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May 26, 1994

RACAL, GTECH SHARES MOVE IN OPPOSITE DIRECTIONS ON UK NATIONAL LOTTERY AWARD

By CBR Staff Writer

Shares in Racal Electronics Plc were the big winners after the award of the UK National Lottery licence to the Camelot Group Plc consortium was announced, and they put on 15 pence at 240 pence within minutes of the award being made public.The performance was in sharp contrast to that of GTech Holdings Corp, which chose the wrong day to announce that lack of product sales growth and lower margins could result in year-end earnings per share for the fiscal year ending February 1995 at or below the fiscal 1994 level. It warned that gross profits from service revenues may not be enough to overcome lower product sales margins and higher operating costs. Some jurisdictions that were expected to award contracts during the fiscal year postponed the deals and also the company expects some start-up losses for its controversial new electronic transfer benefits business in Texas.The GTech share price plunged $11.625 on the profits warning. The company’s history of controversy did not affect Peter Davis, director general of the Office of the National Lottery, who said he was entirely satisfied about the respectability of all members of the Camelot consortium, and declined to comment on specific press allegations that GTech had been involved in using undue influence to win contracts. Camelot was unforthcoming about potential profits, saying only they would be very modest. Communications director David Rigg said profits throughout the seven-year licence period would be far lower than has been speculated – which means that the biggest commercial winners may be the people that get paid for doing something specific – Racal, ICL Plc and De la Rue Plc. One of the unhappiest people after the announcement was Richard Branson, who consoled himself by claiming that the bid of his non-profit UK Lottery Foundation had caused the others to alter their bids, earmarking another ?1,000m for the good causes. In the on-line game, players will pick six numbers from a field of 49. Tickets will cost ?1 each and will be sold in newsagents, tobacconists, groceries and convenience stores. The total prize fund will be more than 56.5% of total lottery ticket sales.

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