LeoVegas aims to re-enter NL in autumn as exit continues to hit earnings

Revenue was up by 1.1% compared to Q2 2021. LeoVegas said that excluding the Netherlands, the revenue was up 9%.

Reflecting on the quarter, LeoVegas said MGM’s acquisition of the business is going “according to plan”, and that the acceptance period for the deal will end on 30 August.

MGM Resorts agreed to acquire LeoVegas in May, in a deal worth an estimated $607m. This is going ahead, despite the Swedish Economic Crime Authority launching an investigation into insider trading of LeoVegas’ shares the following month.

“In the beginning of May, US company MGM announced a takeover bid for all shares in LeoVegas,” said Gustaf Hagman, president and CEO of the operator.

“It seems likely that the bid will be accepted, which would lead to the company’s shares being delisted from Nasdaq Stockholm later in the year,” noted Hagman, while clarifying that LeoVegas’ US expansion had been put on hold until the MGM deal was accepted.

“The expansion project in the US and New Jersey was paused at the end of the quarter due to the ongoing bid and the initiatives and obligations that MGM already has in the US market,” said Hagman.

“The assessment is therefore that the most responsible course of action is to pause the expansion until we know whether the bid on LeoVegas will be accepted. If a launch is made possible in the future, we will be able to resume the US expansion with a short start-up period.”

Also during the quarter, LeoVegas launched in Ontario when its market opened on 4 April.

Hagman added that LeoVegas had applied for a licence in the Netherlands, and that the operator is planning to launch there in autumn. LeoVegas withdrew from the Netherlands in September last year, to comply with rules outlined by the country’s regulator.

Negative impact

Looking at its Q2 results, LeoVegas said that its customer base – specifically its new depositing customers (NDC) and returning depositing customers (RDC) – was “negatively impacted” by its withdrawal from the Netherlands.

The business had 158,149 new depositing customers, down by 10.9%, while returning depositing customers ticked slightly up.

Cost of sales were €15.3m for the quarter, down by €1.5m year-on-year.

Gaming duties came to €17.3m, leaving the gross profit at €65.2m, similar to the figure a year earlier.

Marketing expenses made up the highest operating cost for the quarter at €31m, though this was a decrease of 17.4%. Other operating expenses came to €17.2m, while personnel costs were €16.1m. After considering these costs, and taking into account €4.2m and €306,000 of capitalised development and other income respectively, earnings before interest, tax, depreciation and amortisation (EBITDA) was €5.3m, down 45.1% year-on-year.

Following depreciation and amortisation costs at €4.8m, the operating profit was €570,000. Financial costs and profit shares after tax at a combined €773,000 brought the pre-tax profit to a loss of €203,000.

Income tax totalled €204,000, bringing the total net profit for the second quarter to €407,000 – down by 62.4%.

For the six months ended 30 June, revenue was €196.4m, an increase of 1.5%.

Gross profit is €131.7m for the half year, while EBITDA has been halved year-on-year from €43.3m to €20.2m.

Following financial losses and income tax, the total net profit for the half year is €4.6m, down by 70.5%.