Swedish regulation slashes Svenska Spel profits in H1

19 July 2019

Swedish state-owned gaming business Svenska Spel has seen profits hit by increased regulatory costs in the first half of the year, though the operator noted that customer growth and revenue had recovered during the second quarter.

Revenue for the six months ended June 30, 2019 was down 4% year-on-year at SEK4.1bn (£349.1m/€389.4m/$437.0m), with Svenska Spel’s online division, Sport & Casino, the only one to post revenue growth in the period.

Sport & Casino revenue rose to SEK1.0bn, up 5% from H1 2018, with growth driven by the new online casino and horse race betting products. Sports betting, on the other hand, saw net gaming revenue fall during the period.

The lottery division Tur remained Svenska Spel’s main source of revenue, despite reporting a 3% drop to SEK2.2bn. Draw-based games performed strongly, reporting an SEK13m increase in revenue, which was offset by declines in instant win games.

The land-based casino and gaming machine division Casino Cosmopol & Vegas saw revenue decline 14% to SEK849m. This was largely down to an SEK86m drop in the Vegas gaming machine revenue.

“Svenska Spel's operations have stabilized following the transition to the new gaming market and we see a recovery in customer growth and revenue,” the operator’s president and chief executive Patrik Hofbauer (pictured) said.

“The customers we lost at the end of the year as a result of splitting the group into new divisions, and the transition to separate customer accounts for each have found their way back to us,” he explained. “We are pleased that customers choose Svenska Spel, because they appreciate our products, and because it is safe and secure to gamble with us.”

While direct costs were down 9% at SEK595m, Svenska Spel paid a total of SEK783m in gaming taxes as a result of the opening of Sweden’s regulated igaming market. Once operating costs such as personnel expenses, depreciation and amortisation were stripped out, operating profit was down 50% at SEK1.1bn.

After finance-related costs and corporate tax were removed, Svenska Spel’s net profit was SEK825m, down from SEK2.1bn in the prior year.

For the second quarter of 2019, revenue was down 2% at SEK2.0bn. The operator paid SEK381m in Swedish gaming tax during the three months to June 30, 2019, with sales-related costs falling to SEK294m.

After operating expenses, operating profit dropped 45% to SEK534m. Net profit after financial costs and tax came in at SEK417m, less than half the SEK973m reported in Q2 2018.

Hofbauer said the second quarter had been “intensive” as a result of “vigorous” enforcement action from Swedish gambling regulator Spelinspektionen. However, he added, this was a positive development for Swedish consumers, as it was evidence of consumer protection standards in the market being raised.

“As Sweden’s gaming company, our vision is that games should be for everyone’s entertainment,” he added. “This that while we will look to grow aggressively, we will continue to consider our customers’ safety.”