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Casino closures hit Svenska Spel as net profit falls in Q1

| By Robert Fletcher
Sweden’s Svenska Spel reported a 24.6% year-on-year decline in net profit to SEK294.0m (£21.8m/€25.3m/$27.0m) in Q1 as spending increased and revenue slipped 1.0%.

Net gaming revenue for the three months to 31 March amounted to SEK1.96bn, down from SEK1.98bn in Q1 of 2023. This came as Svenska Spel only reported revenue growth within one of its three core business areas.

Revenue from the Tur lottery segment was higher year-on-year and remains the primary source of revenue for the operator. However, declines across Sport & Casino and Casino Cosmopol and Vegas led to the overall revenue drop.

These Q1 declines, Svenska Spel interim CEO Erik Strand said, came during a period of “adjustment” for the business. This mainly related to the closure of Casino Cosmopol venues in Gothenburg and Malmö, with both sites shutting in late February.

Svenska Spel took the decision to close the locations due to limited profitability. However, Strand said while the impact of this was felt in Q1, there will be long-term benefits for the group.

“It had a major impact on the group’s results during the quarter,” Strand said. “However, the underlying business is still stable with strong results from Tur.

“We have a stable business with strong brands, the highest image in the gaming industry and high commitment among employees. But we also have challenges in the outside world such as slowing growth in the gambling market and recession in the Swedish economy.”

Lottery growth softens the blow of declines elsewhere

Breaking down the group’s performance in Q1, the Tur lottery division generated SEK1.24bn in revenue. This was 6.4% ahead of last year and represents 63.3% of all revenue during the quarter.

Svenska Spel said that Eurojackpot continues to attract customers, while the Triss game also increased sales during the Easter and Valentine’s Day period. It also noted the benefit of an additional Saturday this year and the fact that Easter fell earlier.

In contrast, revenue from the Sport & Casino business slipped by 2.8% to SEK549m. Svenska Spel put this down to a weaker sports offering across some of its pool games and a low margin on sports betting.

Elsewhere, the closure of the two land-based casino sites hit the Casino Cosmopol & Vegas segment, with revenue down 31.6% to SEK169m. In addition to two properties closing, the group also reduced the operating hours of its Stockholm venue. 

Online revenue rises 5.8% at Svenksa Spel 

In a somewhat mixed quarter, there was good news in terms of online growth for Svenska Spel. Total revenue from online gambling increased 5.8% to SEK1.09bn, or 56.0% of all Q1 revenue.

As for offline performance, betting shop revenue was down 1.2% to SEK681m and bingo and restaurant revenue 17.2% to SEK101m.

The remaining SEK68m was attributed to casinos, down by 45.6% year-on-year due to the double closure.

Higher spending leads to lower net profit

Turning to expenses, direct revenue costs were lower at SEK358m, but gaming operations and gaming tax spend both increased.

Personnel costs climbed 37.5% to SEK425m while other external expenses were also 38.6% higher at SEK600m. In addition, an SEK108m loss was reported from its share in a joint venture.

When also including net financial income of SEK61m, this left a pre-tax profit of SEK371m, down 41.9% on the previous year. Svenska Spel paid SEK77m in tax, resulting in a net profit of SEK294, down 24.6% from SEK507m in the previous year.

Svenska Spel to appeal SEK100.0m penalty

Q1 also saw Svenska Spel dealt with a regulatory blow. Svenska Spel Sport & Casino, the group’s digital arm, was handed a SEK100.0m penalty for multiple shortcomings in player duty of care.

This relates to Sweden’s duty of care, as outlined in the country’s Gambling Act. The penalty is the result of an investigation period between October to December 2021.

A review from Swedish regulator Spelinspektionen included how Svenska Spel handled 10 customers who lost most money during the period. Spelinspektionen said Svenska Spel failed to take sufficient measures to protect players against excessive gambling and help reduce their gambling.

Svenska Spel says it has addressed many of the concerns set out by the regulator. However, it also says it does not share the full assessment set out in the review, with Strand arguing that responsible gambling is “central” to its business. As a result, Svenska Spel is appealing the decision.

“We must not only live up to the legislation, but also our own high ambitions,” Strand said. “However, there is reason to test the assessment in order to create greater clarity and practice around the interpretations of the Gambling Act and the duty of care. 

“Therefore, Svenska Spel Sport & Casino has appealed the decision.”

Changing of the guard

Q1 was also the first quarter in which Strand led Svenska Spel as interim CEO. 

He took on the role when Patrik Hofbauer left the business part-way through the quarter. This was a pre-planned departure confirmed by the operator last October, with Hofbauer officially stepping down on 31 January after five years at the helm.

Anna Johnson will soon take over, officially assuming the role of CEO in June. Strand will be continuing in his temporary role until then.

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