Q&A: LeoVegas on how cost cutting and setting dynamic targets are helping to generate positive revenue growth

Last week, Malta-headquartered operator LeoVegas revealed a 3% rise in its Q4 2019 revenues, following several structural changes to the organisation which have seen it abandon a proposed office move in Malta and withdraw its Royal Panda brands from the UK market. CEO Gustaf Hagman chats to EGR Intel about the rationale behind the organisational changes and how they might redefine LeoVegas’s ongoing corporate journey as it heads into 2020.

EGR Intel: Now that your work to reduce complexity and increase efficiency in the group has positively impacted revenues, do you plan to continue this methodology into 2020?

Gustaf Hagman (GH): For me, cost control is a never-ending story in that we’re always working with cost control in various ways. One thing that is always being looked at is the personnel costs and operational costs, while the other part of it is looking into existing supplier contracts and negotiating with our supplier partners separately to take those costs down. Of course, on the marketing side, we have a lot more to do to be efficient from the marketing side of the business. It’s a never ending, grinding thing cutting costs, and it’s something that every operator has to do. We’re not planning to make any dramatic cost cuts over the next few months, but you can always challenge costs everywhere within a business. I think rather than talking about cost savings, it’s better to talk about scalable growth, the activities we can undertake to grow our revenues without adding more fixed costs, and then of course try to be more efficient as a business.

EGR Intel: You’ve had substantial increases in the number of depositing customers and the number of returning depositing customers (RDC) during Q4. Is this down to one specific factor or a combination of things? 

GH: Well, as always, we have a data-driven approach, we open up new channels, and we are constantly improving the ones we have in terms of Google and Facebook everywhere in the group. So, I think, again, that it is a combination of long-term work from the marketing teams, and more specifically the digital marketing teams. Then there are always those instances within the industry that you see from time to time where operators work with larger affiliates which makes a difference to market penetration and the impact on player deposits and accounts. And we are proud to see that we have an all time high RDC in Q4.

EGR Intel: Other operators have reported weaker than expected performance, particularly in the Swedish market, but you guys seem to be doing quite well there. Why do you think your Swedish operations perform so strongly during the period? 

GH: Well, a couple of reasons. One being that we have a history in Sweden, we have a strong brand identity in the Swedish market, and we are the number one brand as well, so naturally we’re doing well. The Swedish market now is going online more and more into the casino sector, and players are choosing the strongest brands with the best product. To answer your question, it’s all about the product.

EGR Intel: Why have you chosen to remove the groups short-term financial targets? What long-term benefits do you think this will have?

GH: These targets were set historically during a different phase in the life of LeoVegas. The industry is quite dynamic and hard to predict these days, and we feel that we also don’t want to have the pressure on us to undertake M&A in order to meet external short-term targets. That being said, we are very committed to our long-term targets to outgrow the market and reach an EBITDA of no less than 15% over the coming years. We think it’s better to guide the company’s long-term future on that basis rather than historic targets.

EGR Intel: You’ve withdrawn Royal Panda from the UK market; can you provide more detail on why this decision was made?

GH: The UK has been a very challenging market for us and having three different platforms creates a lot of hassle. You can’t really see that as a customer but there’s a lot of manual work and collaboration while cross checking between the platforms, and that takes a lot of time and effort on the compliance side. So that’s why we decided to close Royal Panda in the UK and have those guys focus on expansion markets, continuing to grow LeoVegas brands in the UK market and then also migrate the entire Rocket X brand portfolio into our own new Rhino platform. It’s a choice that I feel very positive about and it feels really good for the future actually. And I believe that in the short term it’s good for our UK markets.

EGR Intel: You have made several strategic decisions to create a less complex and more scalable organisation in the UK. Given the effect on revenues, do you plan to do this in other markets?

GH: In other markets, we don’t operate the same platform than the one we use with Rocket X. There are just a few markets where Leo Vegas and Royal Panda crossover, but these markets do not have the same compliance requirements as the UK, which makes it okay to run two separate platforms. So, there’s no need to make changes in other markets but what we are doing is expanding the multi-brand part of the group with the Google casino and rhino live casino opening.

Rhino was built back in 2013, 2014 and 2015, and was built for multi-brand purposes, but it wasn’t really finalised in terms of all the features for multi-brands. We did that beginning of last year and then took the first brand called GoGocasino live in April – and it’s been a tremendous success. It’s only live in Sweden now and we’ll move into a couple more markets during Q1. At the same time, we will launch livecasino.com, the new global brand which is dedicated to everyone who loves live casino. Live casino is the fastest growing sector of the online industry, you need only look at what other operators are reporting and what suppliers are doing in the live casino space to see that. I think there are huge opportunities in terms of growth with both GoGocasino and livecasino.com. Livecasino.com will be launched in Q1.

EGR Intel: What do you think are the other standout points from the results?

GH: One thing I want to add and one thing that we are proud of is the fact that we were able to grow our earnings and EBITDA results despite paying as much as €50m in gaming taxes this year, which is €20m more than last year. Looking around in the industry, I think that’s quite an achievement.