S&P Global Ratings has upgraded the rating of Austrian gaming giant Novomatic AG from “BB” to “BB+”, citing a “sound operating performance” in 2022 and an expected increase in revenues to €3.2 billion (US$3.5 billion) in 2023.
The ratings agency observed in a note this week that Novomatic’s performance in 2022 had already exceeded pre-pandemic levels, with revenue of €2.86 billion (US$3.1 billion) representing a 55% increase over 2021 and also 10% higher than in 2019. This, is said, was driven by a full recovery in both the gaming technology and gaming operations segments, which were up 33% and 72% respectively over 2021 levels.
Similarly, the improved performance saw Novomatic reduce its debt by €120 million (US$132 million), with leverage improving from 3.0x in 2021 to 2.2x in 2022.
Looking ahead, S&P said it anticipates further earnings growth, despite rising regulatory pressure in Europe and the group’s limited online presence.
“We expect the group will continue to roll out its expansion strategy by making small bolt-on acquisitions and investments in its core markets and businesses, notably in the online segment, which is growing fast and highly profitable, but contributed only about 9% of revenue in 2022,” the agency said. “This is well below the 45% to 90% that peers such as Aristocrat Leisure Ltd, Entain PLC or Flutter Entertainment PLC generate through their online channels.
“Regulatory pressure is rising throughout Europe, especially in Germany, but we anticipate that Novomatic will harness its scale and leading position to help it absorb the impact.
“Therefore, we forecast that revenue will rise to €3.2 billion in 2023, although EBITDA margins could contract to about 24% in 2023, from 26.1% in 2022. Increased marketing expenses and rising energy and personnel costs could affect margins via the effect on adjusted EBITDA, estimated at €765 million (US$840 million) for 2023.”
Novomatic Executive Board Member Johannes Gratzl said, “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. 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.”