Analysis: Can LeoVegas turn its luck around in the UK?
Operator pledges to return to growth in coming quarters and expects regulatory strains to benefit in the long-term, but analysts think otherwise
LeoVegas’ Q3 results shed light on a struggling UK business as organic revenue for the UK slipped 32% on increased regulatory pressures. The firm’s share price also plummeted more than 20% yesterday and has remained at the new low.
However, group CEO Gustaf Hagman was quick to downplay the severity of the poor performance, highlighting growth expectations for Q4 with December typically experiencing the highest level of customer activity. He told analysts that despite the set-back in Q3, the operator would meet its financial target of €600m GGR by 2020.
“We still have a strong positioning the UK with several competitive brand and we have a good opportunity to get them growing again,” Hagman said.
He also said post-Q3 NGR for October increased 29% on the previous year to €426.6m, which prompted one Optimizer Invest investor to agree with Hagman’s expectations for growth. “The results of this work have been confirmed by positive customer KPIs during the start of the fourth quarter. This, in turn, bodes well for a return to higher growth figures going forward,” the analyst said.
However, Hagman’s long-term expectations have not swayed other industry analysts, whose responses to the Q3 results having been largely negative.
One anonymous Bloomberg analyst told Swedish financial newspaper Di that the underlying business was not working well and the beginning of the fourth quarter was also disappointing.
Di analyst Johan Wendel said: “The market does not expect LeoVegas to reach [its financial] goals. Actually the goals should have been scrapped because the market’s lack of faith in them hurt confidence in management over the long term and thus hurts the stock.”
On Hagman’s pledge to rebound in the UK, Wendel expects the operator’s focus on regulation to benefit it in the long-term, but added: “At the same time it is difficult to see how Leovegas is able to deliver high growth in the market while remaining within the regulatory framework set up by the authorities,” Wendel said.