Home > Finance > Costs eat into Novomatic H1 profits despite increased revenue

Costs eat into Novomatic H1 profits despite increased revenue

| By Zak Thomas-Akoo
Austrian gaming provider Novomatic reported lower profits in the six-month period ending 30 June, as rising costs offset a general increase in the business’ revenue.

Novomatic reported continuing inflationary pressures in H1. The resulting interest rates landscape and tight monetary policy led to an increase in costs for the six-month period.

The business recorded €1.58bn in revenue in the first half of 2023, up 20.0% from the €1.32bn announced in the same period in 2022. The supplier attributed the increase in revenue to “good performance and demand for [its] products”.

Revenue rose across all segments and market areas, including Novomatic’s online division.

The provider said the renting out of slot machines represented the highest increase in revenue, rising by €124.5m, or 20.8%. Overall, the company’s gaming technology division reported €574.2m in revenue in H1 2023.

Novomatic saw increases in revenue in Germany, Italy and Eastern Europe, which rose by €40.2m,
€25.8m and €24.9m respectively.

The company also pointed to acquisitions as causing the rise in revenue.

Increased costs more than offset increase in revenue

In total, €207.5m of the revenue was spent on gambling taxes and betting fees in H1. This represented a 29.6% increase from the previous year. The business said this was the result of the general increase in revenue.

The increased revenue from renting out gaming machines also led to a rise in costs for materials and other purchased services. These rose 9.1% to €168.m

Personnel expenses increased by €101.4m to €498.5m, a 25.5% rise. This was attributed to M&A activity in the six-month period, as well as high inflation leading to increased wages.

In the first six months of 2023 Novomatic acquired online platform providers Ineor d.o.o and the Alteatec Group through Greentube, its digital gaming and entertainment division. The business also acquired Italian arcade operator 187 Srl, as well as a number of other small UK slot parlours during the period.

The company’s other operating expenses rose 26.5% to €441.8m, which resulted from increased advertising costs in Eastern Europe and the online segment. Energy costs and exchange rate fluctuations also contributed to the rise in this area.

Finance costs lead to fall in Novomatic profits in H1

After expenses were accounted for, Novomatic reported earnings before interest, tax, depreciation and amortisation (EBITDA) of €386.1m, up 3.9% from the previous year. The supplier said both the increased costs and revenue resulted from changes in macroeconomic development.

However, a significant rise in financial costs, which rose from €0.6m to €36.6m during the reporting period, led to an overall reduction in profits. This was a consequence of rising interest rates.

As a result, Novomatic reported pre-tax income of €161.2m. After the business paid €62.9m in income taxes, it reported a final result for the period of €98.3m. This is a 20% decline from the €122.9m the company announced last year.

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