As LeoVegas’ takeover by US betting giant MGM looms, the firm has encountered tricky business during the second quarter of the year, primarily in Europe.
The Swedish gambling group reported a group-wide revenue increase of 1% to €98m (2021: €96m) in its Q2 2022 trading report, alongside adjusted EBITDA of €9m (€10.6m) – a margin of 9.2% and decline of 15%.
Meanwhile, gross profit rose marginally by 0.8% from €64.4% to 65.2%, resulting in a gross margin of 66.6% (66.5%) – expenses affecting this included marketing costs of €31.m, personal costs of €11.9m and costs of sales of €15.4m.
Gross profit for the second quarter was EUR 65.2 m (64.4), corresponding to a gross margin of 66.6% (66.5). Gaming taxes totalled EUR 17.3 m (15.5), corresponding to 17.7% of revenue (16.0). Cost of sales was 15.7% of revenue (17.5) and consisted mainly of costs for external game and payment service providers.
For the Rest of Europe region – outside of the Nordic markets – LeoVegas encountered hurdles, as net gaming revenue decreased by 31%. Regulatory challenges in the Dutch and German markets were highlighted as major causes of this.
The firm’s withdrawal from the Netherlands market following re-regulation in October posed a notable challenge, although the group is in the process of applying for a licence in the country.
Additionally, legislative changes in Germany under the Fourth Interstate Gambling Treaty (GlüNeuRStv) created similar problems across the Dutch-German border.
“The Netherlands continued to slow the region’s development. LeoVegas ceased to provide its services in the country as from 30 September 2021,” explained Gustaf Hagman, whilst the group stressed that excluding the Netherlands, European revenue rose by 9%.
“The market accounted for 7% of the Group’s total revenue and for 18% of the region’s revenue during the year-earlier period. Germany also continued to impact the region’s sales negatively, although from lower levels compared with the preceding quarter.”
The Nordics provided somewhat of a bulwark against general European challenges, as revenue for this region rose by 33% against 2021 comparatives.
LeoVegas’ home market of Sweden generated ‘a new record level of revenues’ during the quarter – although Finnish earnings ‘declined substantially’ due to legislative changes.
In other areas of success, although predominantly an igaming operator, LeoVegas has detailed continued momentum on its sportsbook ambitions, as its Expekt and BetUK brands reported ‘record revenue’.
The group has also mapped out plans to enter into football sponsorships to further promote its sports betting brand – this may be dependent upon market conditions, however, with the future longevity of such partnerships in doubt in some countries such as the UK.
Hagman continued: “We intend to enter into several football sponsorships in the near future. This is expected to provide us with a global reach to a relevant and partly new target group, and we are able to produce unique content with the clubs and their players, which should attract new customers and increase loyalty among existing customers.”
On the firm’s North American performance, LeoVegas noted that any further rollout in the state of New Jersey has been halted whilst the MGM takeover is finalised, but will be resumed should the merger fall through.
Further north, more success was found in the newly regulated Ontario market than in the aforementioned European sectors. LeoVegas was able to launch its flagship brand as well as the Royal Panda holding in Canada’s largest province, and aims to become ‘one of the market leaders’.
Hagman commented: “It seems likely that the bid will be accepted, which would lead to the company’s shares being delisted from Nasdaq Stockholm later in the year.
“Regardless of the outcome of the bid, business remains as usual and we are continuing to work relentlessly to create the industry’s premium gaming experience for our customers.”
LeoVegas has unanimously recommended MGM’s $607m bid to its investors, eyeing up further US expansion as the primary objective of the merger, will delist its shares from the Stockholm Nasdaq later this year should the buyout be approved.