ATG blames higher taxes for net profit decline in Q1

Swedish Gambling Tax and Economic Factors Drive ATG’s Q1 Revenue Decline

In a recent report, ATG (Aktiebolaget Trav och Galopp) highlighted the dual challenges of a rising gambling tax and an ongoing economic recession as key factors contributing to its revenue and profit decline in the first quarter of the fiscal year.

For the three months ending on March 31, ATG recorded a net gaming revenue of SEK 1.21 billion (approximately £94.4 million, €110.4 million, or $125.7 million). This figure represents a 7.7% decrease compared to the same quarter last year, reflecting the tougher operational climate facing the company.

Overall, ATG’s total revenue for the quarter declined by 7.8%, amounting to SEK 1.28 billion. This figure includes a combination of net gaming revenue, agency income, and other income streams for the period.

Published on April 23, ATG’s report prominently referenced the increase in gambling tax in Sweden, which was raised from 18% to 22% of gross gaming revenue in July of the previous year. This substantial hike has drawn considerable criticism from ATG’s leadership.

ATG CEO Hasse Lord Skarplöth has been particularly vocal against the tax increase, previously describing it as a “horse tax” that disproportionately impacts the company’s monopoly status. Following the release of the operator’s 2024 earnings, he called on the government to reconsider the tax structure.

In the latest quarterly report, Skarplöth reiterated his concerns but remained optimistic about ATG’s future. “We face numerous challenges,” he stated. “Yet, we possess a unique advantage: a gaming organization with a mission beyond mere financial performance.”

He continued, “Our commitment to supporting Swedish trotting and galloping sports imbues our operations with purpose—an essential anchor during uncertain times. This is what fuels my optimism, despite challenges ahead.”

“With a dedicated team, loyal customers, and a mission to generate revenue for Swedish equestrian sports—and, by extension, the broader horse industry—we are poised for progress.”

Horse Racing Revenue Faces Challenges in Q1

Diving deeper into financial specifics, horse racing betting is ATG’s dominant revenue stream, accounting for a significant portion of overall earnings. However, revenue from horse racing betting saw a downturn, recording SEK 867 million, which is a 10.4% decrease year-on-year. Despite this decline, it still represents 75% of ATG’s total revenue generated in the first quarter.

Casino revenue also experienced a drop, totaling SEK 143 million, a 13.3% decline compared to the previous year, largely attributed to several significant customer wins resulting in reduced patronage.

On a positive note, the sports betting division demonstrated robust growth, with revenue rising 14.5% year-on-year to SEK 198 million. Skarplöth noted that ATG retains its status as the largest licensed sports betting operator in Sweden, reflecting a resilient segment amid overall declines.

During the quarter, ATG reported engagement from 1.4 million users, maintaining stable participation levels year-on-year.

Tax Implications on ATG’s Profitability

Examining expenditures, while personnel costs saw a slight uptick, this increase was counteracted by reductions in other expenses. Nonetheless, the amplified gambling taxes exerted a significant strain on profitability, with tax obligations soaring by 11.8% to SEK 303 million.

When aligned with lower revenue figures, these factors culminated in a 31.4% reduction in operating profit, which decreased to SEK 267 million. Pre-tax profit mirrored this trend, dropping 33.3% year-on-year to the same SEK 267 million benchmark.

After factoring in income tax obligations and foreign currency influences, ATG ultimately concluded the quarter with a net profit of SEK 258 million, representing a decline of 33% compared to the previous year’s first quarter.