ATG bucks Swedish trends with record third quarter

With other operators struggling in Sweden, former horse racing monopoly Aktiebolaget Trav och Galopp (ATG) bucked the trend to report a 12.6% increase in net gaming revenue for the third quarter of 2019 to SEK1.17bn, setting a new company record.

Hasse Lord Skarplöth, ATG’s president and chief executive, said that it was “gratifying” to see the company’s revenue rise in a year that had proved difficult for the market as a whole.

Swedish horse racing — the only product ATG could offer until 1 January 2019 — continued to make up the vast majority of the operator’s SEK1.17bn in net gaming revenue, at SEK1.00bn, down slightly from SEK 1.04bn in 2018. Sports betting in Sweden made up SEK65m in the three months to September 30, while casino games in the country brought in net revenue of SEK67m.

In Denmark, into which the company expanded through the acquisition of Ecoys after the opening of the Swedish market, the company made SEK10m from horse racing, SEK6m from sports betting and SEK16m from casino for a total of SEK32m.

However, this was largely generated through retail channels, with the land-based contribution rising 28.5% year-on-year to SEK824m, offsetting a 13.4% decline in online revenue to SEK343m.

A further SEK80m in agent revenue and SEK138m in other income brought the company’s total revenue to SEK1.39bn, a 16.1% increase from 2018.

The company paid SEK235m in gaming taxes for the quarter, as well as SEK110m in personnel costs, SEK554m in other expenses and incurred SEK55m worth of amortisation and impairment costs, bringing operating profit to SEK449m.

However, much of this difference in operating profit was due to differences in the way gambling and lottery taxes were considered in Sweden’s old tax regime compared to its new re-regulated market.

Where in 2018 the company paid lottery tax, calculated after pre-tax figures, in 2019 the company paid gaming taxes, calculated as an operating expense. This gaming tax was not a feature in 2018, while ATG did not have to pay lottery tax in 2019.

Similarly, under the former monopoly system, ATG paid SEK550m of third-quarter revenue in 2018 to funds for horse racing and a further SEK12m as an agreement with the state. In 2019, however, ATG did not have to pay into these funds.

As a result, ATG’s pre-tax profit in 2019 was SEK450m, up 42.4% from 2018. The company paid SEK12m in taxes, compared to 2018’s figure of SEK365m, due to the lottery tax.

Because of the changes during the market’s re-regulation, ATG’s overall result was a SEK438m profit, a stark difference from 2018, when it posted a SEK49m loss.

ATG also provided a breakdown of ‘green customers’ and ‘green revenue’, based on customers that were not considered at risk of developing gambling problems, or with existing issues. A total of 68% of sales were considered ‘green sales,’ a decline from 69% in the second quarter, while 86% of customers were considered ‘green customers,’ in line with Q2.

“These are important key figures in our work ahead and is an important part of our contribution to a game-industry that is doing better tomorrow than today,” Skarplöth  said of the ‘green’ figures. “I welcome more companies to follow our example in their interim reports.”

While ATG’s revenue and profit both increased in Sweden, the same has not been true for many other operators who do business in the country.

Former monopoly Svenska Spel saw a 5.2% decline in revenue and a 45.7% fall in operating profit, which president and chief executive Patrik Hofbauer said was, “not yet at the level we are striving for.''

Unibet operator Kindred experienced declines in both overall revenue and profit, as revenue from the Nordic region fell 6.4% to £66.4m.

Betsson’s revenue fell 10.6% to SEK1.28bn, meanwhile, following declines in all product verticals, prompting chief executive Pontus Lindwall to talk up the possibility of acquisitions and expansion into new markets.

Skarplöth said ATG did not anticipate the market’s struggles, which defied the company’s analysis, but he was pleased to see ATG’s revenues increase regardless.

“We continue to gain market share and maintain our position at the top of the podium in the licensed market in Sweden,” Skarplöth said.

For the nine months to 30 September, ATG's net gaming revenue stands at SEK3.26bn.