, why do you guide for the more or less the same EBITDA loss of EUR 45 million to EUR 50 million per month of lockdown? Why not something smaller?

[Pavel Mucha, executive]

It's significantly smaller than the hit, which we had in spring, obviously. This EUR 45 million, EUR 50 million, which we indicate is related just to these 3 weeks, and it's definitely a significantly smaller amount than unfortunately what we experienced during the second quarter.

[Paris Mantzavras, analyst]

If I remember correctly, I mean you were guiding for a monthly impact to the same tune back then in spring? Or I'm mistaken?

[Pavel Mucha, executive]

But -- okay, this figure includes also some local lockdowns which we've been experiencing already during October because already in October, many of the regions in the Northern Greece, were -- we were shut down already since the mid of October.

Also we are really more hit in the Hellenic Lotteries because it's a product naturally susceptible to COVID, people are afraid to buy physical scratch or physical passivate lottery because of COVID. So really, the -- as I mentioned, Hellenic Lotteries product are also significantly impacted.

[Operator]

The next question comes from the line of Tzioukalia Fani with Wood & Co.

[Fani Tzioukalia, analyst]

So again, on the tax repayment question, just to be clear, it's basically on the -- on how it will be treated in the accounts. What will be the percentage reported of GGR tax payments reported in the P&L? And what will be paid in the cash flow? And if there's going to be a deferred tax liability created in the balance it may be for 2030?

And the second question has to do with Stoiximan market share under the new listing environment? What are your thoughts on that front? How do you see the new players coming in? And when will be the new licenses distributed. I believe that it would be towards the end of the year. So these are the 2 questions from my side.

[Pavel Mucha, executive]

Yes. I can confirm that the GGR contribution rate on legacy games from now on will stand on at 30%. However, cash-wise we are going to pay 5%.

[Fani Tzioukalia, analyst]

So GGR tax in the P&L will be on a 30% basis, but you will pay 5%? So does this create a deferred tax liability going forward?

[Pavel Mucha, executive]

Remember that apart from 5%, we prepaid the remaining amount to 30% already. So on the deferred tax liability, there shouldn't be any major impact, really no impact.

[Fani Tzioukalia, analyst]

Okay. So let's assume that you pay EUR 500 million GGR taxes per annum, straight line, for 10 years, it would be around EUR 5 billion. So let's say that you have already paid EUR 1.8 billion and that you pay 5% GGR tax per annum. So more or less, we should imagine that this would offset the estimate or the assumption of the 5% -- of the EUR 5 billion GGR tax that should have been paid based on the 35% -- 30% GGR tax. How about this confusion?

[Pavel Mucha, executive]

If you allow me, I will try to answer this question, please. It's very, very hard to make any such kind of simple calculations as you did with EUR 500 million and so on. Because what we are talking about this new regime related to GGR contribution, please, this is not tax. This is a contribution to the Greek state.

Then it's -- we should also include there that except of these legacy games, we are paying the GGR contribution from other games, from VLTs, from Hellenic Lotteries products, and this is not changed at all.

So this is very hardly to make any such simple calculation. Definitely, our IR guys can have you in the follow-up discussions with you some -- a little bit more detailed guidance how -- what could be there. But definitely, please, we should also have in our mind that it will depend on the volume of our business in the next years.

[Fani Tzioukalia, analyst]

Yes. This is why I assume the straight line and not, let's say, an increase of, let's say, 1% to 2% or -- to make it more simplified and not -- in any case, we can move on to the second question, and then I'll take it from...

[Pavel Mucha, executive]

Yes. The second question was related to Stoiximan. And if I quoted well with -- related to the licensing process, OPAP as well as the Stoiximan delivered all needed documents to the Hellenic Gaming Committee for -- which were needed based on the requirements. And currently, it is in the hands of Hellenic Gaming Commission. That's the whole process of the evaluation of documents and deciding about the licenses.

So currently, we don't have exact time plan when it could happen. We don't expect it will happen during this year. Once we have the -- where is the framework for online in Greece based on the permanent licenses, then as we said also in the past that we will continue fully in our dual strategy in online. It means that, let's say, that on the business-wise or from the business point of view that we will be fully competing with Stoiximan aside with other competitors.

[Fani Tzioukalia, analyst]

Okay. Great. And 1 last question on the VLT side. So what -- 2020 is the first year of the full year of 25,000 VLTs installed. Unfortunately, not as we would all have imagined during -- because of coronavirus, but I was wondering what would you estimate as a maturity period for 1 machine that was, let's say, installed in December 2019 in order to see the matured performance and be able to, let's say, have a clearer view of how the machines are working, would be 1.5 years, 2 years. But in theory, of course, not including 2020.

[Jan Karas, executive]

Well, simple answer for 1 machine properly placed in the market would be somewhere around 18 months to reach its maturity. The answer is, however, not so simple because we are dedicating a lot of time, as you know, from our regular updates to reshuffling of the machines, assuring a proper placement across the network. So with that outlook, we believe that still next year, not only because of the COVID, but because of maturity of the machines as well, will be still a period to learn how the whole business will mature.

[Operator]

The next question comes from the line of Orsini Luca with One Investment.

[Luca Orsini, analyst]

Sorry to come back to the same issue of the tax. But just to make sure that we all understand, and I understand it properly. Essentially, you have already paid the tax, and you will account it for the next 10 years. And you will pay tax accordingly because in reality, you haven't paid -- you haven't deducted from -- you have actually paid more taxes already because you didn't deduct from the tax the payment that you made for the concession. Is that correct?

[Pavel Mucha, executive]

Yes. Let's summarize this. Starting October 2020, we are entering or we entered into the new concession agreement for the legacy games. And we are in the framework where, from these games, the GGR contribution to be 30%.

OPAP already prepaid the significant part of this GGR contribution already in year 2011, which is counted for the period of 2020 to 2030 for amount EUR 1.831 billion, which is equally dispersed for every year or each year from this 10 years period. It means EUR 183 million per year. This is already considered as paid.

Then OPAP is paying 5% of GGR. Plus OPAP and based on this agreement, there is formula, which is saying that at the end of this period, in May, the calculation about this payments done by OPAP. It means this prepayment, EUR 1.8 billion, plus 5% paid every year, and it will be compared -- by the way, this comparison, we are obliged to do every year based on the audited figures and to send this and inform Ministry of Finance about the difference, where the settlement of these differences, yearly differences to be done based on annual accounts of OPAP for year 2030.

It means somewhere in the period May, June 2030. One, where the formula is saying that if OPAP business is going so that this paid money plus prepaid money, including also some corporate tax factors will exceed this prepaid amount, then OPAP will have to do some settlement with the state and at the moment, to pay this difference.

It is also when valid in the opposite. It means if the actual payments counted for these 10 years will be lower than the prepayment, then OPAP will be authorized to be paid or to be settled by the Greek state. Is it clear?

[Luca Orsini, analyst]

That is very clear. Sorry for hitting the fourth one on the same question, but it is very important, and there is a little bit of confusion in the investment community.

[Pavel Mucha, executive]

It is extremely important, of course, for us, and we fully understand that there is good and necessary to provide such kind of information. So this is, let's say, in the summary, what the new concession framework for legacy games of OPAP for the period between 13th of October 2020 till 12th of October 2030, what this new framework, concession framework is bringing to us.

[Luca Orsini, analyst]

Then I have a more general question on the sports betting. We are now getting the events back. The fact that the events are without public in most places or with very limited public in other places, does that affect the betting, the behavior of the betting community? Or does it not? In your view? It's more a qualitive than quantitative question.

[Jan Karas, executive]

Thank you for the question. And I'll probably not surprise you that it's very difficult to draw any kind of direct correlation. We see primarily correlation between the events happening or not. And that's the key benefit of now the second wave that the events are indeed happening.

Obviously, what remains answered in the future is what will be the long-term impact of events happening without the fans because as we all know, from our own sponsoring activities, that's an important part of the game and important essence for the community to be shared.

So it remains to be seen. But at this moment, we don't see any direct correlation between these 2.

[Operator]

The next question comes from the line of Birbos Dimitris with Optimal Bank.

[Dimitris Birbos, analyst]

I have 3 questions. The first one is, I think, very, very, very clean -- very clear. If we would assume to have EUR 1 billion of GGR in 2021, we should assume that we will see on your P&L EUR 50 million of GGR contribution? And if so, what will happen with the agencies because the reduction of the GGR contribution will raise your NGR. So agent fees are based on the NGR. So would you expect the higher agent commissions are going to renegotiate the current contract with them? This is my first question.

The second one has to do with the Scratch and the Hellenic Lotteries operation. If I remember correct, you have to pay a minimum GGR contribution of EUR 50 million. Given that currently the GGR performance of this business is not so good, so the GGR overall will be less than EUR 150 million, should we expect a negotiation of this minimum GGR contribution, given that we have this extreme situation with the nationwide lockdown in Greece, or we should stick to the previous regime?

And finally, regarding the very good performance from Stoiximan. I just want to clarify if we have a positive -- a lower payout ratio. So in -- let's say, according with same or better wages, we have seen this increase in the GGR in Q3. If we have this positive impact on the payout ratio, we have more surprises in Q3?

[Pavel Mucha, executive]

Okay. So the first question, I think you were quoting theoretical example of EUR 1 billion GGR in 2021. So I just repeat, we will be against EUR 1 billion GGR, we would be recording 30%, i.e., EUR 300 million GGR contribution, not EUR 50 million, as you suggested.

Now you mentioned the agent. Look, I think it's very premature to come to any conclusions. We are always discussing the commercial terms and conditions with our agency network. So I think it's a bit premature now to discuss anything else.

On the EUR 50 million minimum GGR contribution on -- in Hellenic Lotteries, indeed, it's prescribed in the concession agreement. We see COVID as a career force majeure, within locked down, the street vendors could not operate. The OPAP stores were closed down.

So we faced quite a substantial period in the year. We simply couldn't produce GGR. And therefore, for us, it's very clear-cut case. And we already discussed with the government that definitely in 2020 the EUR 50 million GGR contribution cannot be met, and it should be a lower number.

[Jan Karas, executive]

Now regarding on the sports betting payouts question. In Q3, we obviously, as usually see different payouts different weeks. But overall, on average, the payouts was not any unusual from our expectations. So no special benefits driven from that.

[Operator]

The next question comes from the line of Pointon Russell with Edison Group.

[Russell Pointon, analyst]

Hello. It's actually Russell Pointon. My name is the other way around. A couple of questions for you. Within your guidance for the impact from the second lockdown, could you talk about the assumed rate of recovery? Are you assuming effectively what you saw post the first lockdown?

And aligned to that, I think you said that December is typically a more important month in the quarter. So as we think about the potential weakness going further on, should -- is it correct to assume a greater impact? And also, therefore, the rates of recovery you've seen would be lower given it is December?

And another question is in terms of your CapEx -- I mean your free cash flow is growing very well this year. And part of that is the profitability, the working capital and CapEx has come down. Will we expect some catch-up CapEx as you move into 2021?

[Jan Karas, executive]

Yes. So I'll start with answering your first part of your question regarding the second lockdown impact and the recovery speed. We -- as we mentioned earlier, we expect that we expect -- or we expect that -- we keep hoping that we will be able to reopen our network, but it's entirely dependent on the state's decisions that we are obliged to follow. The later it comes, the greater the impact in December.

It's very difficult to guess on your question how much any specific week in December is more important than other because this year, everything is simply different.

Regarding the recovery, that also remains to be answered with respect to the measures that will be applied. It all depends on that. We might see anything from very limited amount of customers able to step into the stores all the way to possibly what we have had before the COVID -- second COVID lockdown, which was a limited amount of customers, but still being able to stay in the store. So it remains to be seen. I'm sorry not being able to give you more clear answer.

[Pavel Mucha, executive]

Okay. On the CapEx, indeed, there are quite large savings on CapEx side during 2020 because of COVID and because we wanted to preserve the cash. In 2021, we always declare that probably ongoing maintenance CapEx for OPAP is in the region of EUR 20 million to EUR 25 million. And based on our current project roadmap, this is what we can sort of estimate and assume for 2021.

It doesn't mean that everything which we saved in '21 will be all of a sudden spend in 2020 -- sorry, what we saved will be all of a sudden spend on top of normal CapEx in 2021. So we just expect normal year to deliver the projects, which we need to do to drive our business.

Obviously, with the cautiousness that in case there are further lockdowns, we will always revisit our spend going forward.

[Russell Pointon, analyst]

Sorry. Can I come back on the first question, please? I appreciate the situation is different this time, and there's still uncertainty. But I think what I was trying to get a feel for is you are seeing a closure over a certain period. But then did you assume a similar trajectory in recovery that you saw post the initial lockdown in terms of -- I forget the numbers, but week 1 was 50%; week 2, 60%, 70%. So I'm making numbers up. But were you just effectively on a trajectory basis, assuming the same rate of recovery, albeit things are different?

[Pavel Mucha, executive]

Well, it's already second lockdown. Definitely, there are large groups of population, which are hardly hit, not only from the lockdown in spring and now of the second, but also from the really bad touristic season where many people didn't have revenue or salaries from the jobs in tourist industry.

So yes, I'm sure people will try to have some entertainment, but it will be pre-Christmas period. There will be certainly distancing measures again in place. We will see how strict or not. So it's a bit difficult really to predict what will happen. And maybe also, it's not clear whether the whole Greece will be reopened also on the 7th of December.

In spring, it was in waves, but whenever we opened all the OPAP stores, we were just opened. And remember that the play stores were opened 1 month later. So it's a bit difficult now to estimate and predict what exactly will happen and when, and how much people are hit really by the whole situation and how much they will be eager to spend with us.

[Operator]

[Operator Instructions] The next question comes from the line of Papageorgiou Alexandros with NBG Securities.

[Alexandros Papageorgiou, analyst]

Yes. On the subject of contribution, the GGR contribution. First of all, am I right to understand that this only applies to sports betting and lotteries and not to instants and VLTs?

[Pavel Mucha, executive]

Yes, that's correct, yes.

[Alexandros Papageorgiou, analyst]

Okay. So going back to -- just back on the envelope calculation. If we assume about EUR 1 billion GGR from those two every year, that sums up to about EUR 10 billion in 10 years. So 30% of that is about EUR 3 billion, of which you will have paid, every year, 5%, so that's EUR 0.5 billion. And if we add the EUR 1.8 billion that you have already prepaid, that, if I'm right, leaves about EUR 700 million of tax still to be paid in 2030. So wouldn't that create a deferred tax liability?

[Pavel Mucha, executive]

Just if you allow me to answer your question. Again, this is theoretical calculation. The comment is that there is also -- in the formula, there are some corporate tax parameters, which can influence this whole calculation. So this is -- so definitely, also, this is not about -- from the accounting point of view, this is not about the deferred tax treatment. But, as we said, that we will calculate on every year results this difference.

And as we said also, we have to report this difference to Ministry of Finance. And of course, this difference will indicate that at the end of period, for the relevant year, we will have to or will be sold if the OPAP will pay some additional amount. This amount will be provisioned in our accounting every year.

So this is the way that we will reflect this in our results for -- it means important topic is -- and this is something what we will report is that on every financial year results, there must be calculation based on audited figures, there must be a calculation of the difference of paid GGR contribution, including some corporate tax effects compared to the amount which was -- which is based on the real GGR contribution from the relevant games. So every year, it will be clear, and you will see it what is -- what for the -- based on this formula, what could be the difference, either positive or negative.

[Operator]

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karas for any closing comments. Thank you.

[Jan Karas, executive]

We thank you very much for your attention. Thank you very much for all the questions. And as always, our IR team is ready to follow with you offline. Thank you very much. Have a great day. Have a great evening. Goodbye. See you soon. And very important is stay safe. Bye.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.