Scientific Games starts $75m efficiency drive

Scientific Games starts $75m efficiency drive

Thursday, November 3, 2016
CEO wants a more streamlined and nimble company

Scientific Games CEO and president Kevin Sheehan has said that he wants to make the company structure more simple and efficient as the company announced a net loss of $98.9 million for the third quarter of 2016.

The major global supplier actually increased revenues by 7% for the period year on year to $720.0 million, including an 81-percent increase in social gaming and a 22-percent increase in gaming machine sales. However Scientific Games said the higher revenue was offset by a less profitable revenue mix.

Sheehan said:  “As we look forward, it is time to transform the way we operate by creating a simpler, more efficient and nimble organization with a laser focus on our core businesses. Our priorities are: 1) drive further innovation to create new, differentiated products for our customers that power growth, 2) focus on prudent fiscal management to improve financial returns and free cash flow to accelerate deleveraging, and 3) build a corporate culture open to new ideas and opportunities that help to accelerate our progress.”

Sheehan had said that the company was focused on building momentum and that the fact it has the most comprehensive portfolio of solutions available to the gaming and lottery industries, shows that Scientific Games continues to raise the bar with new products that help customers grow revenue and generate profitable ROI.

Michael Quartieri, executive vice president and chief financial officer, added: "We are increasing our concentration on disciplined cost management with process improvement and lean initiatives across our global businesses. Yesterday, we embarked on a business improvement initiative to manage our expenses more efficiently, which we expect will reduce our annualised cost structure by $75 million. We anticipate the initiative to be largely implemented by the end of 2016 at a cost of approximately $20 million. By strengthening our competencies and investing prudently in our core businesses, we are further positioning Scientific Games to deliver on our priorities.”

Total Lottery revenue declined $4.7 million, reflecting an unfavourable $5.6 million impact due to the expiration of the China Sports Lottery validation contract in January 2016 and $1.9 million of unfavourable currency translation.

One of the big lottery segments - Instant games – saw essentially flat revenues, despite the US revenue figures rising by 5%. This performance was dragged back down by a 9% decline in international revenue primarily from participation contract customers and unfavourable currency translation.

Totally Gaming says:  Scientific Games says that it has continued to deliver this quarter by paying down a total of $42.4 million of debt, including $30.0 million in voluntary repayments on its credit facility and $10.8 million in mandatory amortisation of its term loans. The bottom line also looks better compared to last year which had $1bn worth of impairment charges. However the fact that the board has initiated an efficiency drive shows that the company is concerned enough about revenues to start making some structural changes.

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