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CEO's commentary

A key year on the journey toward a more stable and sustainable gaming market

 

2014 was an eventful, important and challenging year for Svenska Spel. Last year, the new responsibility strategy decided in 2013 became more tangible and clearer, and in which the implementation of obligatory game registration comprises the largest and most significant activity. The objective has been to act even more responsibly, whereby gaming remains joyful and safe without becoming excessive.

In parallel, many unregulated, offshore gaming companies raised activity levels with increasingly aggressive marketing and continued growth in online casino games, mainly on mobile phones. Competition is becoming increasingly intense and the share of the market subject to Swedish regulatory control is continuing to decline.  This is a concerning development given the aims of Swedish gaming policy. In 2014, we completed several tangible responsible gaming measures to make the gaming market more stable and professional. The differences compared with many of the unregulated gaming companies’ sales and revenue-driving activities are now even more pronounced.

We have set the standard for responsible gaming

For 2014, our surplus to the public treasury was slightly more than SEK 4.7 billion, down a little over SEK 0.5 billion compared with 2013. The investment in responsibility means that revenue will decline – which is fully in line with our plan. In parallel, we have maintained a continuous focus on streamlining operations and keeping costs down. The operating margin was 22.2%, which was slightly over the financial target set by our owner.

Another key activity during the year has been to describe for our customers and business partners why obligatory ­registration in particular is such a key link for clearer responsible gaming. Many of our retailers and business partners face intense competition and registration has an obvious impact on their business. I would like to take this opportunity to thank everyone who represents us and meets our customers on a daily basis for excellent cooperation.

The customers have never been more satisfied

The registration of gaming in all sales channels gives our customers the ability to see all of their gaming and allows them to set limits in terms of time and money. This con­tributes to countering and preventing gaming problems.

We are happy to be the pioneers – registering gaming at the retailers is now being considered in ­several European countries with the objective of dealing with unsound gaming, preventing money laundering and combating match fixing. Online gaming has always been registered. Most of our customers understand why we want to bolster responsible gaming by eliminating anonymous gaming. At the same time, we have also received some negative customer feedback. We must always balance the need for strong customer protection in the gaming market with respect for personal integrity.

We received a positive response to the broad responsibility campaign launched in spring 2014.

This confirms that Svenska Spel has a well-known and strong brand. During the year, we also launched new lotteries, invested in new distribution forms and channel development, went live with a new digital platform and delivered a new mobile service with better content primarily for sports games customers. Through a six-year sponsorship agreement with the Swedish Football Association and the distribution of SEK 50 million to youth sports through the Grass Roots programme, we have further strengthened our partnership with sports. Our investments during the year were appreciated by our customers. The customer satisfaction index for 2014 was the highest in the Company’s history.

The goals of Swedish gaming policy are highly relevant

Our vision is that gaming is for everyone’s enjoyment. However, achieving a working, healthy and safe gaming market where social protection considerations are heeded, also requires political decisions.

The Government has announced its intent to investigate the prerequisites for a licensing system. We consider it essential that any operator in the Swedish gaming market, today and in the future, is governed by the same rules, inspections and controls, and that customer protection can in fact be strengthened. 

One can argue – which does happen – that Sweden is part of a global gaming market, that the technical developments have outrun legislation and that Swedish gaming ­regulations are outdated. At the same time, I would argue that the gaming policy objectives on which legislation is based have never been more relevant than they are today. Today, gaming is ubiquitous and available at any time of day and, last year, the investment in marketing was slightly more than SEK 3.6 billion, up a little more than SEK 1 billion on 2013. Bonuses, free spins and gaming on credit are other marketing tools that have appeared in just a fewyears. Within the EU, total annual gaming market revenue is about EUR 80 billion, which makes it an extremely lucrative market with excellent profit potential that attracts both professional and unscrupulous as well as law-abiding and criminal operators. Paying attention to this trend and striving to maintain customer protection so that gaming does not lead to more personal tragedies or increase costs for society, is both obvious and natural. This work requires a strong Svenska Spel that wants to continue to be a role model for the gaming industry.

Outlook

Through our new responsibility strategy, we have contributed to creating prerequisites for long-term sustainable development of the gaming market. For this reason, 2014 was an important year for Svenska Spel.

To continue delivering in accordance with our mandate, strengthening customer protection and positively influencing gaming market trends requires that we have the necessary gaming licences. Our hope is that we receive a positive answer in 2015 from the Government regarding the application to arrange an online casino that was submitted in June 2014.

In spring 2015, the investigation on the ban on advertising will hand over its report to the Government. The investigation’s proposals could have a major impact on the Swedish gaming market and, accordingly, on Svenska Spel.

In 2015, customer interaction will be in focus. Initiatives in product development, distribution and innovation are planned for both digital and physical interaction. The goal is that more customers will choose Svenska Spel with the objective of gaining an enhanced gaming experience in a healthy and safe environment.

Gaming is for everyone’s enjoyment.

 

Visby, February 2015
Lennart Käll, President and CEO

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