Austria-based gaming equipment maker and operator Novomatic AG might see its revenue grow to EUR3.2 billion (US$3.5 billion) this year, according to a forecast from S&P Global Ratings. That is despite “rising regulatory pressure in Europe and the group’s limited online presence,” stated the ratings agency in a recent report.
Though Novomatic’s revenue might increase, the firm’s margin on earnings before interest, taxation, depreciation, and amortisation (EBITDA) “could contract to about 24 percent in 2023, from 26.1 percent in 2022”.
“Increased marketing expenses and rising energy and personnel costs could affect margins via the effect on adjusted EBITDA (estimated at EUR765 million for 2023),” said the institution.
Novomatic reported group-wide revenues of nearly EUR2.86 billion for full-year 2022, up 55.2 percent from the prior year. Its net profit rose by 230.0 percent year-on-year, to EUR214.3 million in 2022.
In its report, S&P said it expected Novomatic’s adjusted leverage “to decrease toward 2.0 times in 2023”, and for the company’s “cash flow to remain at least stable”.
“We expect free operating cash flow after leases to stay relatively stable at about EUR200 million in 2023, as higher taxes offset higher earnings,” it added. “Although cash generation has significantly improved in 2022, it is still weaker than that of peers, largely because of the product mix and lower exposure to the online segment.”
S&P also said it expected Novomatic to “continue to roll out its expansion strategy by making small bolt-on acquisitions and investments in its core markets and businesses”. Some of these acquisitions would likely happen “in the online segment, which is growing fast and [is] highly profitable, but contributed only about 9 percent of revenue in 2022”.
S&P also raised its long-term rating on Novomatic to ‘BB+’, from ‘BB’, with a ‘stable’ outlook.
“Novomatic demonstrated sound operating performance in 2022, exceeding pre-pandemic levels, and its credit metrics have significantly improved,” said the ratings agency.
It added: “The stable outlook indicates that we expect Novomatic’s operating performance to remain sound in 2023 and that it will successfully integrate its latest bolt-on acquisition and invest in its core businesses.”
A Tuesday press release from Novomatic quoted executive board member Johannes Gratzl as saying: “The improvement in our rating once again confirms not only the success of our dual strategy as a producer and an operator, but also our growth and investment strategy in our core markets.”
He added: “This puts Novomatic among the top credit ratings in Europe and puts it in an excellent second place in global comparison, ahead of other gaming technology groups.”
Thomas Schmalzer, Novomatic’s vice president for global sales and VP product management, said earlier this month that the Global Gaming Expo (G2E) Asia event in Singapore confirmed the “great appeal” of the firm’s “portfolio of products and solutions to operators in the Asia-Pacific region”.
Novomatic – traditionally strong in Europe and the Americas – has been working to increase the presence of its casino gaming machine products in Asia-Pacific markets. Novomatic controls a 52-percent stake in Australian slot machine maker Ainsworth Game Technology Ltd.
