Olympic shuffles its deck

Aug 14, 2008
By Mike Collier

TALLINN – Olympic Entertainment Group (OEG) held an extraordinary general meeting on August 14th at which it tinkered with its structure as part of its future strategy.

According to the resolutions adopted by the meeting, the previous Chairman of  the Management of OEG Armin Karu will continue as the Chairman of the Board. The Management of OEG will continue comprising of one member, CEO of OEG Andri Avila who will conduct the day-to-day management of the company. Mart Relve was elected as a member of the Supervisory Board.

Olympic is the largest provider of casino entertainment in Central and Eastern Europe, with more than 100 premises employing around 4,000 people in Estonia, Latvia, Lithuania, Belarus, Ukraine, Romania, Poland and Slovakia.

Shares of OEG are traded in the Main List of the Tallinn Stock Exchange and the Warsaw Stock Exchange, and for some years it's been one of the darlings of investors in the region thanks to its rapid expansion and brisk, professional approach personified by Andri Avila, who now finds himself in day-to-day charge of OEG. He spoke to The Baltic Times recently, outlining the company's strategy.

Avila believes politicians can largely take the blame for any seediness that does linger in his industry. “If the legislation is set in a way that is favourable to higher-quality operators and higher-quality casinos, like in Lithuania, then public opinion about gaming tends to be more positive. If the regulations are more positive towards small locations and a big number of operators then it tends towards lower quality – of which the classic example is Latvia, where there are approximately 600 casinos, including slot casinos. About half of those are in Riga, which definitely I think is too many. You only have to walk around Riga to see this. It causes public opinion to turn against casinos. Operators need to be regulated and there needs to be transparency in the casino business,” he told The Baltic Times.

Europe-wide gaming laws would probably help, but Avila sees no immediate prospect of their introduction. “Currently it is entirely up to every member state to regulate,” he says. “The European Commission tried to put it into a service directive but it was taken out. If I had to make an estimate I would say that in 15 or 20 years there will be a unified gaming law in Europe.”

But with teams of specialists in place in each country to stay abreast of legislation, Avila's priority is seeing OEG come through the economic slowdown in the best shape possible. Despite year-on-year growth in revenues during the early part of the year, pre-tax profits were down.

“People still go into casinos but they do not spend as much time there,” Avila explains. “Also the average bet is smaller than it used to be so people are much more cautious. Definitely we can feel the slowdown in the economy – and this slowdown seems to be much deeper than previous ones.”

This finally disproves the notion that the casino business is “recession-proof,” he believes, as the downturn has been just as pronounced in Las Vegas as in Europe.

“The previous boom was generated not so much by increased productivity or the normal forces of economic growth, but because people were really spending their assets. Now that it's dropped off, the effect is very sharp and severe,” he said.

As a result, OEG has had to revise its own expansion plans, Avila admitted, though still a new location is opening up every other week, the most recent being the Olympic Casino Nyvky which became Kyiv's 22nd Olympic casino with more than €1m invested.

Part of the reason Olympic is able to remain active even during a downturn was a decision made in its early days not to invest in bricks and mortar but to concentrate solely on the core business. It leases nearly all its premises after negotiating favourable long-term contracts, reducing overheads and allowing it to remain flexible in times of uncertainty.

But OEG may be forced into the real estate market as it pursues the next big thing in gaming – casino resorts. “We would like to enter that line of business. In Europe there are many hotels which have casinos but not really any casino resorts other than one operating in Slovenia near the border with Italy,” Avila said.

Even though the global economic downturn is squeezing profits in gaming, it's not dampening Olympic's ambition. “We want to become a global player,” Avila asserted.

“So far we have been focussing on Central and Eastern Europe, but if you look at the countries where we are present and the countries which still could be of interest to us in that part of the world, then the choice is getting very limited. We have already identified potential partners all over the world, so I'm pretty confident that in ten years we will be global rather than regional players.”

 

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