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The state-owned former gambling monopoly, Svenska Spel, has declared its intention to take action to mitigate the fallout from the COVID-19 pandemic. The steps that the organization is taking are drastic, but necessary according to executives. Svenska Spel will not only furlough the majority of its land-based casino staff but will also cancel a dividend to shareholders.

Svenska Spel has been forced to close its land-based venues across Sweden following the government’s decision to ban gatherings of more than 50 people. Some 800 staff have been placed on furlough as a result. ©Unif/Pixabay

The operator also expects to have its online subsidiary affected by the current state of affairs. The outbreak of the new and deadly virus COVID-19 has forced Svenska Spel to transfer 45 of the total 135 employees working at Svenska Spel Sport & Casino to switch to a part-time basis. Such a step has never been necessary since the establishment of the online subsidiary in 2019.

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This arm of the business has been clearly negatively impacted by the distinct lack of sport taking place at the present moment. With many large sporting events canceled, like the Euro 2020, the Tokyo Olympics, and now Wimbledon, there has been a lack of events for punters to place bets on. This has evidently impacted Svenska Spel’s sports betting arm of the business.

Whilst this is a significant number of employees that have been asked to cut down their hours, the real area where the business has been hit is its land-based activities. These activities are mainly constituted by its four brick and mortar casinos across Sweden. Also affected are Svenska Spel’s casinos based in restaurants.

These venues came under fire after the country’s governing party outlawed all groupings of over 50 individuals last week. This ban on public gatherings forced the company to close all of its Casino Cosmopol sites across Sweden.

These casinos are situated in Stockholm, Gothenburg, Sundsvall, and Malmö and there is currently no word on when the business believes they will be able to re-open them.

Svenska Spel announced that it had no choice but to follow the directions issued by the government and as such, it had to shut the casinos despite its desire to keep them open. The casinos, according to Patrik Hofbauer (the chief executive), had been helping the community by staying open as long as possible.

The previous advice from the government was not to exceed 500 people within the same place, which Svenska Spel duly followed. The government then had to change its approach, however, and with the decision to ban all public gatherings, the casinos had no choice but to close their doors.

Since this decision was one that was somewhat forced upon the operator, Svenska Spel now maintains that when to re-opens its land-based casinos is not the businesses’ decision.

The choice now lies with the government with regards to when it begins to sanction public gatherings again. When this moment comes, however, Svenska Spel will welcome its patrons back with open arms.

Svenska Spel has not only closed its land-based venues but has also decided to postpone the SEK850 million dividend that was due to be paid to its stakeholders that was recommended by the company’s executives.

The Swedish government has not yet put the country into lockdown, as has happened in many other European countries. The decision to limit gatherings of people to a maximum of 50 is the strictest the government has been so far but judging by the progression of the outbreak in other countries, it is just a matter of time before Sweden follows the approach taken by countries like France and Italy.

Impacts on Staff

The closures that the business has been forced to make will have a profound effect on the 900 or so employees that work at these locations. Of this number, 800 staff will be furloughed until the situation has improved and the casinos and restaurant-casinos can be re-opened.

Patrik Hofbauer insisted that the decisions were being made with the intent to look out for and care for the company’s staff. He reiterated the need for the closures but insisted that Svenska Spel is trying to accommodate its staffs’ needs as well as the needs of the business at this time.

By deciding to place its staff on the state provided furlough scheme, Svenska Spel aims to come back strong once the social distancing policies have been scrapped. The reduction of the number of staff on payroll right now will allow the company to return quickly and rapidly bring back its staff once the situation has been somewhat remedied.

Hofbauer made sure to emphasize the uncertainty of the current situation, however, saying “right now we do not know how this situation will develop, or how long it will last”. This uncertainty from the business will likely translate to the sentiment of its employees, who will no doubt be very concerned about the future of their livelihoods.

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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.

The decline in revenue for Svenska Spel has not been a shock to many, as the business has been reporting decreased takings all year. The operator will be hopeful the worst is behind it now. ©stevepb/Pixabay

Casino Woes

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.

Lotteries

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.

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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

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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.

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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.

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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.