LeoVegas achievements compensates for legislative obstacles
LeoVegas retaining its financial pace, revealed that its achievements in Italy, Sweden, Spain, and Canada have enabled it to traverse a challenging year, with German and Dutch policy requirements offering significant hurdles.
In its third-quarter trading statement, the Nasdaq-listed gaming firm informed shareholders that overall sales had climbed by 12% to €99.4 million (2020: €88.9m), EBITDA was €11.5 million (2020: €11.9m) With a margin of 11.6 percent (2020: 13.4 percent), and adjusted EBITDA was €9.5 million (2020: €9.2m).
Nevertheless, total revenues were SEK 66.3 million, a 2.4 percent decrease from the last year, with a margin of 66.8 percent. An analysis of organizational outcomes showed sports betting accounting for 10% of total gaming revenue, the live casino at 14%, and the casino at 76%.
LeoVegas described the quarter as an ‘intensive re-regulation period’ related to the introduction of the legislative structure for developing the Dutch online gambling market and the re-regulation of the German segment with the release of the Fourth Interstate Gambling Treaty, revealing that overall sales increased by 21% once both markets were reduced in price.
Advancements in the Netherlands, mainly, have been characterized as producing a “rather volatile and difficult to manage contemporary gaming industry position.” Specifically, the Dutch regulator, the Kansspelautoriteit (KSA), decided at the end of September to order all gaming operators who had not yet been given licensing under the conditions of the KOA Act to halt activities in the country.
Still, regulated markets remained relatively stable in the firm’s earnings, accounting for 66 percent of Net Gaming Revenue, a modest decrease from the 2020 total of 68 percent.
During the third quarter, the Nordic nations were listed as the largest area, contributing for 44 percent of the Group’s NGR, with the rest of Europe representing 34 percent and the rest of the world contributing 22 percent.
Gustav Hagman, the group CEO and President of LeoVegas named Sweden the ‘brightest star’ of its active markets. He cited the firm’s ability to properly exploit its newly purchased Expekt brand, which has seen strong growth since the relaunch at the end of May.
The LeoVegas brand fared well in the area, as did successful outcomes in Italy, Spain, and Canada, where earnings increased by 40 percent to 70 percent during the quarter.
“All main markets fared strongly throughout the quarter, with our domestic market in Sweden shining brightest. The Group’s favorable sales growth indicates that the approach of concurrently scaling up a series of markets and relaunching the Expekt brand was a success. Now, the firm is more diverse than it has ever been, and we have successfully compensated for the steep decline in income in Germany.”
Shifting forward, LeoVegas stated that it intends to submit an application in the Netherlands. Despite regulatory headwinds in the third quarter, it still accounted for 6% of the firm’s earnings, which the company recognized as “higher profitability than the group’s average” – explaining that the latest governed environment would eventually favor its activities.
Furthermore, the firm managed to maintain optimism in its Swedish operations following the Swedish government’s official statement on 14 November that momentary constraints on online casinos would be lifted, and the US and Canada have been identified as key markets for development in 2022, with the latter portraying the largest market throughout the third quarter.
“Despite a substantial rise in paid gaming taxes and larger marketing expenditures concerning revenue over last year, we generated a consistent operating income for the quarter. As revenue grows, the percentage of marketing spend is likely to decline from present levels steadily. Simultaneously, we have continuously invested in products and technology in preparation for future global growth, such as the anticipated US debut. We are witnessing some normalization of office and travel-related expenditures as the epidemic draws close, although overall cost control in the Group remains strong. Overall, we anticipate being able to generate tremendous profitability growth in the future because of the economies of scale given by a broader revenue base.”