LeoVegas H1 dragged by Deustch adjustment as focus turns to Expekt renaissance

LeoVegas AB experienced significant challenges in the German market during H1 2021, contributing to a decline in revenues, although results outside this market were considerably more positive.

Publishing its second quarter trading results, the Stockholm-listed operator revealed that its revenue decreased by 13% compared to previous year comparatives – generating €96.8 million (Q2 2020: €110.7m).

Group EBITDA also declined to €10.6 million (Q2 2020: €23m), representing a margin of 10.9% in comparison to 20.8% 12 months previously, whilst reported EBITDA stood at €9.8 million (Q2 2020: €23m).

German market adjustments were cited as the primary factor behind LeoVegas’ H2 struggles, as strict production limitations and ‘a skewed competitive situation’ resulted in revenue from the sector declining by 81% in comparison to Q2 2020 figures, and scouting for just 4% of overall group earnings.

Group CEO Gustaf Hagman remarked: “We believe it will take time to create a balanced and fair market climate and have therefore chosen to shift our investments to other, more profitable markets. Over the long term we still believe that Germany, with Europe’s largest population, offers great opportunities for the Group.”

However, outside of the German market, LeoVegas experienced considerable success, reporting double-digit growth in markets such as Italy and Spain, whilst also describing developments in Sweden as ‘encouraging’ and reporting ‘record high revenue’ in this market. 

Irrespective of German results, LeoVegas’ revenue rose by 3% to reach ‘a new record level’ – offsetting ‘greater competition from other entertainment activities’ as markets emerge from COVID-19 lockdowns, although leadership underlined tough comparatives against 2020 trading.

Despite the headwinds of 2021, the group predicts positive growth on a yearly basis during Q3, and highlighted the launch of a new game studio and the May acquisition of Expekt – subsequently branded as ‘the New Expekt’ – prior to the UEFA 2020 European Championship as introducing a new sports focus to the group.

Hagman commented on the Expekt relaunch: “It was a successful start, and in a short time we nearly doubled Expekt’s revenue and market share in Sweden since completion of the acquisition.”

Although this acquisition led to an increase in marketing costs in relation to revenue – which the group observed had ‘weighed down earnings short term’ – the relaunch of Expect has contributed to an increase in customers, with the total number of depositing customers across all jurisdictions increased by 6% to 460,697 (Q2 2020: 434,453).

Furthermore, LeoVegas is hopeful that its substantial marketing investment will drive long-term growth, and enable the firm to continue to offset revenue decline in Germany.

Plans have also been put in place to reduce marketing spending in line with an expected increase in revenue and effective cost control has kept operating expenses steady over the past three years.

Additionally, the group has witnessed growth in the North American market – having initially launched in the state of New Jersey in May following an agreement with Caesars Entertainment – with income from the region increasing by 33% to account for 10% of total consolidated revenue.

LeoVegas expects to accept its first North American customers in the first quarter of 2022, also predicting a further increase in revenue from the sector and highlighting the recently regulated Canadian province of Ontario as a lucrative market.

Hagman explained: “LeoVegas has built up a strong brand along with a large and loyal customer base in Ontario and the rest of Canada, among other things with help from former hockey legend Mats Sundin. According to our assessment LeoVegas is one of the larger and most well-known casino actors in the Canadian market.”

Entering the third quarter, LeoVegas has reported a growth rate of 7.% for the month of July to €32.8 million (Q2 2020: €30.7) million, rising to 23% when adjusted to account for the difficulties encountered in Germany.

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