LeoVegas cites German struggles despite pleasing start to the year

LeoVegas has once again elaborated on continued struggles in the German market, building on concerns detailed earlier in the year upon publication of the group’s Q4 and FY 2020 report.

Making fresh comments in the group’s latest quarterly update, the online gambling operator says that during the year’s first quarter “we saw the full effect of the changes taking place” in the region, with new restrictions related to the upcoming regulation affecting performance.

However, elsewhere in Europe, the group also highlights a Swedish market where it states “the strength of the LeoVegas brand and our product breadth is appreciated by our customers”.

The Nordic region set a record during the quarter, with March representing growth on a yearly basis for the first time since the temporary COVID-19 restrictions were implemented in July 2020. 

Gustaf Hagman, president and CEO of LeoVegas, elaborated on the group’s German performance: “ Operators in the market are acting differently with respect to implementing the new restrictions, which unfortunately has led to a skewed competitive situation,” he stated. 

“The assessment is that up to 70 per cent – 80 per cent of the German market for casino has temporarily been shifted over to operators that have chosen to not adapt to the coming market regulation. 

“Our hope is that this will soon be sorted out by the German authorities, which is a prerequisite for the licence system’s success, with a high level of channelisation and consumer protection. Germany generated approximately six per cent of the group’s total revenue during the first quarter, compared with 15 per cent a quarter earlier. 

“Despite this development in Germany we delivered good growth at the group level, which reflects our strong performance in many other key markets, including Italy, Canada and Spain. 

“Our business is more diversified than ever before, and growth at the group level is proof that our data-driven way of working and allocating marketing investments is effective.” 

LeoVegas, which acquired the €5m Expekt brand from Betclic Group during the quarter, saw revenue increase eight per cent during the period to €96.7m (2020: €89.4m).

Net gaming revenue amounted to €93.4m (2020: €87.1m), representing an increase of seven per cent compared with the same period a year ago, but a decrease of three per cent from the fourth quarter.

The firm’s ‘rest of Europe’ segment was again the leader on an NGR per region basis and accounted for 42 per cent of the total figure, ahead of the Nordics’ 38 per cent and the rest of the world at 20 per cent.

On a product basis, casino accounted for 74 per cent of the group’s GGR, with live casino at 17 per cent and sports said to be back at the same level as before the global pandemic at nine per cent.

Gross profit for the period came in at €65.4m (2020: €59.8m), and EBITDA rose 22 per cent to €10.4m (2020: €9m). EBITDA was charged with €300,000 for an additional provision for estimated gaming tax in Denmark for historical periods, plus a provision of SEK 2m for a sanction by the Swedish Gambling Authority, which the company intends to appeal.

The number of depositing customers increased 12 per cent to 462,386 (2020: 413,269), however, new depositing customers dropped 12 per cent year-on-year from 193,428 to 186,510.

During the quarter the group also made a number of moves via its LeoVentures investment unit, regarding which Hagman commented: “The first quarter was an intensive period for our investment vehicle LeoVentures. Among other things we invested in SharedPlay, a company that makes it possible for players to share their gaming experiences with others through the industry’s first multiplayer solution. 

“For a long time we have created successful, exclusive games with the help of external providers. We are now taking the next step by starting our own game studio – Blue Guru Games

“This venture will give us full control and greater flexibility in developing new games, a unique offering to our players, and also a new revenue stream for the group.” 

Revenue for the month of April amounted to €32.7m (2020: €37.5m), corresponding to negative growth of 13 per cent. Excluding Germany, growth in April was positive at  four per cent.

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