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LeoVegas AB: Q4 report and financial targets pushed one year to 2021

George Miller

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LeoVegas AB: Q4 report and financial targets pushed one year to 2021
Reading Time: 9 minutes

 

After a challenging 2018 we now see improved momentum with a record strong December and a positive start to 2019. Entering the new year we have full focus on expansion, cost control, increased profitability and to continue building the world’s best mobile casino.” – Gustaf Hagman, Group CEO

Fourth quarter 2018: 1 October– 31 December 2018

  • Revenue increased by 25% to EUR 84.5 m (67.8).
  • Organic growth in local currencies was 7%. Organic growth in local currencies excluding the UK was 14%.
  • EBITDA was EUR 8.1 m (6.1), corresponding to an EBITDA margin of 9.6% (9.0%).
  • Net Gaming Revenue (NGR) from regulated markets was 33% (29%) of total NGR.
  • The number of depositing customers was 327,156 (253,299), an increase of 29%.
  • The number of returning depositing customers was 181,747 (124,890), an increase of 46%.
  • Earnings per share were EUR 0.22 (0.02) before dilution and EUR 0.22 (0.01) after dilution.

Events during the quarter

  • LeoVegas has applied for a gambling licence for the Spanish market. Approval and implementation are expected during the first or second quarter of 2019.
  • LeoVegas was one of the first operators to receive a licence for both casino and sports betting in Sweden.

Events after the end of the quarter

  • LeoVegas has postponed its financial targets from 2020 to 2021 due to developments in the UK market. However, the direction remains unchanged with financial targets in absolute numbers to reach EUR 600 m in revenue and EUR 100 m in EBITDA.
  • The Group’s Pixel.bet brand was granted a licence for online casino and sports betting in Sweden.
  • The Board proposes a total dividend of SEK 1.20 per share (1.20), to be paid out on two occasions during the year.
  • Revenue amounted to EUR 28.7 m (24.8) in January, representing growth of 16%.

Comment from Gustaf Hagman – Group CEO

2018 – an educational year for a seven-year old
2018 was the most challenging year in LeoVegas’ history. We bumped into challenges that we have not previously encountered and saw a slowdown in growth as a result. It was also a year in which we carried out a number of strategically crucial projects that have taken us large steps forward on our growth journey. There is much left to do, and there’s no doubt we can and will improve in many areas. We have learned a lot, and our position for achieving our long-term vision – to be the global market leader in mobile casino – is good. Today we are already the most appreciated brand in our home market in Sweden, and we are live in more markets than ever before. We are well-invested with our own technology, which makes us scalable and flexible, and we have taken large leaps in responsible gaming and compliance. Our multibrand strategy is in place, enabling us to rapidly launch new casino brands, and we are ready to expand in more markets in 2019 with an overall focus on cost control and increased profitability.

During the fourth quarter we also returned to sequential growth following a slowdown during the third quarter, and we ended the year with all-time high revenues in December, and with record-high customer activity. The new year has also started on a promising note – for example, our depositing customer base was up 42% in January. LeoVegas has just celebrated seven years as a company. We have achieved a lot in a short period of time, but we are still just at the start of our growth journey.

Fourth quarter figures
Revenue during the fourth quarter amounted to EUR 84.5 m (67.8), an increase of 25%. Organic growth in local currencies was 7%. As in the preceding quarter, growth during the period was affected by weak performance in the UK. Excluding the UK, organic growth for the Group was 14% during the quarter, which shows healthy underlying growth. October was the weakest month during the quarter, and December the strongest.

EBITDA totalled EUR 8.1 m (6.1), corresponding to an EBITDA margin of 9.6% (9.0%). We increased our investments in marketing during the quarter, among other things to reassure our leading position in Sweden ahead of the market’s regulation, but also in other key markets. Marketing costs amounted to 37.9% during the fourth quarter, compared with 35.6% during the third quarter. Our personnel costs in relation to revenue remained at a higher level than we are pleased with. We will thus now focus on cost control, improving efficiency in our ways of working, and increase automation in our operations. This is also necessary in order to adapt our cost base to rising tax pressure in our regulated markets.

Sweden – finally a regulated market
The day we have been waiting for has finally arrived, when Sweden became a regulated market. We were among the first companies to be granted a licence, which is a quality seal and confirms our position as a leading, long-term and serious player in the industry. In January, LeoVegas’ Pixel.bet brand also received a licence in Sweden for casino and sports betting. Pixel.bet has the ambition to take the leading brand position in esports betting.

A regulated market has extensive guidelines for responsible gaming. We have good experience from other regulated markets, and we have developed the organisation and our marketing methods to offer our games in the best, sustainable way. We look forward to working side-by-side the Swedish Gambling Authority and our licensed competitors to ensure a sound and responsible market that impedes the presence of unlicensed actors.

With regulation of the market, all licensed gaming companies are now free to operate in stores. LeoVegas was the first one to grasp this opportunity in January. There is important symbolic value in having a physical presence at betting agents in connection with the implementation of the new gambling law in Sweden. We will now be able to truly challenge to the old monopoly through a greater exposure of our LeoVegas brand with an even closer presence to our customers in a new type of environment.

Regulation of the market in Sweden also made it possible for us to launch the popular Swish mobile payment method in the Swedish market. Swish both strengthens our customer offering and is expected to significantly lower our transaction costs.

Improvements in the product combined with increased marketing led to a strong fourth quarter in Sweden, with 18% sequential growth, which affirms our position as the leading casino brand. The new year has also started on a positive note for LeoVegas in Sweden. We have seen record-high customer activity, with 28% growth of our Swedish depositing customer base compared with the same period a year ago. At the same time, revenue is down somewhat compared with the same period a year ago, which is partly due to many customers initially using their welcome bonuses, but also to some trim-in challenges during the first two weeks following the start of regulation, and to the fact that players are getting accustomed to certain modifications in the gaming experience.

It is still hard to accurately predict the market dynamics in Sweden in the near term, but with a record-large active customer base and a large number of exciting product and marketing initiatives under way during the year, we are well positioned in our home market. As previously, we are confident that our product, customer experience, competence in responsible gaming, very strong brand and data-driven marketing will lead to higher market shares in Sweden.

UK
The UK is Europe’s largest gambling market and a market in which LeoVegas sees continued major growth potential in the long term. Together with our brands in Rocket X, LeoVegas and Royal Panda we have a unique multibrand position in casino. In the near term the market continues to be challenging, and after a transitional period we are now working from a new, lower level on which to grow. Our revenue continued to decrease sequentially during the fourth quarter, but with gradual improvements in both revenue and KPIs. This positive development continued on Group level during January. It is still too early to declare that we have turned the corner yet in the UK, but we are confident with the plan we have charted out.

Scale-up markets
We are satisfied with our performance in most of our markets during the fourth quarter. Germany continues to be a strong growth market and once again delivered a record quarter with growth of more than 200%. In addition to Germany – Finland, Denmark and Canada amongst other markets delivered good results during the quarter.

Changes in Group Management team
As previously communicated, Richard Woodbridge has been recruited as our new Chief Operating Officer. He took up his position on 7 January and has overarching responsibility for operations in LeoVegas. Richard is based at LeoVegas’ offices in Malta.

Group Management has also been reinforced with Avshalom Lazar, who we recruited as Chief Compliance & Legal Officer. Avshalom, who is based in Malta, will strengthen the Group Management team with relevant knowledge about the industry and an understanding of and experience in the higher requirements that are placed on companies in regulated markets.

We are also adding a new role to the Group Management, Chief Product and Technical Officer (CPTO), where we are combining the CTO and CPO roles. Mattias Wedar has been recruited to this new position and will begin at LeoVegas during the spring. Mattias joins us most recently from a similar role and has solid experience in product development and keen industry knowledge. With this new position, the product and technology organisation will have a single leader, which will increase its effectiveness and cooperation within the Group.

Tech update
We have previously presented the upgrade of our technical front-end platform, which took place during the second quarter. This has improved our organic search capabilities and during the fourth quarter we saw an increase in organic traffic by more than 70% compared to the same period last year. We expect to see continued positive effects from this combined with our data-driven marketing.

The Rocket X managed UK brands encountered certain technical issues that impacted the site performance during part of the fourth quarter. The issues are now to a large extent solved which is confirmed by a higher revenue and customer activity in January compared to December.

Our technology organisation has been through an intensive period, and during the fourth quarter, three parallel platform adaptations were made to the locally regulated markets in Sweden, Germany and Spain – an impressive record for LeoVegas. We are now beginning to gradually free up resources for a renewed focus on product innovation, new brands and markets – areas that are expected to drive our growth going forward.

Financial targets and focus on growth with profitability
Following a year burdened by a number of external factors and large internal projects, we are now well prepared for the future with a renewed focus on growth. Our direction remains firm, with financial targets in absolute figures to reach EUR 600 m in revenue and EUR 100 m in EBITDA. However, we have decided to push back these targets one year, until 2021, as our adaptation to the increased regulatory requirements in the important UK market caused us to temporarily lose our tempo compared with the previous business plan.

It is also increasingly clear for us that the coming years will be decisive for who will be the long-term winners in our industry and who will not be able to cope with the increased complexity, compliance, technological development and higher tax burden. We are therefore currently in a very exciting period in the gaming industry, and we are well prepared.

As more markets become locally regulated – with more regulatory requirements and higher tax pressure – it is important to be a company that is both agile and of a size that enables economies of scale. We are convinced that this requires proprietary technology and a world-class user experience while at the same time being well invested in responsible gambling and compliance – and having a diver­sified operation both geographically and in terms of brands. Moreover, we will continuously evaluate our marketing and our organisational set-up, all in line with our focus on growth with increased profitability in an increasingly complex business environment.

We have also decided to conduct a strategic evaluation of our portfolio companies within LeoVentures, with the intention to further intensify focus within the Company on our end goal – to be the market-leading mobile casino operator globally. At the same time, we believe that the years ahead will offer a number of new growth opportunities within casino for operators with the strength and ability to act quickly, as smaller actors have a hard time adapting to the growing requirements and complexity.

Comments regarding Q1 2019
2019 has begun on a good note for LeoVegas, with Revenue of EUR 28.7 m (24.8) in January, representing growth of 16%. Underlying customer activity remains strong, with 42% growth in depositing customers compared to the same period last year.

We have now forged ahead through both an eventful and challenging year with several acquisitions, accolades, higher regulatory requirements, a number of major platform projects and a change in listing to the Stockholm Stock Exchange’s main market list. We at LeoVegas now look forward to 2019, where we have put casino front and centre and have our full focus on profitable growth.

Presentation of the report – today at 09:00 CET
To participate in the conference call, and thereby be able to ask questions, please call one of the following numbers: SE: +46 (0) 8 56 61 84 67, UK: +44 (0) 84 44 81 97 52, US: +1 64 67 41 31 67, Confirmation code: 9775259 or join at the web https://edge.media-server.com/m6/p/jtyut9im

This information is information that LeoVegas AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation 596/2014. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CET on 12 February 2019.

 

 

About the LeoVegas mobile gaming group:
LeoVegas’ passion is “Leading the way into the mobile future”. LeoVegas is the premier GameTech company and is at the forefront of using state-of-the-art technology for mobile gaming. A large part of this success can be credited to an extreme product and technology focus coupled with effective and data-driven marketing. Technology development is conducted in Sweden, while operations are based in Malta. LeoVegas offers casino, live casino and sports betting, and operates two global and scalable brands – LeoVegas and Royal Panda – as well as a number of local brands in the UK. The company’s shares are listed on Nasdaq Stockholm. For more about LeoVegas, visit www.leovegasgroup.com.

 

George Miller started his career in content marketing and has started working as an Editor/Content Manager for our company in 2016. George has acquired many experiences when it comes to interviews and newsworthy content becoming Head of Content in 2017. He is responsible for the news being shared on multiple websites that are part of the European Gaming Media Network.

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Industry News

Move to privatise Holland Casino extended

Niji Ng

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Move to privatise Holland Casino extended
Photo Source: hollandcasino.nl
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The move to privatise state-owned Holland Casino in the Netherlands has been postponed to 2020. The country’s justice minister Sander Dekker cancelled the vote for privatisation because of many objections that the measure suffered in the Senate.

The Financieele Dagblad said that senators are concerned about the fact that privatised casinos may encourage gambling and are worried about the way that the government was planning to proceed with the privatisation process, Dutch News informed.

The original plan included the selling of 10 of the 14 branches under the Holland Casino name, while the other four locations would be sold as a group. The cabinet from the Netherlands is also considering opening up the casino market to new providers and offer two licences.

Justice minister Dekker has until June to come up with a new proposal, present it to the senate and gain backing. “We may adapt the law, withdraw it altogether or go for a vote after all,” Dekker said in a note to senators.

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888 appoints Andrew Anthony as Responsible Gaming Director puts responsible gambling at forefront with appointment

Niji Ng

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888 appoints Andrew Anthony as Responsible Gaming Director puts responsible gambling at forefront with appointment
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The Gibraltar based gaming solutions developer, 888 Holdings, has appointed Andrew Anthony as its Responsible Gaming Director. He will be overseeing the company’s player protection efforts through the improvement of responsible gaming operations, systems and processes.

He will report to Yaniv Schwartz, SVP Customer Risk Management, who said about the appointment: “During the course of his career at 888, Andrew has gained numerous insights into the behaviour of the Company’s player base.”

“In addition to this, he brings a wealth of quantitative experience and methodology to his new role heading up our Responsible Gaming team.

“888 strives to ensure that those for whom our games are not intended will not be drawn into the gaming environment and that those customers who develop a gambling problem are quickly identified and helped.

“I am looking forward to the successful delivery of the responsible gaming initiatives we have planned and continuing to drive Responsible Gaming culture throughout the organisation.”

Anthony said he is thrilled about the new role: “I am thrilled to take on this role which is at the centre of how 888 operates. In particular, I am looking forward to working together with my industry peers and stakeholders so we can share ideas and promote best practice initiatives.”

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Online gambling sector posts record growth in France

Niji Ng

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Online gambling sector posts record growth in France
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The online gaming sector in France has maintained its solid growth trajectory as it posted record growth in the fourth quarter of 2018.

ARJEL, the gambling authority of France, has recently results the fourth quarter financial results.

As per the figures, betting companies in France posted a betting turnover of €3.9 billion, representing 56 per cent rise year on year. This is the highest betting revenue recorded in the country since online betting was legalised in 2010.

During the last quarter the value of wagers placed on sporting events was €1.06 billion, which is also a record for quarterly turnovers. The overall revenue generated for the quarter was €215 million, a jump of 32 per cent. The number of active punters also increased by 39 per cent to an average of 546,000 each week.

Volleyball posted the biggest gain percentage of all sports, with an impressive €18.8 million in bet values, registering a robust growth of more than 100 per cent from Q4 of 2017.

Football remained the most popular game for betting, as it generated a turnover of €663 million. The figure marked an increase of 54 per cent. It was followed by Basketball which came a distant second with €162.7 million in bets value. The third most popular market among punters was tennis which realised a turnover of €111.4 million, marking a 70 per cent improvement.

Online poker and horse racing did not record high turnovers as the other markets. The revenue from poker dropped by 1 per cent to €65 million, and tournaments seemed to rake in more profits than cash games. However, the number of active players per week increased by 2 per cent to 256,000.

In horse racing, the value of bets collected by operators in Q4 rose by 2 per cent to €275 million, while the increase in revenue was a meagre 1 per cent to €67 million.

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