Success in LatAm offsets Codere's Spanish decline
Renegotiated Caliente deal almost doubles Mexican revenues " Spain declines ahead of egaming market opening.
Spanish operator Codere has seen its operating revenue rise significantly year-on-year in the three months ending 31 March 2012 after strong performance from its Latin American operations, but increased operating expenses and a decline in the group’s Spanish business, ahead of the issuing of licences on 1 June, has hit the company’s pre-tax profit.
Profit before tax fell 16% year-on-year, from 17.5m to 14.7m for the period, after operating expenses rose 36.5% to 363.2m. This came alongside a drop in Spanish revenues, which fell from 43.6m to 39.4m “ down 9.6% on 2011.
The company has issued a series of injunctions against international operators looking to launch in the regulated Spanish market on the basis that such companies, including PokerStars and Sportingbet’s Spanish-facing Miapuesta brand, had an unfair advantage after offering egaming services pre-regulation without having to pay tax on their activities. However the quarterly earnings release did not comment on the ongoing cases.
An injunction brought against Miapuesta in January was upheld by the Madrid Commercial Court in March. Sportingbet immediately announced its intention to appeal the decision, describing the case as “a blatant attempt to disrupt the market.” However, Cristina Romero de Alba, a lawyer for Loyra Abogados, explained in a blog written for eGaming Review that were licences to be issued without resolving the issue, disruption would be caused by giving the likes of Sportingbet the upper hand against operators which had observed the ban on online activities:
“The Spanish remote gaming market would indeed be disrupted if licenses are granted without carrying out a series of common sense checks such as: conducting a thorough review of the license application files; requesting payment of the taxes due for the last four years; banning the use of illegally gathered databases and illicitly advertised brands and applying international compliance and AML standards,” Romero de Alba said.
This was followed by rumours that some of the largest operators including Miapuesta, bwin and PokerStars would not launch in the market if the decision to charge the operators back-tax on pre-regulation operations was upheld.
Aside from Spain, Codere’s other core markets performed strongly, with Argentina and Mexico the standouts after revenues from the territories increased 24.7% year-on-year to 160.4m and 92% to 101.2m.
Strong performance in Mexico was attributed to the restructuring of Codere’s agreement with Grupo Caliente. The original revenue share deal saw Codere take 50% of profit before tax on gaming venues supplied with the company’s gaming software, and has been changed to an annual fee of up to $36m (28m) until 2014, and an aggregate monthly fee of $1m (0.78m).
This helped push group operating revenue up 31.8%, from 305.9 to 403.3m, while earnings before interest, tax, depreciation and amortisation rose 17.1% from 2011 to 78.9m. Despite the drop in profit before tax, operating profit also grew marginally up 2.8% to 40.7m.