LeoVegas confident of mitigating German headwinds
CEO Gustaf Hagman backs Germany to succeed where Sweden has struggled as regulators are “more driven by enforcement”
LeoVegas CEO Gustaf Hagman remains bullish about the operator’s German prospects as the largest gambling market in Europe readies itself for regulation.
Operators intending to apply for and receive an online gaming licence in Germany’s new-look market from 2021 have been made to comply with temporary restrictions from 15 October.
These include a ban on live casino and a monthly deposit limit of €1,000 for casino and poker games.
From 15 December, operators will be expected to adhere to even harsher restrictions, including a mandatory maximum slot spin limit of €1, as well as a five-second rule between spins.
Despite this, Hagman is confident LeoVegas can make a success of itself in Germany and the company is “looking forward with confidence” to another regulated regime.
According to Hagman, LeoVegas revenue for October reached €33m despite the German changes having a negative impact from halfway through the month.
LeoVegas CEO Gustaf Hagman
Hagman told EGR: “The first restrictions came about three weeks ago in mid-October and we have been working quite hard to mitigate the effect of the first round of requirements.
“We’ve done that quite well, actually. We are quite fast in mitigating restrictions. I remember in 2019 when Sweden regulated, there was a huge hit in the beginning, but we recovered quickly.
“Like Sweden, it will take a couple of months or quarters until everything is mitigated, but it is the largest market in Europe which should make for a good future in Germany,” he added.
Hagman was happy to compare Germany’s liberalisation efforts with Sweden’s, but the Nordic nation has struggled to combat dropping channelisation rates, with consumers shifting to the unregulated market.
During the operator’s Q3 results presentation, an analyst asked Hagman whether he had witnessed an uptick in black-market activity in Germany as unlicensed operators attempt to poach customers before the new restrictions come into force.
“We have seen a little and we have heard a little bit about it,” he said. “There will be unlicensed operators in Germany, but German authorities are much more driven by enforcement.
“They will take a much harder line than Sweden in terms of protecting the legislation. I am convinced it will be a different approach in Germany.”
At present, LeoVegas has a licence in the German state of Schleswig-Holstein. It expects to receive nationwide licences once they become available.
Germany generated around 17% of the group’s total revenue during the third quarter, or up to 40% of its Rest of Europe segment, as estimated by Regulus Partners analyst Paul Leyland.
Leyland said: “While the early implementation of the toleration period has impacted group revenue only marginally, full implementation is likely to leave a much bigger hole, in our view.
“Currently Germany is likely to represent circa 70% of the group’s free cashflow, with a large proportion of this very hard to hold on to, as we do not buy into lower competition or payments flexibility offsetting this,” he added.