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

George Miller

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LeoVegas annual report for 2018 published
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.

 

Industry News

Casino Technology Rebrands as CT Gaming

Niji Narayan

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Casino Technology Rebrands as CT Gaming
Reading Time: < 1 minute

 

Casino Technology has announced its rebranding and name change. CT Gaming will be the new brand name of Casino Technology as of January 1, 2020.

The change is driven by the company’s growth, expanded innovations and its desire to better reflect its commitment to be at the forefront of the ever-changing technology environment and customer demands.

“As we marked 20 years in business this year, we recognised the need to better communicate our vision for the next period. Building on our core and looking into the future objective to embrace innovation and focus on the new generation of players, it was clear that rebranding was in order. The new name mirrors our constant drive to improve and be in the van of unleashing unconventional concepts and shaping trends. Our team embraced the rebranding decision enthusiastically and are charged with new ideas, commitment and motivation to deliver the best of their expertise,” Milo Borissov, founder and president of the company said.

“CT Gaming represents the evolution in our company, reflecting and merging our genesis into this new era. We will continue to strive to deliver the best customer services and bring excellence at all levels to our partners and customers, solidifying loyal and meaningful relationships that shape our industry’s tomorrow,” Rossi McKee, vice president of the company said.

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Industry News

Europe’s Online Gambling Market Grows 11% in 2018

Niji Narayan

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Europe’s Online Gambling Market Grows 11% in 2018
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Europe’s online gambling market has shown an impressive growth last year.

According to the market data published by the European Gaming and Betting Association (EGBA) in partnership with H2 Gambling Capital, Europe’s online gambling market grew 11% from €20 billion GGR in 2017 to €22.2 billion GGR in 2018.

According to the new data, EGBA members had 16.5 million active customers and generated €5.41 billion in online gambling GGR in 2018. The UK market (34.2%) accounted for the largest portion of the total EU online gambling market, with a market value of €7.3 billion GGR.

Sports betting was the most popular online gambling activity with 42.5% of the total EU market share (worth €9.4 billion GGR), followed by casino games at 32.4% (€7.2 billion GGR), lottery at 12.6% (€2.8 billion GGR), poker at 5% (€1.1 billion GGR), bingo at 4.3% (€1 billion GGR), and other games with a 3.2% market share (€0.7 billion GGR).

As per the new data, 57% of online bets were placed from a desktop computer, while 43% of online bets were placed from phones and tablets – up from 39% in 2017 and highlighting a shift towards the use of mobile devices.

“Europe’s online gambling market continues to show a strong demand-driven growth and a switch to mobile devices. But its increased popularity reinforces the need for more consistent and strong consumer protections and industry standards across all EU countries. The current situation of diverging and sometimes conflicting regulations in EU countries is detrimental to consumers, authorities and operators alike,” Maarten Haijer, Secretary General of EGBA said.

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Industry News

Grand Casino Baden Chooses SafeCharge, a Nuvei company, to Power Payments for Its Online Platform

George Miller

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Grand Casino Baden Chooses SafeCharge, a Nuvei company, to Power Payments for Its Online Platform
Reading Time: 2 minutes

 

One of Switzerland’s first licensed online casinos leveraging SafeCharge’s best-in-class payments technology for its iGaming service

SafeCharge, a Nuvei company, announces it has partnered with leading Swiss operator Grand Casino Baden to process credit card payments for its digital gaming platform jackpots.ch, developed by Gamanza. The collaboration provides Grand Casino Baden, a pioneer in online regulated gaming in the region, the ability to better address the needs of a growing audience of online gamers.

Earlier this year, Switzerland’s Federal Gaming Commission (ESBK) made the decision to regulate the country’s online gambling market, allowing Swiss land-based casinos to operate online. SafeCharge offers Visa and Mastercard acquiring services issued by Swiss banks, and through a single API integration that connects to over 180 payment methods, including local favorite Post Finance, enables jackpots.ch players the flexibility to pay through the method of their choice.

By utilising SafeCharge Cashier, Grand Casino Baden benefits from a frictionless payment experience for its online customers, delivering seamless deposits and withdrawals, plus compliance with anti-money laundering (AML) laws. SafeCharge handles the safeguarding of sensitive information, descoping the casino’s PCI DSS (Payment Card Industry Data Security Standards) liability. Further, by integrating with SafeCharge Cashier, Grand Casino Baden aims to increase its readiness for complying with the EU’s revised Payment Services Directive (PSD2) strong customer authentication (SCA) requirements.

“We knew that we had to partner with a technology player with the highest credentials and the ability to support our business within an extremely complex market, outside of EU legislations,” said Marcel Tobler, chief financial officer at Grand Casino Baden. “SafeCharge has been our preferred choice thanks to its proven track-record in the industry and unrivalled experience in fraud prevention and AML.”

“We are delighted to be working with the team at Grand Casino Baden to provide payments for its rapidly growing iGaming operation,” stated Yuval Ziv, MD of SafeCharge and head of global acquiring. “This partnership marked our entrance into the Swiss online gaming market, and we are excited at the prospect of our payments technology platform better servicing the region’s customers. As demonstrated by our long-standing collaborations with multiple tier 1 gaming operators, our solution is the ideal choice for institutions who require navigating the regulatory complexities of local markets without compromising user experience.”

Through this partnership, SafeCharge has displayed it is well-positioned to address the needs of the rapidly growing Swiss online gaming market. Fore more information about SafeCharge Cashier, click here.

 

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