Svenska Spel talks up long-term growth prospects despite H1 declines
Publishing interim H1 results today (16 July), Svenska Spel notes a 2.9% drop in net gaming revenue to SEK3.82bn (£278.4m/€331.2m/$360.6m).
This, Johnson said, is primarily down to its strengthened responsibility measures. These include income checks on high-staking players and an increase in welfare calls. Last month, Svenska Spel also said it would begin reporting the proportion of revenue it generates from customers with a lower risk of gambling problems.
Johnson, who only took over as CEO a month ago, also references the recent decision to close two of its land-based casinos and the impact of this on revenue. Casino Cosmopol venues in Gothenburg and Malmö closed in February due to limited profitability.
In May, Sweden’s government put forward a proposal to discontinue Casino Cosmopol business altogether, saying to “no longer fulfils its purpose”. It also noted ongoing challenges for the business to reach profitability.
Opportunity to invest for Svenska Spel
However, Johnson also says taking such action places Svenska Spel in a stronger position to invest more into other areas of the business. This, coupled with the completion of a recent review of operations and costs, will support wider growth plans moving forward.
“The effect of the changeover is now visible for Svenska Spel in the form of lower costs, improved results and a strengthened operating margin,” Johnson said. “It frees up space going forward for important investments in transformation and growth.
“We have carried out a review of organisation, working methods and costs. We have subsequently carried out a reorganisation of Svenska Spel with a new organisation in place from 1 April. We have also closed down our casinos in Malmö and Gothenburg.
“This has led to lower costs, an improved result and strengthened operating margin during the second quarter. It gives us an opportunity to invest in transformation, strengthened gambling responsibility work and investments that create growth.”
A closer look at H1
Breaking down H1 at Svenska Spel, the Tur lottery division generated the most revenue for the business at SEK2.48bn. This is 4.6% higher than in the previous year, with the operator noting an increase in sales for the Eurojackpot game.
Elsewhere, it was not such good news for the Sport & Casino business, with revenue falling by 2.4% to SEK1.05bn. Svenska Spel mainly put this down to strengthened responsible gambling measures and the subsequent impact on player spending.
Meanwhile, the closure of the two land-based casino sites hit the Casino Cosmopol segment, with H1 revenue down 59.0%. Svenska Spel also notes the impact of responsible gambling measures here, as well as increasing competition from the online market, with fewer people now visiting its land-based casinos.
In addition, the Vegas gaming machine segment, now being reported separately to Casino Cosmopol, saw revenue fall 20.4% to SEK195m. Again, the group references its responsible gambling activity, as well as lower player spending due to the wider economic situation in Sweden.
Svenska Spel hails online growth
As for which channel revenue came from, online remains the main source of revenue by some margin. In H1, internet revenue climbed 6.7% to SEK2.19bn. Of this, 57.0% was from online gambling and 48.0% was from mobile.
Offline revenue fell 4.5% to SEK1.32bn, while revenue from restaurants and bingo halls was 20.4% lower at SEK195m.
Land-based casino revenue, meanwhile, dropped 22.3% to SEK195m after the double venue closure.
Costs increase despite money-saving measures
In terms of spending, Svenska Spel saw costs increase in several areas despite taking steps to reduce spend. Other external costs were listed as the main outgoing at SEK1.03bn, with costs also higher across staffing and depreciation.
Operating profit for H1 fell 18.2% to SEK950m, although Svenska Spel said this was mainly due to non-recurring costs of SEK375m. These included liquidating two casinos, restructuring and costs associated with a SEK100m sanction fee imposed by Swedish regulator Spelinspektionen.
Financial income remained level at SEK76m, leaving a pre-tax profit of SEK1.03bn, down 17.0% year-on-year. Svenska Spel paid SEK233m in tax, resulting in a net profit of SEK794m, a drop of 19.1%.
Q2 makes for mixed reading at Svenska Spel
Looking now to Q2, total revenue during the three months to 30 June was 4.8% lower at SEK1.87bn. Again, the operator references responsible gambling activity as the primary reason for this.
Tur lottery revenue increased 2.8% to SEK1.24bn but Sport & Casino revenue fell 2.0% to SEK504m. Casino Cosmopol revenue was understandably lower – down 72.0% to SEK35m – after the double casino closure. Meanwhile, Vegas revenue dropped 23.6% to SEK94m.
Internet-based gambling in Q2 topped SEK1.10bn, an increase of 7.5% on last year. As for offline revenue, this was down 7.7% to SEK637m, while land-based casinos accounted for the remaining SEK94m.
Spending-wise, costs were lower across the board following the review completed at the end of April. Lower personnel costs are noticeable in particular, falling 21.2% to SEK253m.
This helped push operating profit up 16.4% to SEK640m. When also including SEK15m worth of financial income, this left a pre-tax profit of SEK655m, up 9.7% year-on-year.
Svenska Spel paid SEK156m, meaning it ended Q2 with a quarterly net profit of SEK499, up 5.9%.
“It is now a month since I took office as president and CEO of Svenska Spel,” Johnson said. “It is an extremely exciting opportunity to lead a group that has a strong position in the market and four million customers to whom we offer joy, excitement and dreams through our well-known games.
“Although right now it’s summer and vacation for many of us, I know that we at Svenska Spel every day continue to create sustainable gaming experiences that contribute to a better Sweden.”