Online gambling operator LeoVegas saw revenue rise and earnings fall in the first quarter of 2019 thanks to regulatory scrutiny in the UK and marketing costs in Sweden.
On Thursday, the Stockholm-listed LeoVegas reported that its revenue in the three months ending March 31 totaled €86.3m, a 12% improvement over the same period last year. However, organic growth in local currencies was a more modest 4% and earnings fell nearly one-quarter to €7.2m.
Investors reacted with outright joy, apparently expecting something infinitely worse – possibly because of the downer narrative in the company’s last financial report – pushing the shares up 22% by the close of Thursday’s trading.
The quarter started out on a momentous note thanks to Sweden’s new regulated online gambling market. LeoVegas was one of the first companies to receive a new Swedish license, and its Pixel.bet brand launched its Swedish-facing site in February while GoGoCasino, the first new brand on LeoVegas’ proprietary multi-brand platform, made its Swedish debut at the end of March.
The downsides of Sweden’s regulated market – high marketing expenditure, the built-in advantages of the former gambling monopolies – have been detailed at length in other online operators’ recent earnings reports, but LeoVEgas CEO Gustaf Hagman claimed to be “generally satisfied with our performance.”
Hagman said that while LeoVegas’ Swedish market revenue had fallen 16% in Q1, the company’s depositing customer base grew 23% year-on-year, suggesting that the company has “taken market shares” from its rivals. Hagman said Swedish revenue was growing month on month, a trend that continued in April.
The UK remains a “challenging” market for LeoVegas, as sequential revenue growth and “good profitability” at its Rocket X brands was offset by a “weaker” showing by its Royal Panda brand, which suffered from reduced marketing and “necessary regulatory adaptations.”
One year ago, LeoVegas was fined £600k by the UK Gambling Commission (UKGC) for compliance failures involving advertising and self-exclusion practices. Last month, the UKGC announced it was probing new complaints of self-exclusion failures and the media immediately piled on with reports of similar incidents. Hagman said Thursday that LeoVegas “takes compliance with the utmost seriousness and is working consistently to ensure a safe experience for our customers in all markets.”
LeoVegas expects to be granted extended licenses in the German state of Schleswig-Holstein and the company says Canada, Denmark and Finland all performed well in Q1. The company also claims to be taking market share in Italy, despite that country’s increasingly harsh stance towards gambling advertising.