INSIGHT ICE 2023 PRESENTATION NOVOMATIC GROUP
A decade ago, the Novomatic Group did not operate in the UK market. We had a technology business, but no gaming operations. However, we saw an opportunity to get involved in the business of electronic casinos, or as it was called at the time, gaming arcades. We saw this as an opportunity in the UK market, embarking upon a journey of acquisitions over several years. We completely changed the arcade business in the UK, turning it into an electronic gaming experience - an electronic casino. It was a customer journey that was a radical departure from the norm in the UK.
We now have over 250 stores with 3,000 employees, all under the Admiral brand. Around 33 per cent of our floors is comprised of NOVOMATIC Product, though our strategy is to always offer the best possible games on the floor. We have nearly 20,000 machines in operation, and if you compare 2019 to 2022 - we almost trebled our bottomline profits. Last year was an incredible year for Novomatic UK, which saw revenues in excess of £250m.
An interesting statistic about our operations is that we account for 17 over cent of the venues in the UK, around 37 per cent of the machines, but we generate nearly 50 per cent of the GGR - which gives you an idea of the quality of the business we operate in the UK.
We've always had annual growth rates since 2015 of seven-eight per cent consistently in the UK. What we have shown is that arcades are anything but dead. It has been an incredible growth story for us and we are immensely proud of the business. We continue to grow, mostly organically, but with some acquisitions. We will never stop growing, it is part of our DNA, we will always look to improve our offer, be that content, customer journey, food and beverage, look and feel - we have a constant update programme in all of our venues.
We are probably the best performing, pound for pound, operations business in the Novomatic Group right now, of which we are immensely proud. We also have a very interesting technology business in the UK. We have spearheaded Novo-Server-Supported Gaming, NSSG, which is a networked terminal system, which connects to gaming machines via a network. We download content through our entertainment studio, which reports remote diagnostics, we flight new games to the front screen, we change the menu remotely.
Many of these developments already take place elsewhere, but this is a new initiative in the UK jointly-developed with Novomatic in Austria. As a result of this success, we have now networked over two-thirds of casino gaming machines in the UK. We have in excess of 65 per cent market share in UK casino machines supply and we are rapidly growing in AWP, where we are deploying the same technology in the B3 category, and ultimately in the future in Cat. C.
Zane Mersich Chief Executive Officer NOVOMATIC UK
“Based on what we know about the incoming UK Gaming Act, we are are positive about the changes expected to take place. We are hoping that an additional
allocation of slot machines are allowed beyond the current allocation from the 1968 gaming act, which is
something we have been pushing towards an an industry for a long time. In busy UK casinos, the arbitrary 20 machines limit, is not enough. We have situations in casinos with players queuing
to play machines, and players unable to leave they seat too
for fear of losing their spot. We hope the White Paper addresses this.”
Zane Mersich, CEO, NOVOMATIC UK
We also have a very lively ETG business, largely roulette, in which we have in excess of 60 per cent marketshare in the UK. We have developed fantastic content, including Lucky Lady's Roulette, which has been a great success as it rolls out to UK casinos and is now rivalling the performance of traditional roulette - something we thought we'd never see.
We also have the Going for Gold product, we have a wide area network solution connected to over 1,000 terminals and we have also launched our live dealer studio in Middlesborough where we have roulette and blackjack playing 24/7 in a studio which is pumped into the electronic table solution via a wide-area network. We are pushing ahead in innovation and development to develop the best type of product.
Another area of responsibility for Novomatic UK is our Dutch business, in which we have a similar setup as the UK, but additionally also
have game development and single site operations, making us the third largest operator in Te Netherlands. We are also the largest operator of single sites, with around 40 per cent of the market. We have just launched our new Dutch super product in selected sites. It is an exciting market and we are in it for the long- term in Holland.
Based on what we know about the incoming UK Gaming Act, we are are positive about the changes expected to take place. We are hoping that an additional allocation of slot machines are allowed beyond the current allocation from the 1968 gaming act, which is something we have been pushing towards an an industry for a long time. In busy UK casinos, the arbitrary 20 machines limit, is not enough. We have situations in casinos with players queuing to play machines, and players unable to leave they seat too for fear of losing their spot. We hope the White Paper addresses this.
Another aspect is the wait and see online gambling legislation. Will there be an element of stake and prize? It seems likely, but the devil is in the detail. I hope the government takes a rational and sensible evidence-based approach, finding a middle ground that achieves their goals without stifling the industry. Anecdotally, the level of problem gambling is as low as they have ever been.
I don't see the AWP changing much - nor the adult gaming sector and the LBO space will continue. We have asked for a relaxation of the 80/20 rule*, which is massively energy- inefficient. As we all pay more for our energy - we don't see it going back to price per kilowatt hour of the past. It will fall, but we need to be more energy efficient and the 18/20 rule is not in step with this agenda.
We are operating an estate of 20,000 machines, when in fact we could reduce that number by 4- 5,000 machines, if we were able to provide our customers with what the want. 80/20 legislation is consuming millions of pounds of energy on an annual basis does not make any sense as is best utilised elsewhere in th grid.
Tis is probably going to be the most interesting of Gambling Acts in recent times as it corrects past anomalies, and aligns legislation for the future. We are probably the only industry in the world that is unable to adjust its prices according to inflation. Te stakes in the UK has been set in excess of 10 years while compounding inflation rates has meant that are prices have not reflected the marketplace and we have not been able to capture back those inflationary costs. I think these are anomalies that need to be addressed.
*Te 80/20 rule in the UK means that operators must operate 80 per cent of their floor with lower category machines to qualify for the maximum 20 per cent of category B3 machines on their floors.
WIRE / PULSE / INSIGHT / REPORTS P33
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