2024 was a challenging year for the Swedish gambling industry. In February, the government made the decision to close two major land-based casinos in Gothenburg and Malmö, owned by Svenska Spel, due to lack of profitability. Despite this setback, the company is still aiming to boost revenues, even amidst a decline in overall profits.
Problems Svenska Spel
In spite of the decrease in revenue and net profit in the first half, Svenska Spel CEO and President Anna Johnson stated that recent actions taken by the operator will support long-term growth plans. The interim financial results for the first half of the year were released on July 6, showing a 2.9% drop in net gambling revenue to SEK 3.82 billion. Johnson attributed the profit decline mainly to the implementation of stricter responsible gaming measures, such as income verification for high-stakes players and more frequent welfare checks.
Last month, Svenska Spel also said it would start reporting the share of revenue it receives from customers at low risk of problem gambling.
Johnson, who took over as CEO just a month ago, also mentions the company's recent decision to close two land-based casinos and how that will impact revenue. Cosmopol locations in Gothenburg and Malmö closed in February due to low profitability. It is worth noting that both casinos are among the first in Scandinavia; for decades they have been the hallmark of cities - a place of attraction for tourists, entertainment and high-level service.
In May, the Swedish government proposed a complete closure of Casino Cosmopol, saying the establishment was "no longer fit for purpose." The government also noted that businesses continue to struggle to become profitable.
Opportunity to invest for Svenska Spel
Johnson is of the opinion that closing the casino provides Svenska Spel with more opportunities to invest in other areas of the business. A recent review of operations and costs, along with the closure of the casino, will help support the company's broader profit growth plans. Johnson stated, "The company is already seeing the positive effects of this transformation through reduced costs, improved results, and higher operating margins. This allows us to make important investments in the company's transformation and growth." Svenska Spel conducted an analysis of its organisation, working methods, and costs, leading to a reorganisation and the implementation of a new structure on April 1. The closure of casinos in Malmö and Gothenburg resulted in lower costs, improved results, and higher operating margins in the second quarter. Johnson believes that these changes provide the opportunity to invest in transformation, growth, and bolstering responsible gaming regulations.
Revenues: review of the first half of the year
In the first half of the year at Svenska Spel, the Tur lottery division saw the highest revenue of SEK 2.48 billion, marking a 4.6% increase compared to the previous year. Eurojackpot game sales also experienced growth. However, sports betting revenue declined by 2.4% to SEK 1.05 billion, with responsible gambling measures impacting player spending. The closure of two land-based casinos led to a 59.0% revenue decrease in the Casino Cosmopol segment, while revenue from the Vegas slot machine segment fell by 20.4% to SEK 195 million. Factors such as responsible gaming measures and economic instability in Sweden contributed to these declines.
Svenska Spel is betting on online gamers
Online platforms remain the main source of income by some margin. In the first half of the year, Svenska Spel's online profits increased by 6.7% to SEK 2.19 billion. Of these, 57.0% came from online gambling and 48.0% from mobile communications.
Revenue from offline sources fell 4.5% to SEK 1.32 billion, while revenue from restaurants and bingo halls fell 20.4% to SEK 195 million.
Revenue from Stockholm's only land-based casino fell 22.3% to SEK 195 million after the closure of two other locations.
Costs rise despite rescue measures
Despite trying to cut costs, Svenska Spel appears to have increased costs. The main source of funds leakage is external expenses amounting to SEK 1.03 billion, as well as personnel costs and depreciation.
Operating profit for the first half fell 18.2% to SEK 950 million, although Svenska Spel said this was mainly due to one-off costs of SEK 375 million. These included the liquidation of two casinos, restructuring and costs associated with a SEK 100 million sanctions fee imposed by Swedish regulator Spelinspektionen.
Finance income remained at SEK 76 million, resulting in profit before tax of SEK 1.03 billion, down 17.0% year-on-year. Venska Spel paid SEK 233 million in taxes, resulting in net profit of SEK 794 million, a decrease of 19.1%.
Mixed results for Svenska Spel in Q2
Looking ahead to the second quarter, total revenue for the three months ending June 30 decreased by 4.8% to SEK 1.87 billion. The operator attributes the main reason for this decline to a responsible approach to gambling.
Lottery revenues saw a 2.8% increase to SEK 1.24 billion, while Sport & Casino revenues dropped by 2.0% to SEK 504 million. Cosmopol Casino experienced a significant 72.0% decrease in revenue to SEK 35 million, and Vegas revenue fell by 23.6% to SEK 94 million.
Internet gambling in the second quarter surpassed SEK 1.10 billion, marking a 7.5% year-on-year increase. Offline gaming revenues, on the other hand, decreased by 7.7% to SEK 637 million, with land-based casinos contributing SEK 94 million.
Expenses decreased across all categories in the second quarter, with personnel costs notably dropping by 21.2% to SEK 253 million. As a result, operating profit increased by 16.4% to SEK 640 million. With financial income of SEK 15 million, profit before tax reached SEK 655 million, a 9.7% increase compared to the previous year.
Svenska Spel paid SEK 156 million in taxes, leading to a net profit of SEK 499 by the end of the second quarter, which represents a 5.9% increase from the first quarter.
Johnson, the President and CEO of Svenska Spel, expressed enthusiasm about leading a group with a strong market position and four million customers. He emphasised the company's commitment to providing enjoyable gaming experiences that contribute positively to the community.
