CEGO sale leads to record profits for Danske Spil in 2019

2 March 2020

Danish government-owned operator Danske Spil recorded a record-high profit in 2019 despite a dip in revenue, as the sale of game developer CEGO boosted its balance sheets.

The operator’s revenue of DKK5.00bn (£580.4m/€668.7m/$741.8m) was down 1.6% year-on-year. The Danske Lotteri Spil lottery division brought in DKK2.56bn, down 3.8% year-on-year, with 40% of lottery sales online, up from 26% in 2018.

Revenue from the Danske Licens Spil online gaming division increased 1.8% to DKK2.06bn, with revenue growing in both casino and sports betting. The operator said the growth in sports betting revenue was “remarkable” given the lack of a major competition in 2019 on par with 2018’s FIFA World Cup. 

Gaming hall and slot manufacturer business Elite Gaming provided an additional DKK369.1m, down 2.4% while revenue from Danske Spil’s Swush fantasy sports brand fell 46.0% to DKK8.8m.

The operator paid DKK590.0m in state taxes, up 0.6% of which Danske Licens Spil paid DKK420.5m. Elite Gaming paid DKK160.1m in state taxes while Danske Lotteri Spil paid DKK8.9m.

Danske Spil paid DKK709.9m in dealer commissions and similar costs, down 1.9%. DKK312.3m was paid by Danske Lotteri Spil, DKK275.0m by Danske Licens Spil and DKK122.6m by Elite Gaming.

Other gaming costs came to DKK330.9m, up 32.3%. The bulk of these costs were incurred at Danske Licens Spil, where they came to DKK288.3m, up 36.4%.

These costs resulted in a profit of DKK3.36bn from gaming activities, up 4.5%. 

Danske Spil reported DKK40.0m in other income. Although the over-arching Danske Spil Group brought in DKK349.8m in other income and Danske Lotteri Spil DKK34.6m, discontinued operations offset these through other costs of DKK351.3m. These stemmed from games developer CEGO, after the operator sold off its stake in the business, in July 2019.

Danske Spil incurred a further DKK402.0m in depreciation costs, up 125.7% year-on-year. Discontinued operations were the reason for DKK150.7m of these costs, contributing DKK150.7m. Danske Licens Spil paid a further DKK112.4m in depreciation costs while Danske Lotteri Spil paid DKK60.4m.

Danske Spil recorded an additional profit of DKK375.5Mbn due to the sale of CEGO.

Other external costs came to DKK1.10bn, down 6.0%, of which DKK305.2m were staff costs. These costs were highest at Danske Licens Spil, at DKK603.5m, down 5.9%, while at Danske Lotteri Spil these costs came to DKK506.5m. At the Danske Spil Group these came to DKK290.9m, while a profit of DKK352.3m from these costs was recorded due to the sale of CEGO.

This led to a profit before financial items of DKK2.28bn, up 5.1%. Danske Lotteri Spil accounted for DKK1.67bn of this sum, down 4.7%, and Danske Licens Spil DKK335.0m, down 16.6%.

After paying out DKK11.4m in financial items, less than a quarter of 2018's expenditure, Dansk Spil's pre-tax profit stood at DKK2.27bn, up 5.1%.

Danske Spil paid a further DKK433.0m in income tax, resulting in profit of DKK1.84bn, up 8.8%. 

While this profit was the highest ever for the operator, chief executive Susanne Mørch Koch said it does not mean the year was Danske Spil’s most successful ever.

“Does this mean that we generally ‘make more money than ever’? Not quite,” Koch said. “In 2019 we got an extraordinarily high revenue of DKK376m from the sale of our shareholding in the gaming company CEGO, which runs spilnu.dk.

“That income will not come in again in 2020, and new initiatives in responsible gambling will also impact earnings.”

These responsible gambling initiatives include the launch of a new retail ID verification card, which will be required to identify customers looking to purchase its products at retail locations. Koch said the product will be launched in 2020, but it’s “too soon” to set a specific launch date.

Koch also called for mandatory loss limits and increased advertising regulation in gambling.

“Danske Spil wants further regulation,” Koch said. “It is natural to look at the scale of game advertising and time is to come to a reconsideration of whether to put actual loss limits in place for gambling in Denmark.”