LeoVegas growth slows amid German and Dutch challenges in 2021

Revenue for the 12 months to 31 December 2021 reached €391.2m (£329.0m/$445.1m), up 1.0% from €387.5m in the previous year. The share of revenue from locally regulated markets was compared to 2020, rising to 74% (€289.5m).

Over the year, the number of new depositing customers (NDCs) fell 3.3% year-on-year to 724,540, though this was mitigated by returning depositing customers increasing 12.5% to 1.1 million.

The group said its progress in 2021 was hampered by regulatory challenges. In Germany a 5.3% turnover tax for online poker and casino – the highest rate in Europe, LeoVegas said – came into effect from July. As a result the market only contributed 2% of group revenue in Q4, compared to 15% in the prior year.

The operator also halted operations in the Netherlands ahead of the country opening its regulated online gaming market on 1 October, in the hope of securing a licence in the future. This market alone contributed 6% of LeoVegas’ revenue in the third quarter of 2021.

The operator also moved to ramp up its sports betting capabilities through its acquisition of Expekt for €5.0m, coupled with the relaunch of the brand in the Nordics region.

“The new launch of Expekt has been a major success, with sales increasing almost fourfold since the acquisition,” chief executive Gustaf Hagman said. “We are now planning to expand into more markets.”

The group also took a 25% stake in SharedPlay, a startup that allows players to share their gaming experiences with each other.

LeoVegas also reached an agreement with Caesars Entertainment to launch its online casino product in the state of New Jersey in the first half of 2022, a deal that will mark its entrance into the wider US market. The operator is also planning to move into Ontario, once the Canadian province’s igaming market opens on 4 April. It is already active in Canada, which accounted for 13% of group revenue in January 2022.

Expenses for the year rose faster than revenue grew, with marketing expenses the main outgoing for LeoVegas, rising 8.5% year-on-year to €143.8m.

Personnel expenses were also up 5.4% to €53.2m, while other operating expenses edged up 3.7%. Cost of sales were down 3.2% to €65.7m, but gaming duties increased by 11.7% to €64.0m, partly due to Germany’s new tax regime.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was down by 19.5% from €55.4m in 2020 to €44.6m.

After including €11.7m in depreciation and amortisation costs, as well as €13.6m related to the amortisation of acquired intangible assets and impairment of assets, this resulted in an operating profit of €18.0m, down 21.1% year-on-year.

LeoVegas also noted €4.0m in financial costs, leaving a pre-tax profit of €14.1m, a decline of 34.4% from €21.5m in 2020. The operator paid €2.3m in income tax, leaving a net profit of €11.8m for 2021, down 38.9% year-on-year.

Turning to the fourth quarter, revenue for the three months to 31 December reached €98.2m, marginally down from €98.4m in the corresponding period in 2020. This was largely down to the difficult operating conditions in Germany and LeoVegas’ Dutch withdrawal. Taking out these markets, revenue would have been up 26%.

Breaking this down, classic casino games accounted for 74% of total revenue, with live casino at 14% and sportsbook 12%.

The operator said the Nordics were responsible for 50% of revenue, 29% coming from rest of Europe at 29% and 21% from the rest of world. Hagman noted that it had performed particularly strongly in Sweden, where it was the largest commercial operator in the market during Q4.

NDCs in the fourth quarter fell 4.9% to 172,756, the lowest quarterly total since Q4 of 2019, but RDCs were up 1.0% year-on-year.

Marketing spend fell by 7.9% to €33.8m, but personnel costs edged up 7.85 to €13.9m and other operating expenses 17.8% to €10.6m. Cost of sales were down 8.8% to €15.6m, while gaming duties were up 210% to €17.3m.

Adjusted EBITDA climbed 45.0% to €11.6m, while after including €3.1m in depreciation and amortisation costs, as well as €2.4m for the amortisation of acquired intangible assets and impairment of assets, operating profit was €6.1m, compared to a €833,000 loss in 2020.

LeoVegas also noted €884,000 in financial costs and €91,000 in expenses related to activity with associated companies, resulting in a pre-tax profit of €5.1m, up from a €1.4m loss in the previous year. After paying €926,000 in income tax, LeoVegas ended the fourth quarter with €4.2m in net profit, compared to a €1.9m loss in 2020.

“I am proud of how we concluded 2021 and how we offset the revenue loss related to the ongoing regulatory changes in Germany and the Netherlands,” LeoVegas president and chief executive Gustaf Hagman said.

“We demonstrate a high ability to adapt and continue to drive innovation even when faced with turbulent times,” he continued. “An increasing number of European countries are becoming regulated and some 74% of our revenue is currently regulated and/or taxed.

“The external market environment will remain erratic and turbulent in places, but we are well-positioned to manage this. Armed with all of our ongoing growth initiatives, I feel optimistic ahead of 2022.”