LeoVegas completes debut M&A deal in Italy

LeoVegas completes debut M&A deal in Italy

Wednesday, February 22, 2017 Posted by Scott Longley
Winga acquisition comes after results roar to record

Swedish-based mobile gaming specialist LeoVegas has made its first M&A foray with the acquisition of the licensed Italian gaming operator Winga.it from previous owner PAF for €6.1m.

The company said the deal would propel LeoVegas into the Italian market and marked another milestone for the company which listed on Stockholm’s junior Nasdaq market in March of last year.

Winga achieved revenues of €8m in 2016 with more than half coming from its live casino operations and from its TV broadcast product. LeoVegas said the business is currently loss-making.

It hopes the business will benefit from LeoVegas’ data-led marketing approach and from its expertise in mobile gaming. “The acquisition of Winga.it will enable rapid expansion in Italy, as we are acquiring a company with local knowledge and an established position,” said Gustaf Hagman, chief executive at LeoVegas.

LeoVegas said it had been discussing a variety of M&A opportunities in recent months at board level and with €55m in cash sitting on the balance sheet had the potential to follow up the Winga acquisition with more deals.

The deal came a week after LeoVegas announced results which showed revenues rising 70 percent for the 12 months to €141.4m with adjusted EBITDA soaring to €21.3m from €1.8m in 2015. Just under 60 percent of all revenues was generated in the Nordic region while a further 10 percent came from the UK.

The company said its most recent initiatives, launching a sportsbook and also moving into live casino, were progressing well.

Marketing expenses as a percentage of revenues has fallen back significantly from the 60 percent level in the second quarter back to 36 percent in the third and fourth quarters. Total marketing expenditure in the fourth quarter came in at €14.9m.

The company is yet to state would be a normalised revenue percentage spend on marketing. However, it does say that it has historically had a higher marketing-to-revenue ratio than its industry peers and that the return on marketing investments has been high “which justifies a continued focus on investments in growth.”

The company points out that gaming taxes made up only 4.1 percent of revenues in the fourth quarter, down from 4.5 percent the year previously.

Gaming taxes will increase going forward after the company announced it had launched in the regulated Danish market. The company also said it was be applying for a licence in the soon-to-regulate Czech Republic market. IT said it has already exited that market ahead of regulation and warned that this would impact revenues in the first quarter of the year. LeoVegas said the market was worth 4 percent of total revenues in the fourth quarter.

Totally Gaming says: LeoVegas is another of the Nordic-facing operators that is enjoying a purple patch in terms of revenue uplifts, helped by huge increases in marketing spend, particularly earlier in 2016. The Italian deal marks a departure in terms of M&A but also pitches the company into a tough market. Meanwhile, the news from the Czech Republic suggests it will be encountering the complexities of the European gaming landscape on many levels in the year ahead.

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