iGaming growth offsets horse racing decline for ATG in H1

27 August 2019

Swedish operator AB Trav och Galopp (ATG) has reported a 2% year-on-year rise in net gaming revenue for the first half of 2019, but admitted that increased competition around horse racing had proved a challenge during the period.

Net gaming revenue for the six months to 30 June 2019 amounted to SEK2.1bn (£177.0m/€195.2m/$216.9m), the highest sum in the company’s history.

ATG has benefitted significantly from the opening of Sweden’s regulated igaming market, which not only allowed the operator to launch online sports betting and casino in the country, but also expand into the Danish market, via the acquisition of Ecosys.

Ecosys, which was consolidated into the business from 1 April, helped ATG generate a further SEK255m from online casino and sports betting, which broke down into revenue of SEK138m from casino, and SEK117m from betting.

This helped offset a decline in the core horse race betting product, which saw revenue fall by SEK213m to SEK1.8bn. ATG blamed this on social responsibility measures and mandatory registration for players across all channels, both of which were introduced in 2018.

However, it added, competition had increased significantly, with even players for the softest forms of play being fought over by licensees. For Sweden alone, horse racing turnover was down 10% year-on-year at SEK6.0bn, with a further SEK1.3m coming from international racing (up 3%), for total racing turnover of SEK7.3bn, an 8% decline from H1 2018.

Coupled with the SEK2.1bn in net gaming revenue, ATG generated a further SEK148m from sales agents, and generated an additional SEK265m from other sources, for total revenue of SEK2.5bn, up 6.5% year-on-year.

It paid total gaming taxes of SEK424m over the six month period, comprising Swedish and Danish taxes. Personnel costs increased to SEK204m.

Other costs rose sharply to SEK1.2bn, which is due in part to ATG paying fees for equestrian sports information and rights to racing organisers Svensk Travsport and SvenskGalopp. As a result, operating costs rose to SEK1.5bn.

This slashed ATG’s operating profit for the year, which declined to SEK590m, compared to SEK1.6bn in H1 2018.

However, the operator still turned a profit for the year as a result of the re-regulation of the market. Under the monopoly structure, ATG provided funding to trotting and canter sports, which amounted to SEK930m in the prior year, and paid a lottery tax of SEK718m for the same period.

Without these financial obligations, ATG was able to record a net profit of SEK568m after financial items and taxes, compared to an SEK33m loss in H1 2018.

For the second quarter of the year, the three months to 30 June, ATG reported net gaming revenue of SEK1.1bn, up 3% year-on-year. This included an SEK27m contribution from Ecosys, while horse racing reported a SEK107m decline in revenue, offset by a SEK140m contribution from online sports betting and casino.

For the first time, 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. As of 30 June, the operator estimated that 86% of customers would be able to gamble sustainably, accounting for 81% of total revenue.

Using its Player Tracking System, ATG monitors player behaviour, sending at risk individuals personalised warnings and recommending they use a self-assessment tool to gain insights on their gambling habits. Chief executive Hasse Lord Skarplöth said that 30,000 players have completed this self-test to date.

“This dialogue is in most cases very much appreciated by the customers,” Skarplöth said. “Having said that, we are not in any way close to our goal for responsible gaming. We are learning every day and constantly developing our responsible gaming controls.”

Total revenue, bolstered by a SEK77m contribution from sales agents and SEK140m in other revenue, amounted to SEK1.3bn, up 8% year-on-year.

ATG paid gaming tax of SEK228m, while the media rights contributed to costs growing to SEK778m, leaving an operating profit of SEK302m, less than half the prior year’s total of SEK868m.

However, once again, the lack of lottery tax and industry funding contribution led to ATG posting a net profit after tax of SEK291m, compared to a SEK45m loss in Q2 2018.