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CEO's commentary

– We are leading the way toward a more sustainable gaming market

2013 was the year when Svenska Spel decided to lead the way toward tomorrow’s gaming market by taking the lead in responsible gaming and, in parallel, securing our attractiveness and competitiveness through customer experiences.

In 2013, we took a key decision regarding our responsible gaming efforts. Svenska Spel must improve consumer protection throughout operations. We are raising ambitions for responsible gaming efforts by adopting a number of tangible new measures. Clear targets have been set for this work. We must be leading in terms of responsible gaming. Our measures should lead to a general decline in problem gaming in society at large, not just with our customers. The measures we implement must be quantifiable and possible to follow up. Our responsible gaming efforts must be consistent, extensive and proactive.

The single most important decision is that in 2014, we will implement mandatory registration for all gaming at Svenska Spel, with the exception of paper lottery tickets and games at Casino Cosmopol.

Raised ambitions for responsible gaming

We view the registration of games as a key step in preventing problem gaming in an improved and more distinct manner, further strengthening age restrictions and preventing crime and fraud, for example match fixing and money laundry. This also means an expanded service to customers who, thereby, gain improved possibilities to take control of their gaming.

Mandatory registration of games also provides us with the possibility of acting more proactively in customer relations, whereby, on receiving the customer’s consent, we can initiate dialogues with individuals at risk of excessive gaming. I am particularly proud of the latter – we often talk of technical achievements in the development of responsible gaming, but this is about building skills in our customer service. Our employees are being trained to be better able to handle ­customers with unsound gaming practices. This can include questions about a customer’s gaming or relatives who are concerned about a family member. This is where we can make a difference and provide better support and guidance to individuals at risk.

Effective responsible gaming efforts require increased knowledge of the issues with games for monetary gains. Today, generally speaking, there is limited knowledge about gaming problems and gambling addiction and gaming research is a relatively underdeveloped area of research. In 2013, Svenska Spel continued to support research in to this field. Furthermore, in 2013 we decided to fund a professorial chair in gaming at one of the country’s seats of learning.

Our investment in responsibility is not restricted to individual products and sales channels, it applies to the entire Group and will further strengthen our total sustainability efforts. I am convinced that the raised ambition levels for our responsible gaming efforts will strengthen Svenska Spel’s long-term competitiveness though a positive impact on experiences, image and customer satisfaction.

Stronger performance despite tough competition

Competition in the gaming market is tougher than ever. We performed well with a good product mix and, in parallel, cost-efficiency enhancements have started to generate results. This was reflected in 2013, by our best operating profit ever and delivery of a surplus to the public treasury of slightly more than SEK 5.2 billion.

We met our financial efficiency target from our owner of an operating margin of 22% over an economic cycle, with an operating margin for 2013 of 22.6%. In terms of net gaming revenue, it was primarily sports games and number games that performed best. Casino Cosmopol performed in line with the preceding year, while Vegas lost ground due to increased competition from online casino games as well as our implementation of a new responsible gaming tool.

In 2013, our happy winners shared about SEK 13 billion and the number of new millionaires totalled 338.

Investments in gaming experiences

In parallel with strengthening consumer protection, we are also creating an enhanced player experience for our customers. We have previously decided to invest about SEK 300 million in the ­digital platform and digital customer interaction. In 2013, we invested substantial resources in developing both the platform and our offering. Our customers will soon be able to see more concrete results from these initiatives, in the form of improved usability in all channels, a wider sports games offering and enhanced integration of content and games on all digital platforms.

Naturally, a stronger customer experience means that we are applying for new and changed permits for operations. In 2013, our launches included the Eurojackpot number game and we have improved the payout percentage on Oddset, which gives customers a better offering and strengthens our competitiveness, primarily against the unregulated gaming companies.

Grass Roots strengthens bonds with Swedish sport

In 2013, we extended our already strong bond with Swedish sport. Through a new initiative under the name Grass Roots, our customers were part of distributing SEK 50 million to youth sports in Sweden. In total, about 6,300 associations in 69 different sports shared these funds, which will make a substantial ­difference to being able to go on tour, train leaders, rent ­training facilities, buy equipment, etc.

During the year, we initiated a brand new partnership with the Swedish Sports Confederation (RF) to counter the occurrence of match fixing and other forms of betting-related corruption. In 2013, ­suspicion was cast on, among other things, a number of football matches. This is a trend we take extremely seriously, since fraud of this type hurts our business and our customers and, primarily, undermines the credibility and integrity of sports as a whole.

Major challenges

Generally, there is growing scepticism about games for monetary gains. In parallel, unregulated gaming companies primarily interested in private profits are gaining a stronger foothold in the Swedish gaming market. This trend impacts Svenska Spel’s prerequisites for carrying out its mandate.

Customers demand fast games with high wins – the sort of games that entail substantial risk of problem gaming. Competition in the market grew increasingly intense during the year and, unfortunately, this is a trend that directly conflicts with the gaming policy goals established by Parliament and the government. Svenska Spel is continuing to lose market shares in a growing online gaming market. The game form that is increasing most, online casino games, is a game form that Svenska Spel does not have a permit to operate.

At present, functional gaming regulations based on the gaming policy decided by Parliament are lacking. The government gave notice in 2013 that over the next two-year period a more effective body of regulations would be proposed.

I welcome the coming political measures to achieve functioning regulation aimed at dealing with the increasingly aggressive marketing and risky gaming.

Toward a more stable and sustainable gaming market

Many challenges lie ahead of us and I look forward to 2014, as a year which will further define Svenska Spel as a company and what differentiates us from our competitors, both in terms of responsibility and experience.

We have a clear and important mandate, we have a stable foundation, with competent and motivated employees, satisfied customers, strong and well-known products as well as ambitious retailers and partners. We have recently implemen­ted a changed organisation, which leaves us better placed to meet the future and to meet customers in parallel with our continued streamlining of operations. Never before have so many customers said that they perceive us as taking our responsibility to counter gambling addiction. In the fourth quarter image survey, 40% of those asked agreed with this, which is almost double the figure for the closest competitor in the market.

Over the past year, we have shown that we put responsibility ahead of profit, by taking decisions that will result in lower revenue and earnings. Above all else, my hopes are that 2014 will be the customers’ year and that we will be able to present an even better customer experience of Svenska Spel and our products and services  before, during and after gaming.

The aim is clear – we will show the way toward a more ­stable gaming market, one where gaming is for everyone’s enjoyment.

Visby, February 2014
Lennart Käll, President and CEO

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