South American declines lead to wider losses at Codere in Q3

Gambling operator Codere has put a year-on-year increase in net loss for the third quarter down to struggles in its key South America markets of Argentina and Panama, as well as declines in Spain.

Operating revenue for the three months to 30 September 2019 totalled €343.4m (£294.6m/$378.2m), down 3.6% from €356.2 in the same period last year.

Argentina remains the main source of revenue for Codere, but revenue for the market slipped 12.6% to €80.6m, primarily due to the decline in value of the Argentine Peso, which also harmed the operator in the first half. On a constant currency basis, Argentina revenue was up 23.4% to €122.1m.

Elsewhere, Mexico revenue dipped 6.5% year-on-year to €75.9m, while Panama revenue also fell by 8.0% to €19.7m and Colombia slipped 21.4% to €4.8m. The only South American market that saw growth in Q3 was Uruguay, where revenue climbed 5.0% from €17.4m to €18.2m.

In Europe, Italy was Codere’s core market, with revenue up 4.1% from €79.4m to €82.6m. However, Spanish revenue slipped 2.4% from €47.1m to €46.0m in the quarter.

Codere noted that on a constant currency basis, overall revenue for the quarter would have been up 7.9% year-on-year to €384.2m.

In terms of spending for the period, operating expenses remained level year-on-year at €263.5m, excluding depreciation and amortisation. Gaming and other taxes were the main outgoing at €121.3m, but this was down 2.2% on Q3 of 2018.

Personnel costs were up by 0.9% to €60.3m, while rental costs climbed 36.0% to €8.9m. However, costs of goods sold were down 22.4% to €10.7m.

Although operating costs were level year-on-year, Codere did note a sharp rise in deprecation and amortisation expenses, with this climbing 32.9% year-on-year to €50.8m.

This, coupled with lower revenue, had a negative impact on operating profit for the quarter, which fell 58.5% from €46.5m to €19.3m. However, after making an inflation adjustment on operating expenses, operating profit was down 57.6% from €27.3m to €11.6m.

Earnings before corporate income tax for the period fell from a positive of €1.9m in Q3 of 2018 to a loss of €30.4m this year, while net loss after tax widened from €19.1m to €30.7m. 

The Q3 results mean that revenue for the first nine months of the year, through to the end of September, amounted to €1.05bn, down 6.3% on €1.11bn at the same point in 2018.

Operating profit after the inflation adjustment on operating expenses was down 31.0% to €69.1m, while loss before corporate income tax increased from €6.2m to €33.2m. However, net loss was slightly down from €57.8m to €54.6m.