Svenska Spel Q1 profits grow despite Covid-19

Swedish operator Svenska Spel saw revenue tick up 0.7% in the first quarter of 2020 to SEK2.14bn (£173.5m/€199.4m/$217.0m) and profit grow by 33.6% to SEK545m, despite the effects of the novel coronavirus (Covid-19).

Of Svenska Spel’s SEK2.14bn in revenue, The Tur division, which deals with lottery games, brought in the majority, at SEK1.145bn, up 4.3% from Q1 of 2019.

Patrik Hofbauer, president and chief executive of Svenska Spel (pictured), noted that Tur was the one vertical for Svenska Spel that was most resistant to the effects of the virus.

“Although the situation has changed for Tur, it has not changed to the same extent as the other business areas,” Hofbauer said. “Noticeably, there have decreased sales of physical lotteries by agents, as a result of fewer customers in shops and stores.”

Revenue from the Sport & Casino division declined 0.8% to SEK538m net revenue from Casino Cosmopol and Vegas, Svenska Spel’s land-based casino and gaming machine division, fell 10.6% to SEK372m. This resulted in net gaming revenue of SEK2.06bn, almost exactly in line with the figure from 2019, on turnover of SEK4.59bn, down 4.6%.

Casino Cosmopol and Vegas were especially hit by the impact of the virus at the end of the quarter. On 29 March, Svenska Spel was forced to close all four of its Casino Cosmopol locations due to a ban on all gatherings of 50 or more people.

Of this SEK2.06bn in net gaming revenue, SEK 819m came through sales agents, with SEK834m through online sales. Land-based casinos brought in SEK196m while restaurants and bingo halls contributed SEK176m and other sales channels brought in SEK30m.

Other income increased 22.5% to SEK80m. The business paid SEK338m in gaming taxes, down 15.8% and SEK282m in direct operating costs for a net operating revenue of SEK1.52bn.

The operator paid a further SEK826m in operating expenses, down 9.3%. Of this total, SEK297m came from personnel costs, down 0.7%, SEK432 from other external expenses, down 19.1% and SEK97m, up 19.9%, from amortisation and impairment of fixed assets.

This led to an operating profit of SEK701m, up 35.1%.

The operator made SEK15m in interest and financial income, but this was offset by financial costs of the same value.

After paying SEK155m in taxes, Svenska Spel’s profit came to SEK545m, up 33.6%.

“The first quarter of the year began with two months of good growth for all business areas within Svenska Spel,” Hofbauer said. “However, from the middle of March, the coronavirus's effects have had a significant impact on parts of the group.”

In March, the operator announced it had suspended its dividend, furloughed 800 of its 900 employees in the Casino Cosmopol and Vegas divisions and moved 45 of its 135 Sport & Casino employees to short-term work because of the virus.

“Svenska Spel, like many other companies and organizations, has quickly been forced to adapt to a new reality with the effects of the coronavirus,” Hofbauer said. “We have therefore implemented measures to ensure a sustainable business, and we have done so with the utmost care about our customers and employees.

“Our hope is to be able to quickly switch to full operations when the situation turns around.”

The virus is set to lead to increased regulation of the Swedish gambling market. Last week, Minister for Health and Social Affairs Ardalan Shekarabi proposed a SEK5,000 mandatory weekly deposit and a SEK100 cap on bonus offers, which will be in effect from 1 June until the end of 2020.