The gambling firm, Paf, has announced a tax warning, even though they achieved record highs in 2023. Despite this success, their earnings are still in jeopardy.
Paf achieved a new revenue record of €177.1 million (£150.8 million/$191.4 million) in the 2023 fiscal year. However, the Nordic operator also cautioned that higher gambling taxes could negatively affect their future profits.
Paf issued a tax warning, despite record highs in 2023, profitability is still at risk. This was another financially successful year for Paf, with revenue increasing by 6.9% year-on-year. The operator’s net profit also increased by 23.0% to €55.1 million, another new yearly record.
However, while CEO Christian Fahlstedt welcomed the news and commended Paf’s performance, he also expressed concern about future profitability. Fahlstedt specifically mentioned that increasing gambling taxes in various markets could impact net profit levels in the coming years.
In Finland, a temporary reduction in lottery tax has ended, with the rate now increasing from 5% to 12%. Meanwhile, gambling tax in Sweden has increased from 18% to 22%, in Estonia from 5% to 6%, and in Latvia from 10% to 12%.
“We are pleased and proud of the past year,” said Fahlstedt. “We have gained a larger customer base, with a 27% increase in active customers, which explains part of it.
“However, we are also aware that the temporary lower gambling tax in Finland contributed to this outcome. The trend of rising gambling taxes will continue.”
Fahlstedt also highlighted the influence of the demand for enhanced responsible gaming measures, which he characterized as a “critical need.” Interestingly, Paf decided this month to further reduce the loss limit for players aged 20 to 24 to €8,000. Previously, Paf had implemented a comprehensive overhaul of its mandatory online loss limit in April 2023, decreasing it from €20,000 to €17,500.
“These modifications will result in a decline in profitability, and many operators will face greater challenges,” stated Fahlstedt. “However, Paf is prepared for the future.”
Paf’s revenue growth is primarily driven by the expansion of its online operations.
Examining the revenue performance in 2023, it is evident where Paf’s growth originates. Its online business revenue increased by 8.2% to €153.8 million, with Paf emphasizing strong growth in Sweden, Spain, and Latvia.
The latter benefited from the acquisition of Latvia-focused William Hill Latvia SIA and SIA Mr Green in June 2023. Paf stated that these agreements generated an additional €5.1 million in online revenue.
Paf also reported a 27.3% increase in the number of registered online clients, reaching a record 615,557. The operator anticipates that this total will continue to rise in 2024, supported by ongoing marketing initiatives.
Regarding Paf’s other operations, revenue from the land and ship sectors decreased by 0.9% to €23.3 million. Despite a 4.0% increase in the total number of ship passengers in 2023.
Here, Paf has established new agreements with Tallink Group and Eckerö Linjen, and welcomed Finnline’s new vessel M/S Finnsirius.
Paf and Pikseli have joined forces to establish the inaugural land-based gaming space in Helsinki. The gaming room concept blends entertainment games with recreational activities.
Paf has also recognized the escalating trend of contactless payments, and all entertainment games and nearly half of the coin-operated machines now provide cashless payment options. Paf asserts that this move is intended to satisfy customer demand for more convenient payment methods.
“Through these initiatives and innovations, we anticipate continued growth and ongoing enhancements to our services and offerings,” stated Paf.
Net earnings expanded driven by revenue growth.
On the cost side, material and service expenditures increased marginally by 7.9% to €42.6 million. Personnel costs remained at €24.2 million, while depreciation and impairments only rose slightly to €10.6 million.
Other operating expenses declined by 2.0% to €52.9 million, while Paf’s net financial income rose modestly by €723,605.
Consequently, its pre-tax profit reached €60 million, representing a 27.9% year-over-year increase. After paying €5.2 million in taxes and considering the €305,468 deferred tax impact, net profit for 2023 climbed by 23.0% to €55.1 million.
Paf also observed that higher revenues and profits enabled it to allocate €31.4 million in 2023. These funds are utilized for social welfare, including supporting third-sector organizations committed to promoting social activities, culture, youth work, sports, environmental activities, and more.
“It’s commendable that Paf has achieved such outstanding results, enabling us to allocate a total of €31 million.”
Four meters,” proclaimed Chairman Jan-Mikael von Schantz. “Our workforce has accomplished an exceptional feat this past year, and the board wishes to express its gratitude to every single Paf employee for contributing to this achievement.”
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