Svenska Spel Q3 Report
Svenska Spel has reported an 8.2% decline in revenue during the third quarter of 2020 when compared to the same period of the previous year. The company has reported the decline a revenue during the quarter despite seeing growth in its igaming and lottery verticals. This growth did not mitigate the continued shut-down of its flagship gambling network, Casino Cosmopol. In addition, the operator has felt the strain that has come with the reduction of the numbers of land-based slot machines it is operating.
Over the three-month period from July to the 30th of September took a concerning downturn for the operator, as it dropped to SEK1.85 billion. Svenska Spel has chalked this decline largely down to the difficulties that arose with the outbreak of the novel coronavirus, COVID-19. The pandemic that has impacted all industries throughout the year saw restrictions placed on land-based gambling in Sweden that damaged revenue for the operator.
During the third quarter, the Casino Cosmopol venues remained closed to the public. They were first forced to close their doors on the 29th of March when the Swedish government placed restrictions on the size of gatherings. This has not been the only problem for the operator, as it was also forced to permanently close one of its locations in August – Sundsvall Casino.
On top of this, the slot network that is owned and managed by Svenska Spel has reported sub-par revenues during the period. The reason given for this in the company’s quarterly report was the temporary closure of more than 100 of the venues that host the machines across the country due to the restrictions put in place to mitigate the spread of the virus.
Other venues that host the machines also made the decision to take them offline all together in an attempt to reduce the number of people that would get infected by touching communal machines.
On top of this, there was also a mandatory spending limit that was introduced by the Swedish government in an attempt to reduce the effects of problem gambling on the Swedish public whilst they were subject to restrictions. These limits did not help the books of Svenska Spel, though, as Casino Cosmopol & Vegas reported revenue of just SEK177 million, a 58.7% decline compared to the same period in 2019.
Svenska Spel’s Sport & Casino vertical also experienced its fair share of difficulties because of the spending limit that gamblers in the country had to abide by. This area of the operator’s business includes its regulated online offerings and, as such, didn’t do quite as bad as some other areas.
Overall, the Sport & Casino division did see some lost revenue because of the SEK5,000 per week spending limit it was forced to abide by. Despite this, it was one of the few areas that grew year-on-year during the third quarter, as the revenue for this vertical grew by 6.5% to SEK490 million.
The Return of Sports
The operator did explain that some of the declines in revenue it experienced were offset to some degree by the return of live sporting events after a long hiatus. Revenue for the vertical plummeted to nearly non-existent levels earlier in the year when almost all sports matches were canceled globally.
For example, football fans were left with nearly no other option to watch the sport apart from the Belarussian Premier League after other European leagues were suspended.
In the third quarter, the amount of money that this division of Svenska Spel’s business brought in rose significantly, back to the same levels that were seen at the same point of last year. The operator reported that it experienced growth in both the pool and fixed-odds betting revenue streams during the three months.
It is also likely that sports betting could further improve the fortunes of Svenska Spel, as it launches its new product that is aimed at horse racing betting. This new offering has received its fair share of criticism this year because of the restrictions that some areas of the market have been facing.
The service is still in its infancy, though, and during the third quarter of 2020, Trav & Galopp had an almost negligible impact on the financial statement of the operator. This is likely due to the launch date of the service, which was only launched in the middle of September. This is an area of Svenska Spel’s business that is likely to grow in the coming months, especially as sports increasingly return to a more normal state.
One of the stand out performers for the operator during this difficult period has been the company’s lottery offerings, known as Tur. There was no exception during the third quarter of the year for this vertical, as it once again accounted for the majority of the money that was brought in by the operator.
The revenue that Tur brought in grew by 5.2% compared to the third quarter of 2019, and the absolute amount that it generated was SEK1.18 billion. This was facilitated to some degree by the high prize pots that were on offer during the period. For example, the EuroJackpot lottery was offering the chance to win substantial jackpots, which led to the product growing by SEK34 million.
The growth of other products such as Keno and Keno Xpress also played a role in the substantially higher amounts that the lotteries offered by Svenska Spel managed to generate.
Overall, the near-complete halt of the land-based offerings of the operator was significant in terms of the revenue that Svenska Spel was able to draw in during the third quarter of the year. Despite this, there was growth that came directly from this apparent loss.
The contribution that was made by the company’s online offerings to its overall revenue grew substantially over the course of the three months. This contribution grew to 48% of the overall total revenue that was reported, which was higher than the 41% share commanded by retail sales. Gaming machines accounted for 10% of revenue during the quarter, and 1% came from other sources.
This other revenue totaled SEK72 million, which, whilst it may not seem especially high, actually represents an enormous 30.9% growth compared to the third quarter of 2019. This mainly came as a result of revenue share agreements made by the operator with restaurants that host its gaming machines. Additionally, equipment rentals to sales agents contributed to this figure.
Taxes and Fees
Svenska Spel was required to pay some SEK360 million in gaming duties to the Swedish government as well as SEK 260 million that it had to settle in gaming-related costs. After these are taken into account, the net revenue that the operator reported for its business in the third quarter came to a total of SEK1.30 billion, which represents a loss of 8.0% year-on-year.
The company did manage to reduce its operating costs during the period, partially by reducing the amount that it spent on staff, many of whom were moved to a part-time basis in April. The amount saved by this was offset by a rise in amortization charges that Svenska Spel paid. The write-down of assets owned by the operator also contributed to this, which included the SEK81 million in winding-down costs for the Casino Cosmopol Sundsvall venue it operates.
Overall, this led to a decline in operating profit of 16.9% during the period, which fell to SEK527 million after financial items are considered. Despite this, the quarter ultimately has left the operator hopeful going into the final quarter of the year.
The decline in revenue reported in the third quarter is not an isolated incident, though, as the company has not excelled throughout the year, mainly due to the pandemic. It remains to be seen whether it will fully recover from the impact of the pandemic.