LeoVegas Q3 revenue flat at 1% as Swedish restrictions take their toll
Operator highlights Nordic struggles as decreasing channelisation "shakes the foundation of the entire Swedish licence system"
LeoVegas has reported a modest 1% year-on-year rise in operating revenue for Q3 2020 to €88.9m (£80.3m).
Company EBITDA fell to €11.9m during Q3 from €12.7m annually, with a corresponding decline in EBITDA margin at 13.4%. The percentage of company revenue generated from regulated markets fell 6% during the quarter to 44% of total revenue.
LeoVegas reported strong growth in new and returning depositing customers during Q3, with NDC numbers rising by 24% and returning depositing customers up 28% on the previous year’s figures.
In the Nordics, LeoVegas confirmed a 20% year-on-year decrease in net gaming revenue (NGR), citing the implementation of temporary restrictions on the Swedish market as a strong factor for the decline.
However, there were double digit increases in the group’s other operating markets, with NGR for the rest of Europe increasing by 13%, and rest of the world NGR growing by 21% during Q3.
The mobile casino operator reported increases in its marketing and personnel costs but a decrease in sales costs over the quarter.
As part of a plan to “optimise scalability and reduce complexity” in the LeoVegas Group, the operator confirmed the realisation of synergies from previous acquisitions and the institution of a clearer operational group structure.
These measures added €0.5m to LeoVegas group costs during Q3, but the operator has said it would generate yearly net savings of €1.5m starting in 2021.
Reflecting on the group’s Sweden struggles, LeoVegas CEO Gustaf Hagman said the temporary restrictions on operators were “troubling” and leading to the growth of the unlicensed market there.
“A growing number of operators without licences are actively targeting Swedish players, including those who have been barred by the self-exclusion tool Spelpaus,” Hagman claimed.
“The problem is big and is shaking the foundation of the entire Swedish licence system. Quick and strong measures are now needed by Swedish politicians and authorities to ensure a well-functioning Swedish gaming market,” the LeoVegas CEO added.
LeoVegas also confirmed its compliance with new German online casino standards, which include switching off online casino operations over the coming year.
The Malta-headquartered operator said these measures had a “slight negative impact” on the group’s October revenue, but reaffirmed its intention to receive a German licence as soon as possible.
Regulus Partners analyst Paul Leyland said LeoVegas has been one of the “best managed Western-facing casino operators by some margin,” but that growth could be about to dry up due to its market exposure.
“It used to be the case that by being operationally better than the relatively low standard set by first and second-generation competition meant market share gains in growth markets (doubly attractive),” said Leyland.
“However, the growth trap is now strategic rather than operational, in our view: there isn’t much LV can do about the Nordic situation and it is likely to get worse before it gets better; equally, Germany rips a hole in European cashflow that the rest of the world is still too small to replace (at least LV has taken most of its UK regulatory beating early),” Leyland added.