Codere reveals impact of Covid-19 in Q1

28 May 2020

Spain, Italy and Latin America-facing operator Codere’s revenue fell 21.3% to €278.5m in the first quarter of 2020, while a combination of retail shutdowns resulting from novel coronavirus (Covid-19) and exchange rate fluctuations contributed to losses rising to €97.1m.

Of the €278.5m in revenue generated for the three months to 31 March, Italy's contribution was the largest. However, as the country was one of the first in Europe to be affected by Covid-19, its total was down 39.4% year-on-year, at €86.5m. Spain, another country badly affected, fell 16.7% to €40.5m.

A further €64.8m came from Argentina, down 19.8%, with Mexico's contribution declining 24.9% to €60.4m. Revenue from Panama, meanwhile, fell 23.2% to €14.6m and Uruguay's total was down 9.6% to €17.0m. Colombian revenue, on the other hand, declined just 0.9%to €4.9m.

Online revenue increased, but at a slower rate than retail's decline. The channel's Q1 total amounted to €16.1m, up 7.6%.

“The impact of Covid-19 on Codere's business has been very significant as it has caused the temporary closure of all face-to-face operations gradually since 8 March,” the operator explained. “Only the online business has continued to operate normally, but this was still strongly affected by the cancellation of major sporting competitions.”

Codere's operating expenses for the quarter fell 15.5% to €230.8m, while contingency plans taken following the closure of its land-based business contributed to a 56.5% reduction in costs for that period. In addition, the business took out a MXN500.0m loan to be paid off in 2025.

Gaming taxes came to €82.8m, down 21.4% and other taxes to €18.4m, down 13.9%, while personnel costs declined 6.6% to €56.8m.

Rental costs for gaming venues fell 44.1% to €1.5m, while slot machine rental fees grew 8.8% to €7.0m.

Costs of goods sold came to €8.6m, down 32.5%, while advertising and marketing costs came to €11.1m, down 9.4%. Utility costs grew 9.8% to €13.0m while repair and maintenance costs declined 13.6% to €5.1m. Professional fees for contractors fell 37.3% to €3.0m.

Insurance costs grew to €1.2m while travel and transport costs remained steady at €2.1m and other operating costs fell 21.9% to €20.0m.

This resulted in earnings before interest, tax, depreciation and amortisation of €47.7m, down 41.1%. 

Codere made a further €0.5m loss due to fair value variations of trade transactions. The business paid a further €1.1m in the disposal of equipment such as gaming machines and paid a further €2.0m in impairment costs.

Non-recurring costs came to €7.7m, of which €4.4m related to online marketing investments.

As a result, the business made an operating loss of €7.1m. After adjusting for the inflation of the Argentine Peso that occurred in 2019 driven by the election of Alberto Fernández as president, as well as inflation in other Latin American currencies due to uncertainty over the effects of Covid-19, Codere’s loss came to €10.4m.

The operator paid a further €23.1m in net interest expenses, compared to a €28.3m gain in the prior year, while it made a €2.8m loss on financial investments.

Exchange rate variations, driven again by Fernandez’s election over the more market-friendly incumbent Mauricio Macri and global uncertainty caused by the pandemic, led to a €49.9m loss. After adjusting for inflation, Codere’s pre-tax loss came to €85.0m.

Codere paid a further €14.1m in income tax, up 64.9% from 2019. The operator made €3.3m through businesses in which it has a minority interest, compared to a loss of €1.6m in 2019.

As a result, after accounting for inflation again, Codere made a net loss of €97.1m, compared to a loss of €8.6m in 2019.

Currently, only Uruguayan racing and some Spanish points of sale have resumed operations, but the business said it expects the rest of operations to resume gradually from June.

“Codere has also resorted to seeking additional liquidity with the support of financial advisers, with the aim of obtaining an additional €105m that allows the business to face this period of uncertainty, the evolution of the pandemic and its implications on when and under what conditions Codere may reopen its operations, more comfortably,” the business added.