conference call conducted by chorus call hellas/media/files/o/opap-ir/...why the gdp in q3 2016...

112 Leof. Athinon, Athens

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“Nine Month 2016 Financial Results Conference Call”

November 23rd 2016, 16:00 (GR Time)

Conductors:

Damian Cope, Chief Executive Officer

& Michal Houst, CFO, Executive Director

Conference Call Conducted by Chorus Call Hellas

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OPAP Nine Month 2016 Financial Results Conference Call

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OPERATOR: Good afternoon Ladies and Gentlemen, this is the Chorus Call

Conference Operator.

Welcome and thank you for joining OPAP Nine Month 2016

Interim Management Statements Conference Call.

Please note that a PDF presentation for the Results is now

available on OPAP’s website www.opap.gr under the section for

Investor Relations.

At this time I would like to turn the conference over to the

Executive Management of OPAP S.A.

Mr. Cope, you may proceed please

Cope D: Thank you very much, and good morning, good afternoon or

good evening to everyone. I am glad to welcome you to OPAP’s

Q3 2016 Investor Conference Call.

For today’s call, I am joined by our CFO, Michal Houst. And in

terms of the running order, Michal will first take you through

our Q3 results and a summary of the latest economic trends. I

would then provide an update on our progress in the last three

months including the recent developments with VLTs. We will

then be available for any questions you may have. Michal, over

to you.

HOUST M: Thank you Damian, hello, everybody. I apologize I am a bit

sick, so I hope you will be able to understand me. So I guess


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that you all agree that Q3 was an interesting quarter, when it

comes both to our figures but as well macroeconomic situation.

The reason for that is that in Q3 2015, it was very bad quarter

for Greece which was heavily affected by the uncertainty caused

from the Bank holidays period and the capital controls. That’s

why the GDP in Q3 2016 increased by 1.2% year-on-year,

reversing the negative trend of the previous quarters, and that’s

why retail sales rose sharply in July which was the first months

of capital controls last year, only of course to return to negative

growth territory in August and September.

As for the future, although it’s right to say that most economic

figures are admittedly at very low levels, and the base effect

growth scenario may materialize, we note that the pension cuts

and additional tax contribution from individuals will inevitably

further burden disposable income and private consumption.

Amidst this environment, OPAP reported material revenue

growth of 6%, thus bringing the nine months year-to-date

figures exactly at the same levels as last year. We feel this is

some achievement taking into account that our benchmark

which is private consumption was actually down almost 2% for

the same period.

In contrast to the GGR, EBITDA in the nine months and three

months period decreased by 28% and 19% respectively year-

on-year. This drop is mostly a result of the significant increase

of the GGR contribution from 30% to 35% as of January the 1st

this year.


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As also mentioned in our press release, when adjusting for this

increase, the like-for-like EBITDA in nine months actually

declined only by 3% and that is despite the €6.4 million of one-

off cost mostly related to the VLT arbitration that hits

profitability for the third quarter.

As a side comment, you may have noticed that some of our key

cost items were up in the third quarter. This increase can be in

a nutshell explained by four major reasons. The first one is, the

horse racing which is a loss making business and it’s still at the

very early stage of operation. The second reason is the one-off

costs already mentioned related to the arbitration.

The third reason is marketing cost which in Q3 2015 was very,

very low, due to the effect of the capital control and due to the

fact it didn’t make any sense basically to market in this very

difficult environment last year. And this accounts almost for €4

million, this difference. And then the fourth reason is finally the

increase in payroll which is indicated by us in the previous costs,

is rising due to the continuous enhancements of the Company

workforce and upcoming introduction of the new projects.

Further down the road, net…€9 million net profit declined

by…nine months net profit declined by 40% while after adjusting

for the GGR contribution, net profit would drop by a lower 21%

at €38.7 million.

As for the balance sheet, our cash pile amounted to €187 million

and our net debt position came at €167 million which we find as

satisfying taking into account the distribution of €0.92 per share

which is €293 million in 2016.


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Going forward, we stick to our commitment to distribute the

bulk of the free cash flow back to the shareholders should no

new significant investment opportunities come. Fortunately for

us, there is many investment opportunities that Damian would

mention later in his speech, so there would be definitely some

increase of the CAPEX going forward.

Jumping to a quick review of the Group’s segment, lotteries

growth reached 8% and that is despite the Joker unfavorable

jackpot rollover for the third quarter. However, we were luckier

in October and November, so there was again jackpot reaching

over €13 million and this partially offset this negative

performance year-to-date.

With regard to KINO, KINO was doing fine but we need to note

that basically we launched last year in November we launched

KINO bonus and the initial hype which was there in November,

December 2015 would be hardly reached at the current level of

performance of that game.

Hellenic Lotteries also posted material growth for scratches and

scratches and passive also posted material growth reaching

23% year-over-year, which was actually the highest across all

our segments for the quarter. We reported uplift games as a

result of both the easy comps in 2015 as some of you may

remember scratch tickets were the product which took the

hardest hit during the Bank holiday period, but also it is the

result of improved marketing campaign and improved product

mix and distribution actions that helped the game recover

quickly.


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Finally, sports betting’s stayed down year-on-year declined by

2.6% in terms of GGR, being an exception across our portfolio.

It’s clear that the game remains on a slight downward trend.

The good news is that we are determined to proceed with

product improvements in 2017, that such as SSBTs and other

changes, however, this is something that Damian will focus on

and as such, I pass the ball over to him. Thank you for your

attention.

COPE D: Thank you, Michal. I realized that our Q3 update is typically

more of a trading update only, but I would like to provide you

with a brief summary of our overall strategic progress in the last

three months. On the 31st of August this year, I set up OPAP’s

2020 vision and the eight strategic priorities on which we are

focusing in order to deliver that ambition.

In the short presentation, now available on our site, I provided

updates against each of these priorities. It’s fair to say that

over the eight strategic priorities, the last on our list entitled

building a healthy relationship with states and regulators is

probably the one that the majority of investors, shareholders

and analysts have been most focused on in recent months.

Taking a government to the international court of arbitration is

not a decision to be taken lightly by any organization and clearly

reflected a broken relationship. That is why we are pleased with

the recent approval by the Hellenic Gaming Commission on the

1st of November of a new framework agreement for VLTs. This

allowed our Board to decide to restart the project and to

significantly reduce the size of the arbitration claim. Although I


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believe that we still have a lot of work to do in this area, we are

certainly encouraged by the recent VLTs decision and in

particular by the more pragmatic tone in which our

conversations with the HGC are now taking place. We continue

to maintain an open and regular dialog and are looking forward

to further constructive communications.

As for the VLTs regulation itself, I believe that this new

framework secures public interest in revenues, contributes to

the process of tackling illegal gaming activity, provide a strong

responsible gaming policies while also allowing for the economic

viability of this new business activity.

In relation to policies around player protection, the regulation

remains by international standards amongst one of the strictest,

as it requires the issuance by OPAP of a player card with full

player’s identification without which playing VLTs is simply not

possible. Moreover, a new feature was imposed, whereby

players are being permanently and clearly informed on their

screen of the total time and money spent. Around the world

such measures have only been adopted by a handful of other

countries.

Now, that the regulation has been approved by our team led by

Vaios Karantinos, is very much focused on the prompt

implementation and deployment of the machines. This involves

the rollout of 16,500 VLTs within the next 18 months, or more

specifically the deadline set by the Hellenic Gaming Commission

regulation of the 1st of May, 2018.


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Originally, OPAPs plans were focused very much on deploying

these machines across the network of gaming halls, each of

which are allowed to have a maximum of 25 machines.

However, we have since decided that we will also deploy VLTs

across a large number of shops in our network of OPAP stores

with a maximum of 3 VLTs allowed in each shop. The latter is

clearly similar to the successful UK model where there are

maximum of 4 FOBTs allowed in each license betting shop.

The overall deployment of legally license VLTs is a brand new

development for both OPAP and the Greek market, so we will be

analyzing our performance carefully as we go along, and we will

be fine tuning our rollout strategy based on our learnings.

We are currently finalizing the rollout plans, and so we do not

yet have a confirm split or ratio of machines to be spread

between gaming halls and OPAP stores, but we will be able to

share this with you, when we will announce our full year 2016

results in March.

In terms of timing as you know, we have around 90 gaming

halls that are close to being ready, and already we hold in our

warehouses almost 9,000 machines. We are now in the process

of concluding our mapping, securing new premises and taking

all of the other steps necessary to execute the rollout as

smoothly as possible. For the OPAP stores, we are

identifying the optimum rollout timetable and this will exist in

parallel to our gaming hall rollout, also we will, of course,

maximize any synergies of these similar streams of work.


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There is no question that this deployment is one of the largest

projects in Greece, and as such will command a significant

amount of our management time in 2017. Nonetheless, we are

naturally excited to be finally entering the implementation phase

of this investment, and expect the first pilot locations to go live

in January 2017, with the full rollout timetable to commence by

the end of Q1, 2017. Thereafter, we expect to relatively

straight line deployment rate into Q1/Q2, 2018.

I would also like to briefly touch on our progress in a few other

key areas. Starting with our retail network, under the

leadership of Jan Karas, we’ve made good progress across each

of the three areas of focus; our shops, our products, our

services, and our people.

We are now finalizing our plans for 2017 which will include the

necessary upgrade, of much of our shop technology

infrastructure, for example, as new routers, cables and better

connectivity in order to enable the arrival of VLTs and other

products and services.

We are also in the final stage of the planning with our partners

for the rollouts of self-service betting devices across our

network. This would transform our current sports-betting offer

and provide a much more engaging experience for our

customers. Exact numbers of terminals and a better idea of

phasing will be shared with you once that vendor agreement has

been concluded, and we will certainly be able to provide much

more detail at our full year results in March 2017.


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My comments to the people, our people in our network, my

team and I have spent considerable time meeting many of our

hardworking agents across Greece and also in discussions with

POEPPP, the union that represents our agents.

Like all small businesses in Greece, our agents are facing tough

times, and OPAP remains focused on providing them with the

best chance of success. This success will come from an

improved relationship between OPAP and our agent, which

ensures our interests are fully aligned. This new relationship

will provide for a more modern dynamic and customer centered

operation which will support and reward by the dedication and

entrepreneurial effort of our agents. We expect to make

progress in the business relationship between OPAP and the

agents in the next few months, and again, I expect to be able to

provide more details of this in March.

Turning to technology, I said back in August, I wanted to

transform the role of technology within the Group, and we

remain very much on track to do so. Our RFI process to identify

the right long term technology solutions and partners is coming

to an end, and we expect to finalize our decisions before the end

of the year. This will provide modern, best-in-class solutions for

all of our existing activities, plus provide the foundation for

future multi-channel or Omni-channel strategies.

With the rollouts of VLTs, SSBTs and key platform upgrades, our

new CTO, Michele Fusella and his team have a busy couple of

years ahead, but we are confident in our ability to deliver this

change between now and the end of 2018 which will provide the

foundation for much of our future growth.


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Our digital revenues remain at disappointing small part of our

overall operation, and offer still much less competitive than we

would like. As stated in August, we will be transforming our

digital sports by no later than the end of 2107, well ahead of the

busy summer of 2018, which includes the Football World Cup in

Russia. Plans are underway and again we will be able to provide

further details in March.

As for the online licensing regime, we are encouraged to see the

HGC had a significant number of names to the list of blacklisted

websites in the last few months. OPAPs position remains clear,

we have exclusive rights, and as I have stated previously, we

will take any steps we believe to be necessary to protect our

Company and our stakeholders.

On our desire to create a world class portfolio of products and

services we’ve made good progress in addition to the obvious

news of VLTs and our advance planning on SSBTs. In

September, we also announced our agreement with Inspired

Gaming, the leading provider of virtual sports betting to launch

their products across both our shop network and online.

Integration work has already started and we expect the service

to go live across our network of shops, no later than Q2, 2017.

Based on the experience of other markets, notably Italy and the

UK, we expect the introduction of virtual products to contribute

to overall GGR growth in our shops net of any substitution, but

we will not be providing any specific guidance at this stage.


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Finally, I just like to touch on the Group’s important CSR

activities. Although OPAP before privatization had historically

contributed significant amount for various causes, OPAP is

clearly now a private company and as such we have discussion

over the CSR activities we choose to undertake. 10 days ago

Greece enjoyed the 35th running of Athens Marathon Run on the

original route from Marathon to Athens and this year the total

number of participants across all of the races was over 50,000.

As the official sponsor, we were keen to leverage the huge

awareness of the event and direct this towards one of our major

CSR initiatives, the renovation of the two largest children

hospitals in Greece. By virtue of a comprehensive and truly

innovative digital and social media effort, we created the

engagement of over 200,000 people, and thanks to this network

our ambassadors, partners and other third-parties together with

our people, we successfully raised €3.3 million, which we will

investing in the further renovation of the hospitals. By any

measure, this was a truly impressive achievement and is

testament to the importance we put on our strategic priority of

committing to our communities.

In summary, I believe that we have made good progress with a

number of our key strategic priorities. However, we are

entering a very busy period of change in 2017, and so, we will

be ensuring that we keep our focus very much on day-to-day

operations while successfully delivering the various programs of

work.

I look forward to being able to provide you with more detail

across a number of areas in March next year. With that, I am


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concluding our opening comments and we are now ready to

address any questions you may have. Thank you for your

patience and your attention.

Q&A

OPERATOR: The first question comes in line of Mr. Draziotis Stamatis of

Eurobank Equities. Please go ahead.

DRAZIOTIS S: Yes, hi there and thank you in advance for taking my questions.

You actually addressed several things with your presentation.

Two main things, I would like to ask if I may please. The first

one has to do with CAPEX, you kind of alluded to higher CAPEX

in the future. Could you please provide some granularity as to

the plans CAPEX spending for 2017 and whether…and…this will

relate to i.e., you know, have you…do you have anything more

concrete you can share with us regarding, for example, the self

service betting terminals? And the second question would be on

cash management. Could you maybe elaborate a bit on this 80

million amount referred to as loan granted to third parties.

What is this instrument and what will be the benefit be or has

been in terms of the income earned.

HOUST M: Thank you for your questions, it is Michal, I am taking this

question because it is financially related.

DRAZIOTIS S: Yes.

HOUST M: So with regard to the CAPEX, unfortunately we cannot be too

much specific because we are now in the phases of the

business…preparing of the business fund for the, let’s say period


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of the next year, and but as well for the period of covering the

whole strategy 2020. But what we can say is that definitely you

could see in the last year there was not so much CAPEX because

we were waiting for the VLTs and we were rather chasing a

court verdict then in the business there, so we were not able to

invest into the projects and now this is changing.

So with regards to the main CAPEX is that it’s ahead of us, we

need to prepare the infrastructure of the shops, improve the

connectivity of the shops, to accept basically all these new

features and products that we plan to launch. Now, it would be

definitely CAPEX in basically across the whole network, and it is

about few of thousands euros per shops, and it would somehow

staged within the next two years. The other major CAPEX would

be, as you mentioned SSBTs deployment, and there we

definitely would go with some, again few thousand machines to

deploy in stages into our shops across…within 2017 and 2018.

And you could probably know that the cost of one machine could

vary between €2000 to €4000, so it would be again significant

investment.

Then the last…the last not least is VLTs, in which basically we

restart the whole project and as Damian said, we need…we

basically refer a bit the deployment model, so we would deploy

not only in the gaming halls, but in the majority of the shops.

This investment and rollout would be again staged within the

next two years. And again, you are talking about few thousands

euros per shop of investment into the project. So I think you

could somehow sum it up to the numbers which would be tens

of millions euros, like.. may be many tens of millions euros in


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the next two years. But we don’t have a specific number here.

Is it clear?

DRAZIOTIS S: Yes. Can I follow-up a bit on the last point with regard to the

CAPEX required for the VLT deployment in the shops, so you are

talking about the necessary refurbishment in the shops, which

you intend to cover so that these can be adjusted, so that there

is enough space for VLTs?

HOUST M: This investment will be probably born by the agents, but what

we are talking about is the IT technology that need to…

DRAZIOTIS S: The technology okay, okay. That’s clear, okay, thanks.

HOUST M: Yes, so the other question was about a fixed investment, so it

was the short-term instrument for a limited period of time of,

let’s say, four months and it borne better the interest of around

8%, so it was a good investment from our side.

DRAZIOTIS S: That’s great, so a very short last question regarding VLTs. The

subcontracted machines actually, is there a plan as to when you

will proceed with an RFI for these machines.

HOUST M: This question, I will handover to Damian.

COPE D: Are you talking about the sub-concessions?

DRAZIOTIS S: Yes, yes exactly.

COPE D: Yes, I think you are aware under our license we are obliged to

launch. This is a tender, and we are now in the process of


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preparing this, I mean, obviously, there is a quite a lot going on

around VLTs, but we know what our obligations are, and so that

process has started.

DRAZIOTIS S: Sure, and last follow-up. Is it…I mean, should we expect like,

you know, the deployment of the subcontracted machines to

kick off, after you have finished with the entire rollout of your

own operative machines.

COPE D: I think we are expecting parallel, but it very much depends on

the timing of the tender prices itself, but we would expect it to

be around the same time.

DRAZIOTIS S: That’s very clear, thank you very much.

OPERATOR: The next question comes in line of Kourtesis Iakovos of Piraeus

Securities. Please go ahead.

KOURTESIS I: Good afternoon, my first question has to do with the VLTs. I

would like to know how many…what would be the exact number

of the VLTs that you plan to install by the end of 2017 out of the

16,500 that you are going to operate yourself. And taking into

account the fact that you are going to install a large part of

these or part of these machines to your agencies, how you are

going…what are the actions you are going to proceed to avoid

the potential cannibalization of KINO. If I remember correctly a

KINO bonus initiative was launched in late November of 2015,

so what are the actions…what are your plans related to this?

And second question has to do with, if you have any plans to

further leverage your balance sheet in 2017. And despite the

fact that, as far as I understand, you are going to have


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increased CAPEX due to the investments you refer to, do you

have any possibility for additional capital returns in 2017.

Thank you.

COPE D: Thank you for your questions, its Damian here. I will take the

first one and then Michal can take the second one. On VLTs, I

can’t tell you the exact number at the end of 2017, because we

are still working on the plans. I mean, I am not hiding

anything, and what I try to give is as much guidance as possible

to say, we’ve got a deadline of the 1st of May 2018. We are

clearly not planning to be rolling out right up into that point, so

we will have some kind of safety zone, if you like, towards the

end of the period. We are doing a pilot in January and we will

start sort of the full run rate of the rollout from the end of

March. So, I think you can literally draw a straight line that will

give you a pretty good guess. I think the only thing you are

missing is the split between machines in shops and machines in

gaming halls. And again I am hiding anything, but there is a

number of moving parts there and we are still finalizing the

exact numbers.

Second related question on VLTs around KINO cannibalization. I

mean look, in every other market where VLTs have gone in

there has been a net growth in gross win GGR or whatever is

calculated. We expect the same. Yes, we think some of our

KINO customers will enjoy playing machines, we also think

some of our other customers, sports betting customers and

other products will also play machines. And so, overall net, net,

we expect that to be a significant positive contribution and there

is no specific rate that I would share with you now that we think

of in terms of KINO cannibalization.


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HOUST M: And the second question with regards to the leverage, as you

pointed out, rightfully pointed out, there is this CAPEX needs,

you know, in the next two years. So basically, we are definitely

thinking that we would cover this CAPEX need by additional

leverage. And as we said, and as I would repeat, the rest and

the bulk of the free cash flow we would distribute to the

shareholders. We cannot now comment whether we would

basically increase the leverage significantly just to distribute, I

don’t have any clear plan like that. But definitely, we would

consider covering the CAPEX at least by the increased leverage.

KOURTESIS I: Thank you very much.

COPE D: Is that okay?

KOURTESIS I: Yes, thank you.

COPE D: Great. Thank you.

OPERATOR: The next question comes from the line of Lewis Vaughan with

Morgan Stanley. Please go ahead.

LEWIS V: Hi, I have just to two, one on SSBTs, have you selected the

supplier for those and if I understood that correctly, you expect

to rollout all of those by the end of 2017 as well as most of

VLTs. Is that correct? And should that product give a sort of

significance boost to the range of things that you can bet on in

STIHIMA. And then a second one on the negotiations with the

agents; is the discussion now over changing the basis of


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commissions to a GGR basis or is it something else now?

Thanks.

COPE D: Thanks Vaughn for both of those. I will take them. So SSBTs,

yes, we are still in negotiations with the vendors. So we can’t

share any details of that, but we are a long way down the road.

And in terms of rollout, I think I said on the last call that we

were really looking at the mix of if you like traditional standup

terminals and what I described is compact terminals or tabletop

or laptop terminals. There are no other operators that we have

found anywhere in Europe who have a significant mix of those

because tabletops are relatively new. We think that it will be

particularly popular here but we are still doing some work to

assess what ratio of traditional terminals and tabletops we will

be rolling out. And we are talking to our likely provider about

that.

In terms of the timing of the rollout, I think we see it being a

very positive improvement to our sports betting offer generally,

particularly on live betting but even on pre-game as well. The

bulk of our sports betting, as you are aware, in Greece is

football. And if you look at other markets particularly the UK,

but other countries as well, sports betting terminals drive higher

bets, higher lines, but multiple and higher margins and you

know, significantly more attractive for customers than OTC

activity. And I think that will be the same here.

Whether we will do the whole of the network by the end of

2017, I think that is unlikely. We clearly have a 2018 World

Cup as a target. So, I would like to see that in a large


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proportion, if not all of the network, had some kind of self

service devices by that time.

On agents, yes, to be honest, there is a long list of things that

we are talking to the agents about, commission is definitely one.

As you know, based on commission as a percentage of turnover

restricts our ability to be a bit more competitive and flexible on

our products, particularly sports betting. But there are a

number of other issues. We’ve got a long list, some are more

contentious than others, but we are very hopeful that we will

get a change in that relationship in the next couple of months

that will be good for OPAP, but also good for the agents.

LEWIS V: Great. Thank you.

COPE D: Is that okay.

LEWIS V: Yes, thank you.

COPE D: Thank you.

OPERATOR: The next question comes from line of Petrova Victoria with

Credit Suisse. Please go ahead.

PETROVA V: Thank you very much and congratulations on VLT agreement.

Just for understanding, could you please explain, do you look at

the VLT machines operating on these VLT halls and VLT

machines operating through agents, those two, three machines.

Would they have different economics, how should we look at it?

Is there any profile in difference, so should it be the same

machine sort of performing the same at the similar commission,


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what is the difference and why have you made this decision

because that is something you were not considering initially in

the VLT project before.

COPE D: Thank you, Victoria. Thank you for the congratulations, it’s a

long way to go yet. So, you can say the congratulations maybe

for 1st of May, 2018 assuming that we roll out all of our

machines successfully by that date. But, I appreciate the

sentiment nonetheless.

Look, I think there is a…the gaming hall model was certainly the

established view for a long period of time. And I guess it

became apparent partly because we were spending more time

talking to our agents and listening to their requirements. But

again, also myself and others looking at the UK market and

other markets where there is a successful combination of VLTs

with other gaming products. So, we see there are probably

going to be different customer types, some that go to a shop

where they can play maybe multiple products and others that

want to go a gaming hall where with up to 25 machines from a

number of different vendors, it’s more of a broad, but more

focused gaming experience. We think there is good business

opportunities for both the machine mix, the product mix, it’s

something that we are obviously looking at very closely and

again, it’s very much part of our planning, like I said, it’s driven

by very different customer profiles.

In terms of the business model, again, I think that you will

aware it is a significant difference between an agent who

wanted to have OPAP shop license and someone who wants to

be a partner with a gaming hall, so it’s a completely different


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kind of economic model for them. For us, we think there are

good business opportunities for OPAP at both models. So, we

will be looking for partners for gaming halls and we are also

already in discussions with the number of agents who are keen

to have up to three and most of them would like three VLTs in

their own stores.

PETROVA V: Thank you very much.

COPE D: Thank you.

PETROVA V: It’s very clear.

OPERATOR: We have a follow up question from Mr. Draziotis Stamatis of

Eurobank Equities. Please go ahead.

DRAZIOTIS S: Yes, hi again, just a quick follow-up on this…on the VLTs and the

rollout in the current agent outlet. Just wondering what portion

of the outlets would you say are qualified basically to be

considered for this project given you know, the space

requirements?

COPE D: That’s exactly the kind of question that we are asking ourselves

right now. We’ve got a long way down the road in terms of

looking at the size of the store, the economic opportunity that

we think the store provides for gaming, the quality of the agent,

the desire of the agent. There is a number of different factors,

and you know, if we were having this call in a month time, I

would be able to give you probably a lot more information.

Because as you can probably appreciate although we were

ready…and have been ready for some time for the rollout of


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VLTs, we’ve only had I think just over three weeks since it was

formerly approved. So we are still very much in planning mode,

and I hope you understand that.

DRAZIOTIS S: That’s very clear. Thank you very much.

OPERATOR: We have a follow-up question from Mr. Kourtesis Iakovos of

Piraeus Securities. Please go ahead.

KOURTESIS I: Yes, I would like to ask about the online. That as far as I

understand, you mentioned that from your side you have

monopoly rights on the online gaming. So assuming that, let’s

say, in 2017 the Greek Gaming Committee would proceed with

the issue of more licenses to additional providers, would you

seek to be compensated, if I could say in other way, sort of,

what would be your reaction paging…. especially your reaction

on the VLTs case, if you could clarify, please?

COPE D: Okay, I am not sure how much clarification is needed. So I first

of all, thank you for the question. But I mean, I think I’ve been

pretty clear and I think the Company has been pretty clear for a

number of years now. We are very clear on our position that we

have exclusive rights, and we’ve consistently said we will take

any steps necessary. I don’t think it’s right to speculate now on

what may or may not happen next year, and how our Board

may or may not choose to react, but I am suffice to say that we

are pretty clear in our opinion and that position hasn’t changed

for some time now.

KOURTESIS I: Thank you very much.


23

OPERATOR: The next question comes from Clark Michael with Citibank.

Please go ahead.

CLARK M: Hi, good afternoon. Apologies, if these questions were already

been asked. I'm coming late to the call. I just want to know

about how many gaming halls do you have ready to go from day

one, and how many are in the pipeline, that’s my first question.

And also just did you make any comment on the subcontracting

of the additional VLT machines, and if you are done with the

first 16,500? Thank you.

COPE D: Thank you. Better late than never, don’t worry. So we have

about 90 gaming halls that are…if you like almost ready. They

need to be sort of made ready properly to be open to the public.

But certainly in terms of the construction and everything

related…they are ready. And we are again starting the work to

assess exactly how many more gaming halls we hope to have by

the end of the 18 month period. Again, I have mentioned on a

couple of calls now that we are still finalizing what the ratio will

be between gaming halls and shops, in terms of the allocation of

our machines. Sorry, what’s the second question again? I

missed that.

CLARK M: About the subcontracting the…

COPE D: Yes, again I did pick up that up on an earlier question. Just to

say, we are obliged under our license to launch, this is a tender

process, and we are in the process of preparing this now.

CLARK M: Great. Thank you.


24

OPERATOR: We have a follow-up question from Lewis Vaughan with Morgan

Stanley. Please go ahead.

LEWIS V: Hi, I have a couple of follow-ups on VLTs again, please. Do you

have any idea what the net win per day is for the black market

machines that are currently operating, please? And then,

secondly just on the accounting, just the full depreciation

amount on the €560 million license kick in straight away when

you kick off the process or is it phased in with the rollout of the

machines? Thanks.

HOUST M: Yes. Thank you. With regards to the illegal markets, you could

imagine we are not in the position of some great that are

moving markets but sort of what we know, from what we know

and from some indications that it could vary between €50 to

€70, €80, it depends really on the shop.

The second question with regard to the depreciation, we have

agreed with our auditors already that the depreciation would not

be the straight line. So it would be the line, which would reflect

the deployment and the economic, let’s say, economic ramp up

of the business. So the depreciation wouldn’t be straight line.

So it should accommodate the business evolution.

LEWIS V: Got it. Thank you.

OPERATOR: The next question comes from the line of O’Neill Kevin from

ICBC Standard Bank. Please go ahead.

O’NEILL K: Great. Thank you. I just had one question in relation to CAPEX,

you mentioned that you might fund the additional CAPEX


25

required to rollout the VLT programs in 2017 through additional

leverage. I was just wondering, if you could paint the picture of

what that would look like and had leverage might be layered in

as you roll it out through the beginning of 2018?

HOUST M: Pardon, I think we didn’t fully get the question, what about

2018 or…?

O’NEILL K: Sure. Sorry, let me restate it. You mentioned the additional

CAPEX required for the rollout of the VLT could be funded by the

Company taking on additional leverage. My question is how

much more leverage do you think will be required to fund the

CAPEX spend?

HOUST M: We will definitely try to cover the majority of the CAPEX, if not

all. And about the phasing, I cannot be specific, because I don’t

know, because it depends on the instrument that we would use

for funding. For instance, if you go with some banking

financing, we could have some loan line, let’s say, the debt line

that would allow us to fully reflect the staging of the CAPEX. If

we go for instance the fixed income bond instrument, there is

not this flexibility, and I cannot be more specific because I don’t

know yet, yes.

O’NEILL K: Understood and what is the amount of that additional CAPEX?

HOUST M: I think we answered this question in the beginning of this call.

So it’s not 100% clear, because we are working on the final

business plan, but I gave the indications, let’s say, per CAPEX

category in the beginning. So I think you would need to spend

a bit more time on calculating that, but we cannot be specific


26

because we don’t know either…. fully, we don’t know full

information yet.

OPERATOR: Excuse me; there are no more questions registered at this time.

You may now proceed with your closing statements.

COPE D: Okay everybody. Thank you very much for your time. I hope,

we’ve answered your questions. But if not you know where to

find us and look forward to talking to you on the New Year.

Thank you.

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