CEO'S COMMENTARY

”We will maximise the customer experience and cultivate growth, but through healthy revenue”

We invest in the gaming experience of tomorrow
In a market of tough competition, Svenska Spel managed to increase net gaming revenue in 2016 and still holds a strong market position. We focus on improving the customers’ experiences in the different channels, in particular online.

Positive full-year result – many winners

As in previous years, Svenska Spel reports a positive result for full-year 2016. Operating profit improved SEK 63 million, or 1.3%, providing a profit of SEK 4,866 million, a surplus that is paid to our owner the Swedish State. The operating margin was 22.2%, which is slightly higher than the owner target of 22%. In total, we paid out SEK 12.5 million in winnings to our customers and Sweden gained 349 new millionaires.

Net gaming revenue rose SEK 32 million or 0.4%. Our focus is to develop the digital customer interaction, primarily for mobile phones, which is why it is gratifying to note that net gaming revenue for mobile phones increased 57%. Sales online increased in total by SEK 232 million, a 14% growth compared with last year.

During the year, we noted a positive trend for our sports games products Stryktipset, Europatipset and Oddset Mixen. Among games of chance, Eurojackpot is increasingly positioning itself as a popular customer product, reaching almost SEK 400 million in net gaming revenue, marking a 34% increase. Keno and Bingo sales also increased, due to successful campaigns and the launch of Bingo for mobile phones. On the other hand, we noted a decline for Triss, largely due to greater competition in stores, and Lotto lost out to the benefit of Eurojackpot. Within our casino games, table games showed positive trends while slot machines games at physical casinos, Vegas video lottery terminal games and Poker declined during the period, mainly due to the continued rise in competition from online casinos.

New customer experiences

To fulfil customer demands in primarily digital channels, we have invested heavily in new modern technical platforms in recent years. Initiatives in innovation, product and service development, modern IT infrastructure, new analysis platforms and more are expected to generate faster and extended possibilities for enhancing customers’ experience, strengthening responsible gaming and raising cost efficiency. Comprehensive investments using the latest technology also extend to the new retailer terminals and Vegas video lottery terminals (VLTs) to ensure crucial long-term business.

To enhance customers’ experience, we launched a new site at the beginning of 2016 that offers better service and responsible gaming tools as well as an app for sports games customers. Customers can use the new app to play, receive goal service, see live reports from the games and receive notifications for all sports games online. The number of objects and amount of live games has doubled compared with last year and services for “live correction” and statistics have improved.

To address current trends and customers’ wishes, we applied in 2016 for permits for a number of new game forms such as e-sport and fantasy sport as well as higher levels of payout percentage. We have been waiting for a decision regarding our online casino application since 2014. It is my hope that we will receive a positive response to our applications in 2017. The permits are important to face the competition and customer demand for attractive games, but also for reinforcing ownership value.

Toward the end of 2016, the customer satisfaction index (CSI) was 68, which is slightly higher than last year. Customer satisfaction is still higher among the more frequent customers and those who play sports games. The public’s trust in Svenska Spel, its brands and its responsibility is decisive since the competitors offer similar products and services. The image rating that measures the percentage of Swedes between the ages of 18 and 75 who are positive to the Company amounted to 55% for the fourth quarter in 2016, which is in line with previous quarter. Our closest competitor has an image rating of 33%.

We advocate customer protection

Swedish regulator Håkan Hallstedt will present his gaming license investigation no later than 31 March 2017. Svenska Spel welcomes a licensed market where the same conditions apply to all companies. It is paramount that the new legislation guarantees that all companies who are granted a license uphold strong customer protection. A high level of channelling is critical for a long-term sustainable gaming market, but it may not be done at the expense of customer protection. That would be detrimental to all.

Svenska Spel has long been devoted to countering match fixing. We carefully monitor all signs of unusual gaming patterns and are often able to discover suspected match fixing. Unfortunately, there are loopholes in the laws that make it difficult to take criminal action against those involved in match fixing. It is therefore extremely positive that regulator Håkan Hallstedt has announced that he will propose an act that will criminalise gaming fraud as part of his gaming investigation.

Our responsible gaming tools have effect

In the spring of 2016, Svenska Spel commissioned an external independent evaluation of our responsible gaming tools. The conclusions are that the responsible gaming tools works and have effect and that the customers who use the tools play less risky.

Since 2014, Svenska Spel funds a research position in addictive disorders with particular focus on gambling addiction at Lund University. In December, Anders Håkansson was appointed Sweden’s first professor of medicine to focus specifically on gambling addiction. We are co-funding the position by investing SEK 2.5 million per year for a five-year period.

Sports are part of our history and culture

Svenska Spel has a strong relationship with Swedish sports and sports have been a part of our history and corporate culture. As Sweden’s largest sports sponsor, our ambition is to contribute to the development of Swedish sports’ amateur as well as elite levels. During the year, we signed new three-year agreements with both the Swedish Bandy Federation and the Swedish Floorball Federation. In October 2016, we launched our new sponsorship guidelines in which we clarify for our sponsorship recipients how they are expected to act on issues concerning human rights, diversity and working conditions.

Activities for children and young people among the country’s sports associations received a welcome economic contribution in November. Through Svenska Spel’s Gräsroten initiative, our customers were part of distributing SEK 50 million to 7,972 associations in 71 different sports.

Svenska Spel has an inclusive approach in terms of what is best for the community, not only sports associations. I am proud to highlight Casino Cosmopol’s diversity agenda; as many as 35% of our approximately 1,400 casino employees have a foreign background.

Outlook

We will give customers even better gaming experiences based on our well-known brands and develop new popular products and services. We will continue to be an attractive employer and attract the best talents. Our sustainability efforts and culture of responsibility is a competitive advance that we value and invest in. In short, we will maximise the customer experience and cultivate growth, but through healthy revenue that focuses on mobile phones. We look forward to 2017 and an evolving gaming market on equal terms where gaming is enjoyed by all.

Visby, February 2017

Lennart Käll
President and CEO