Novomatic is a major name in the online gaming community and one who is heavily invested in the Australia region. Recently, the company revealed financial information that shows the company is struggling mightily.
According to recent earnings reports, Novomatic is suffering from a nearly 70% decline in profits. This drop is largely due to the struggling pokies market in Australia. While the company has not announced any cuts to staffing, they have reduced the size of their supervisory board, executive board, and have hired a new CFO.
Novomatic Profits Down 68.8 Percent
Novomatic released their bi-annual earnings report last week and showed a startling trend. For the period ending in June, the company earned $37.82 million. This was a drop of 68.8 percent from the same period in 2018.
The report also revealed that total earnings for that same period had dropped 5.1 percent. Total earnings do not take account for taxation, interest, depreciation, or amortization.
Australian Operations Largely to Blame for Decline
One of the biggest reasons that the company has seen a drop in profits year-over-year are Australian gambling software operations. Ainsworth Game Technology Ltd has been experiencing a steady decline thanks to increasingly restrictive gaming regulations.
The move by some companies to move away from live pokies has seriously cut into the profits of the company. The company has experienced a 40% decrease in profits alone. Keep in mind that Ainsworth is unable to offer online pokies in Australia due to gaming regulations.
Australia is not the only problematic region. Several European markets, including Germany, have been making life difficult for gambling operators. Navigating these waters will be key to increasing profits over the next half of the year and in the future.
Novomatic Makes Organizational Changes
The company has also announced changes to its organizational structure that they hope will help improve performance. First, the company has reduced its supervisory board from five to three. Their executive board is now just six members, down from three. Finally, they have hired a new Chief Financial Officer.
Johannes Gratzi is the company’s new CFO, taking a promotion from the company’s Head of Group Treasury. Peter Stein previously served as the company’s CFO but he and Novomatic mutually agreed to part ways.
These changes have been made as Novomatic is actively working towards both consolidation and optimization of its corporate structure. According to CEO Harald Neumann, “NOVOMATIC will continue along its chosen path and further optimize internal structures in Austria and the international Group companies across national borders.”
UK Technology Operations to Be Sold in Second Half
Something that news services are overlooking in reports regarding Novomatic is a statement made during the consolidation statement in the half-year results report. According to the report, “in the second half of 2019, after all regulatory requirements have been met, most of the existing technology business in the UK will be sold.”
Such a move is not exactly uncommon with casino gambling companies. If a region becomes particularly difficult to work in, gambling companies pull out. Sometimes this means a shutdown of operations. Other times, this means that companies running in a region are sold to other entities.
This type of move will accomplish two things. First, it will reduce the drain on resources and profits from companies in difficult regions. Next, it will provide positive cash flow from the sale. As a result, you can expect that revenues from the company to be increased dramatically for the second half of 2019.
However, these revenues will largely come from the sales of its UK-based technology companies. We will have to wait until this time next year to get a clearer picture of the overall health of the company.