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Novomatic faces ‘regulatory pressures’ despite record sales

| By iGB Editorial Team
Company posts double-digit increase in H1 revenue, largely driven by acquisitions

Analysts have warned of continuing regulatory pressures and online challenges for Novomatic after the gaming firm’s acquisition-led growth led to a 12.6% year-on-year increase in revenue for the first six months of 2018.

Novomatic registered record sales of €1.3653bn (£1.225bn/$1.592bn) through to the end of June, helping to drive an 11.6% increase in earnings before interest and deductions to €318m.

Sales revenue from gaming machines rocketed by 96.2%, largely thanks to Novomatic’s takeover of Ainsworth Game Technology, which was finalised in January.

The company added that “acquisitions, above all in the core markets of Germany, Spain, Italy and Eastern Europe, are having a positive impact”.

Analysts at Regulus Partners said that the acquisition-based expansion of the company had “offset organic issues at the group level”.

However, they added that exposure to Germany and Italy would be “likely to continue organic regulatory pressure, while Australia remains a market of high regulatory risk for machines, in our view”.

They continued: “Equally, Novomatic’s online position is now even weaker after the loss of key German revenues – now representing only 3.9% of group revenue (B2B and B2C).

“Novomatic has therefore successfully diversified away from Germany machines risk, but while geographic risk has been diluted, the macro-led risk of exposure to gaming machines has increased for the group from both from a regulatory and channel-shift perspective.

“Novomatic’s online contraction also illustrates the dangers of trying to have one’s cake and eat it from a regulatory perspective – especially in ‘uncertain’ markets.”

In its trading update, Novomatic said it is “noteworthy” that its earnings before tax, “despite investment-intensive regulatory challenges in Germany and Italy”, had increased by 23% to €148.4m.

Novomatic CEO Harald Neumann (pictured) added: “This pleasing result confirms our strategy of consolidating our market leadership in existing markets and of opening up new markets and technologies through acquisitions… The focus is on optimising internal processes and structures across borders.”

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