Codere hammered by Covid-19 in first half

Southern European and Latin American operator Codere was hit hard by novel coronavirus (Covid-19) in the first half of 2020, with the pandemic shuttering its land-based venues and the resulting lack of sports weighing down its online business.

Revenue for the six months to 30 June dropped 54.7% year-on-year to €317.6m (£288.9m/$373.9m), with Codere reporting declines for every market and region.

Latin America proved to be the biggest contributor to the half-year total, accounting for €175.0m, though this represented a 56.7% decline from the prior year. The biggest fall was seen in Panama, where revenue dropped 61.7% to €14.7m, while Mexican revenue was down 60.7% to €62.3m.

Argentina’s contribution, meanwhile declined 59.7% to €64.8m, and Colombia 48.5% to €4.9m.

Uruguay, where Codere operates racetracks, was the only Latin American market to resume operations during the second quarter of the year – from May – and as a result reported a lower year-on-year decline in revenue. Its contribution was still down 24.0% to €28.3m, however.

While Codere’s land-based operations in Italy and Spain resumed from June, revenue was down 57.9% to €112.8m. This comprised €66.8m from Italy (down 61.1%) and €46.0m from Spain (down 52.2%).

While Codere’s online business was the only unit to be fully operational throughout the half year period, the lack of sporting action for betting meant that it only posted marginal growth, with revenue up 0.1% to €29.9m.

The shut-down did result in a decline in costs, with total operating expenses falling 44.7% to €301.0m. Once depreciation and amortisation charges of €80.7m, plus impairment charges, non-recurring costs, asset disposal costs and changes to supply contracts were factored in, plus a €6.4m adjustment for inflation to Argentinean operations expenses, Codere’s operating loss widened to €90.7m.

Earnings before interest, tax, depreciation and amortisation, which factored back in the €80.7m depreciation and amortisation charges, plus €5.7m of the inflation adjustment, impairment charges and supply contract amendments came to €1.5m, down from €148.4m in H1 2019.

After finance costs, including €53.2m in interest expenses and a €46.3m loss from exchange rate fluctuations, the business’ pre-tax loss rose from €2.9m in the prior year to €179.9m.

Income taxes for the period totalled €5.1m in income taxes – plus a €2.7m inflationary adjustment – and Codere recorded a €10.2m gain from subsidiaries, offset by an €0.2m equity loss on affiliated businesses. This meant its net loss for the half year jumped from €23.9m in the first half of 2019 to €177.6m.

While Covid-19 disrupted Codere over the first six months of 2020, the brunt of the impact was felt in the second quarter, when revenue plummeted 88.8% to €39.1m.

Online, as the only uninterrupted offering, was the biggest contributor, accounting for €13.8m of the total, though this was down 7.3% year-on-year. Uruguay, as the first market to begin reopening, was the main land-based contributor, bringing in €11.3m, down 38.6%.

Italy followed with €6.6m, down 92.3%, the Spain, though revenue in that market was down 88.5% to €5.5m. Mexico contributed just €1.8m, while Colombia’s contribution was marginal, and no revenue was generated in Argentina and Panama.

Codere posted an operating loss of €77.2m for the three months to 30 June, and a €38.1m EBITDA loss. After finance costs, its pre-tax loss widened to €94.9m, and while this was reduced by an income tax benefit and share of profits from non-controlling interests, net loss for Q2 grew to €80.5m.

Following the end of the reporting period, Codere has continued to reopen its venues, with Mexican gaming halls outside of Mexico City reopening from July, and the properties in the capital to reopen form September. In total it has 30 gaming halls back in operation.

In Colombia, it has approval to open venues outside of the capital Bogota, though in Panama and Argentina this is not expected to be granted until October.

The operator also moved to shore up its financial position in July, agreeing a refinancing transaction with noteholders of 55.5% of its existing notes. Interim notes have already been issued, and the process of issuing final notes and extending its bonds is expected to be completed in October.

This gives Codere €156.4m in liquidity, up from €73.0m as of 30 June, though it warned that this will be rapidly reduced as accrued and deferred gaming taxes in Italy and Spain become due in September. Costs associated with the resumption of activity in Colombia, Argentina, Panama and more of its Mexican business will hit liquidity further, it warned.