LeoVegas AB has reported its ‘strongest fourth quarter ever’ but has found going tough in its core Nordic markets.
Changes in regulations in both Sweden and Norway, and large tax increases in Denmark have caused the company’s Nordic profile to strain, but the group has still been able to report adjusted EBITDA growth of 25 per cent for the full year while the operating cash flow increased almost 90 per cent.
The Stockholm-listed group further noted concerns in the ongoing transition period of the re-regulated German market, which came into effect after federal states had agreed to introduce a licensing system to be implemented during the second half of 2021.
Before that takes effect, operators that intend to apply for and receive a gaming licence must align themselves with a number of restrictions, which include a mandatory maximum limit of a €1 wager per spin, five-second rule between spins on slots, ban on live casino online, monthly deposit limit of €1,000 for casino and poker games, and more.
The comments from the online gambling group, which expects to receive nationwide licences once they have been made available, suggests that “there are certain elements and limitations in the German regulations that will affect customer value negatively and also risk leading to low channelisation”.
Acknowledging that “regulation is positive from a long-term perspective,” the group adds that over time such concerns may be compensated by lower competition, and greater access to local payment opportunities and marketing channels.
Gustaf Hagman, President and CEO at LeoVegas, noted: “In the German market, LeoVegas has implemented a number of changes ahead of the forthcoming licence system in July 2021. As expected, this affected revenue during the period.
“Operators in the market are acting differently with respect to the new restrictions, and at present necessary clarity is lacking in the ongoing transitional period, which unfortunately has led to a skewed competitive situation until the licence system has been fully implemented.”
The comments come amid the group’s 2020 Q4 and FY report, a period which has seen LeoVegas secure high double-digit growth across core markets, with the exception of Sweden and the UK. Italy has also become a top five jurisdiction for the group.
During the quarter, revenue increased 13 per cent to reach €98.4m (2019: €87.1m), gross profit reached €66.9m (2019: €57m), and EBITDA dropped 45 per cent from €14.5m to €7.9m. The number of depositing customers was 461,983 (2019; 372,032), an increase of 24 per cent.
The firm’s ‘Rest of Europe’ segment was the largest region during the fourth quarter and accounted for 47 per cent of NGR. The Nordic countries came in at 36 per cent, and Rest of World with 17 per cent.
On a product basis, casino accounted for 75 per cent of the LeoVegas’ GGR during the reporting period, followed by live casino with 16 per cent, and sports betting with nine per cent.
“LeoVegas concluded the record year 2020 with its strongest fourth quarter ever,” Hagman noted. “And we did this despite frequent changes to the gaming requirements in our markets in addition to finding ourselves in the midst of a global pandemic.
“I am proud of our ability to quickly adapt to changed conditions through a high capacity for innovation at the same time as we are building an increasingly solid and diversified business.”
For the full-year, LeoVegas’ revenue grew nine per cent to €387.4m (2019: €356m), gross profit increased to €262.3m (2019: €237.1m,) and EBITDA finished up at €51.8m (2019: €49.5m). Preliminary revenue in January amounted to €32.5 m (2020: €29.9m), representing growth of nine per cent.
“On the tailwinds of a strong 2020 we are now looking forward to a year with many exciting growth initiatives and an even stronger customer offering,” Hagman added.