Investing.com -- S&P Global Ratings has elevated the credit rating of Italy-based gaming operator, Lottomatica Group SpA, to ’BB’ from ’BB-’, based on the company’s solid performance and reduced influence from financial sponsor Apollo. The rating agency has also upgraded the company’s €1.97 billion senior secured notes to ’BB’. The recovery rating on the debt remains at ’3’.
Lottomatica has shown a robust operating performance, backed by long-term growth in the Italian online gaming market and the successful integration of previous acquisitions. The company reported a revenue of €2.01 billion in 2024, marking a 23% increase year over year.
Apollo, a financial sponsor, has recently reduced its equity interest in Lottomatica to 31.6% as of March 2025, relinquishing its majority ownership and control. This development is expected to result in a more predictable financial policy for the company and supports the belief that leverage will consistently remain below 3x from 2025 onward.
The stable outlook reflects the expectation that Lottomatica will continue to deliver on its growth strategy, with revenue and EBITDA consistently expanding. Adjusted leverage is expected to stay at or below 3x, backed by solid free operating cash flow (FOCF) and the company’s publicly stated financial policy.
On March 4, 2025, Lottomatica announced positive 2024 full-year results, with reported revenue of €2.01 billion and company-adjusted EBITDA of €707 million, marking a year-on-year increase of 23% and 22%, respectively. This growth was driven by the eight-month earnings contribution of recently acquired PWO and continuous organic growth.
Apollo’s reduced stake in Lottomatica is also seen as a positive move. The private equity firm has gradually reduced its stake in the company to 31.6% as of March 2025 from 72.0% post-IPO in May 2023. This change has resulted in a free float accounting for 68.4% of share capital, with a market capitalization of about €4.5 billion as of end-March 2025.
The company’s financial policy is seen as more conservative following the IPO, despite a history of debt-financed mergers and acquisitions. Lottomatica’s adjusted debt includes €1.96 billion of reported debt, an estimate of €80 million-€85 million of reported lease liabilities, and an assumed cash balance of about €60 million. These factors, along with the expectation of gradually increasing profitability, will lead to an adjusted leverage of about 2.8x in 2025.
Lottomatica recently announced it will seek authorization for a share buyback of up to 10% of its equity, equal to about €430 million spread over 2025 and 2026, considering current market capitalization levels. This is fully included in the forecast.
The company’s credit metrics and FOCF are expected to improve over the next two years. The group is projected to generate an adjusted EBITDA of about €745 million in 2025 and €820 million in 2026, up from about €630 million in 2024.
Despite being exposed to a single market, Italy, Lottomatica is expected to continue capturing industry expansion in the fast-growing regulated gaming market by increasing its market share across its multiple segments, brands, and channels. The online franchise is expected to contribute about 65% of the company-reported EBITDA in 2026, up from 59% in 2024.
The stable outlook suggests that Lottomatica will continue delivering on its growth strategy, with revenue and EBITDA expanding, driven by the integration of past acquisitions and the increasing share of online betting. Adjusted leverage will remain at or below 3x, supported by Lottomatica’s publicly stated financial policy.
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