Successes in Italy, Sweden, Spain and Canada have helped LeoVegas to navigate a difficult year, with German and Dutch regulatory changes in particular posing major challenges.
Updating stakeholders in its Q3 trading update, the Nasdaq-listed gambling group detailed that its total revenue had increased by 12% to €99.4 million (2020: €88.9m), while EBITDA stood at €11.5 million (2020: €11.9m) – a margin of 11.6% (2020: 13.4%) and adjusted EBITDA reached €9.5 million (2020: €9.2m).
Meanwhile, gross profits stood SEk 66.3 million, a minor drop on the previous year of 2.4%, with a margin of 66.8%. A breakdown of unit performance saw sports betting account for 10% of gross gaming revenue, live casino at 14% and casino at 76%.
Describing the quarter as an ‘intensive re-regulation period’ due to the implementation of the regulatory framework for the emerging Dutch online betting market and the re-regulation of the German sector with the launch of the Fourth Interstate Gambling Treaty, LeoVegas disclosed that total revenue rose by 21% when both markets are discounted.
Developments in the Netherlands in particular were described as creating a “somewhat turbulent and difficult to navigate current situation in the gaming industry”. In particular the decision by the Dutch regulator, the Kansspelautoriteit (KSA) towards the close of September to require all gaming operators that had not yet been granted a licence under the terms of the KOA Act to cease operations in the country.
However, overall, regulated markets continued to predominate in the firm’s results, with 66% of Net Gaming Revenue coming from such markets, although this was a slight decline on the 2020 figure of 68%.
The Nordic countries were reported as the largest region during the third quarter and accounted for 44% of the group’s NGR with the Rest of Europe accounting for 34%, while the Rest of World accounted for 22%.
Sweden was identified as the ‘brightest star’ of LeoVegas’ active markets by group CEO and President Gustav Hagman, as the company was able to successfully leverage its newly acquired Expekt brand – which experienced ‘strong growth since its relaunch at the end of May’.
The LeoVegas brand itself also performed well in the territory, while positive results were also yielded in Italy, Spain and Canada, where revenues grew variously between 40% and 70% throughout the quarter.
“All key markets performed well during the quarter, where our home market in Sweden was the brightest star,” Hagman explained. “The favourable revenue growth for the Group confirms that the strategy to simultaneously scale up a number of markets and relaunch the Expekt brand has been a success. The company today is more diversified than ever, and we have succeeded in compensating for the sharp drop in revenue in Germany.”
Moving forward, LeoVegas detailed that it plans to apply for a licence in the Netherlands – which despite regulatory headwinds in Q3 still accounted for 6% of the firm’s revenues. The company acknowledged this as “higher profitability than the group’s average” – reasoning that the new regulated environment would ultimately favour its operations.
Additionally, the firm maintained confidence in its Swedish activities due to the announcement by the Swedish government to end temporary restrictions on online casinos on 14 November. The US and Canada have also been targeted as a key market for expansion in 2022, with the latter representing the largest market during Q3.
“During the quarter we delivered a stable operating profit compared with a year ago, despite a sharp increase in paid gaming taxes and higher marketing investments in relation to revenue compared with a year ago,” Hagman remarked.
“In pace with growing revenue, the share of marketing investment is expected to gradually decrease from the current levels. At the same time, we have continued to invest in product and technology ahead of forthcoming market expansions, including the upcoming US launch.
“We are seeing some normalisation of office and travel-related costs as the pandemic is hopefully nearing its end, while general cost control in the group continues to be good. All in all, we expect – through the economies of scale provided by a larger revenue base – to be able to deliver good earnings growth going forward.”