Svenska Spel results "not what we're striving for," CEO says

24 October 2019

Svenska Spel’s third-quarter gross gaming revenue declined to SEK4.6bn (£317.8m/€430.1m/$478.9m) as the effects of competition and regulation in the re-regulated Swedish market hit the company's balance sheets.

“Even though we have stabilised Svenska Spel's operations after the changes at year-end, the result is not yet at the level we are striving for,”  Patrik Hofbauer, president and chief executive of Svenska Spel, said.

The company's net gaming revenue also declined year-on-year, by 5.2% to SEK2.01bn. Hofbauer said the presence of new competition in the licensed Swedish market as a major reason for the decline in both gross and net gaming revenue.

Our digital business and our customer bases continue todevelops positively, but revenue is adversely affected by increased competition and efforts in gaming responsibility," Hofbauer said.

However, Hofbauer added that Svenska Spel still saw competition as a positive.

"Increased competition is something that is positive and that spurs us on at Svenska Spel to be even better," Hofbauer said.

Of the company’s net gaming revenue, SEK1.12bn — 1.5% less than in 2018 — came from the Tur division which handles lottery games.

Svenska Spel’s online Sport & Casino division also experienced a slight decline, to SEK462m. Revenue from Casino Cosmopol and Vegas, Svenska Spel’s land-based casino and gaming machine division, declined 16.4% to SEK429m.

“The results for Casino Cosmopol & Vegas are affected by customers' move from physical play to online, but also by efforts linked to the duty of care and money laundering legislation,” Hofbauer added.

Hofbauer said that although increased regulation has hurt revenue across the industry, the restrictions would prove to be a good thing in the long term.

“We can see that the gaming industry is being squeezed by lower revenues in 2019,” Hofbauer said. “Part of the explanation lies in the changes brought about by the new game regulation, in particular the national self-exclusion database Spelpaus and mandatory deposit limits.

“These are positive changes as they protect consumers and build a long-term sustainable industry through sound revenue.”

The company paid SEK 377m in gaming tax, a new expense in 2019 due to the re-regulation of gambling in Sweden. In addition, Svenska Spel paid SEK 279m in direct operational costs, down 7.3% from 2018, resulting in net turnover of SEK1.41bn, a 25% year-on-year decline.

Personnel costs for Svenska Spel increased 4.4% to SEK257m, while other internal expenses increased 7.9% to SEK439m. Depreciation and amortisation costs, meanwhile, rose 35.5% to SEK84m.

These increased expenses led to an operating profit of SEK639m, down 45.7% from 2018.

Although the company lost a further SEK6m on financial items, Svenska Spel reported a SEK687m gain from deferred tax assets. This comfortably offset the SEK99m paid in tax, resulting in an overall profit of SEK1.22bn, up 4% year-on-year.

The deferred tax asset was a result of differing ways of measuring depreciation between Svenska Spel's financial reports and taxable revenue. As a result of these differences, Svenska Spel's current taxable income is higher, but it will be required to pay SEK687m less tax in the future.

"Uncertainties" in terms of how to report depreciation in the first half of 2019 mean that the deferred tax asset covers the first nine months of 2019, the operator explained.

Hofbauer said that the Sport & Casino division is well-primed for growth in the future, particularly after its SBTech-powered platform launches in 2020.

“On the product side, the Sport & Casino business area has expanded its range with, among other things, more tables in the live casino and the new game Football Studio 1X2,” Hofbauer said. “Poker has been updated so that customers can play directly on the web without downloading software.

"The offering on sports betting is being developed through the collaboration with SBTech as supplier of a new sports book, which is expected to be in place in 2020.”